Asymmetrical Information - Megan McArdle

05.30.13

What Price Drug Use?

In the last few decades, we've put a lot more people in jail for drug offenses. And the street price of drugs has fallen.

Over at the Washington Post, Harold Pollack has a rather shocking graph, showing the intensity of law enforcement efforts, vs. the street price of heroin and cocaine.  Summary: putting people in jail doesn't seem to have much effect:

Of course, that doesn't necessarily tell us that enforcement isn't reducing drug use.  For most drug users, illegal drugs have three costs:  

1.  The cash price of the drug

2.  The search costs to find and obtain the drug

3.  The risk of getting arrested while obtaining, transporting, or using the drug.

As drug policy expert Mark Kleiman told me on the phone, for most drug users, the latter two costs may outweigh the first, especially for cannabis; for a casual smoker, he says, "the Cheetos are more expensive than the pot."

But even for a casual cocaine or heroin user (and the majority of hard drug users never become addicts), the price is probably manageable.  On the other hand, if you'r smoking eight joints a day, or doing an eight-ball of crystal meth, price starts to matter a lot.  Kleiman argues that the street price is most important in keeping some people from converting into heavy use, but matters less in terms of reducing the overall number of users.  

In other words, tight enforcement might be successful in preventing people from trying the drug, even though it doesn't lower the price.  What it doesn't seem very good for is keeping people who do try the drug from turning into drug abusers.

But Kleiman cautions that we should be careful about saying even that much.  "The price of cocaine in 1980 was like the price of hand calculators in 1974," he says.  In other words, it was a boutique market dominated by specialists with high costs.  As the market grew, it naturally moved down the cost curve . . . just like the pocket calculators that cost a fortune in 1974 now cost $5 at the nearest drug store.  So enforcement may be keeping the price higher than it would be . . . but that doesn't mean it's enough to keep it higher than it was in 1980.  

What this graph indisputably tells us is that there are limits to the efficacy of enforcement.  And of course, it also tells us something about the cost of that enforcement.  Unfortunately, we don't have a market price on the lives we've ruined with harsh prison sentences.