Tuesday, July 12, 2005

L & S - More on the Economics of Prohibition

The Stossel video we saw last night raised a couple of issues for me which I think it ignored and libertarians generally ignore as well. He sets out the negative effects (costs) of prohibition. There seems to be an unspoken assumption among libertarians that these are an inevitable result of prohibition and must always arise. However a moments thought will show that this is not so. To follow on one of James's examples from yesterday, necrophilia is prohibited, but we don't see criminal body snatchers digging up cadavers or killing people (like Burke and Hare) to provide cadavers for necrophiliacs. More substantially, we have had drug prohibition since 1922 in the British case and the 1930s in the US, but the negative effects only became very apparent and substantial in the 1970s. Partly this is due to a shift from 'smart' to 'stupid' prohibition but reflection shows the critical factor is the level of demand. If we have two variables prohibit (Yes/No), and demand (High/Low) there are four outcomes Y/H, Y/L, N/H and N/L. If demand is low then the choice between legalise and prohibit is in fact a philosophical one with relatively minor practical effects - neither option is likely to carry substantial costs. However if demand for the service or substance is high then we have a grim choice because both legalisation and prohibition will have substantial costs. (It is worth adding that we know what the costs of prohibition are but we don't know for sure what the costs of legalisation would be. It would be foolish however to assume that they would be trivial). On balance I would argue that the costs of prohibition are still going to be higher, because, given that prohibition is going to be less than fully effective (to put it mildly!), you will have the costs of prohibition and some of the costs of use (which may well be exacerbated by such prohibition induced problems as purity etc). However we should not glibly dismiss the costs of widespread demand for and use of drugs or assume that we have a choice between a bad policy and a painless one.

This means that the key issue is to reduce demand and the practical question is how to do this. History has some interesting cases for us, particularly the way in which the catastrophic alcohol problem of later 18th and early 19th century Britain was resolved (so far as this could be done). This was done not with prohibition but by use of the tax code to encourage a shift from gin to beer, the spontaneous but also encouraged emergence of the pub, which made drinking once again a social activity governed by a whole series of formal and informal rules, (and also raised the marginal cost of drinking by making necessary to walk a certain distance to get one), and by making heavy drinking deeply unrespectable, uncool and [very important in the British case], fearfully lower claars). This is the way to go for me and coming up with a social strategy of this kind to reduce drug use will make the principled argument for legalisation much more convincing to the wider public.

1 comment:

Ken said...

"(It is worth adding that we know what the costs of prohibition are but we don't know for sure what the costs of legalisation would be. It would be foolish however to assume that they would be trivial)."

We may not know what the costs of legalization would be, but we know that more of them would be borne by the users than is currently the case. Under prohibition, it ain't just the users who get shot... which means that prohibition is a mechanism to get innocent people killed to stop idiots from hurting themselves. That's not a tradeoff that we should be making, regardless of the relative numbers involved.

So the right comparison to make is to compare the costs to non-users of prohibition and legalization.