Sunday, April 30, 2006

Illegal Drugs

A student in ec 10 emails me:

Hi Professor Mankiw,

Friday's Wall Street Journal had an article regarding the shortcomings of U.S. drug policy ("Drugs Beget Thugs in the Americas"), and I was wondering what your thoughts were on the issue.

I recall that in the fall we discussed the different effects of supply and demand shifts on drug quantity and prices. Given the theoretical arguments (supply shift -> higher prices), and the high costs and empirical ineffectiveness of drug interdiction, it seems like the U.S. should reevaluate its policy.

Also, I wanted to thank you for doing a great job with Ec10 this semester. I've really enjoyed the course a lot (to the point where I'm now thinking about economics on my Saturday afternoons).

All the best,
[name withheld]

Here is an excerpt from the Wall Street Journal article:

Nobel economist Douglas North taught us the importance of institutions in development economics. Yet prohibition and the war on drugs are fueling a criminal underworld that handily crushes nascent democratic institutions in countries that we keep expecting to develop. Is it reasonable to blame Mexico for what enormously well-funded organized-crime operations are doing to its political, judicial and law enforcement bodies when we know that Al Capone's power during alcohol prohibition accomplished much the same in the U.S.? These are realities of the market, of supply and demand and prices under prohibition that no amount of wishing or moralizing can change.

My own views on this issue are not fully formed. Two things are clear to me:

1. The use of illegal drugs has a lot of bad effects. My colleague David Laibson, who lectured in ec 10 in the fall, is famous for modeling the self-control problems that lead people to suboptimal behavior such as drug use.

2. The war on drugs has a lot of bad effects. The paragraph I have excerpted above gives a good sense of them.

To go beyond these bland generalities, one has to know a lot of details to weigh the pros and cons of various policy options. I am ignorant enough of these details that I should avoid opining.

My colleague Jeff Miron has studied this issue extensively, however, and he is a proponent of drug legalization. I recommend that ec 10 students look out for Jeff's courses, including ec 1017 (A Libertarian Perspective on Economics and Social Policy) and ec 1471 (Economics of Crime).