Legalising drugs

At Obama’s recent online town hall meeting the most popular question was whether he favoured legalising marijuana. There are plenty of persuasive arguments in favour: the revenues from sales tax and taking drugs out of the hands of gangs to name but two. It was suggested to Obama that taxation of marijuana might be a good way to put a dent in the budget deficit! Of course, there are negative externalities in terms of health costs and negative internalities from addiction (OK, that’s more contentious). According to drug and alcohol rehab centers, one of the worst side effects is addiction, which can also lead to death in extreme cases.

Recent posts here have shown commenters to be against regulation where no externality can be shown. My question is, if the externalities are removed via taxation, is there any good reason to ban drugs? Can the harm from them ever be so high that banning them doesn’t markedly reduce welfare? Here we also need to bear in mind the extreme highs that result from taking drugs and their positive effect on welfare.

In case you’re wondering how bad all these drugs are, here’s a helpful chart from The Lancet, via Wikipedia:

Update: Other economists in favour of drugs: Mike Moffat and Jeffrey Miron.

6 replies
  1. StephenR
    StephenR says:

    May I say that that is a ridiculously helpful looking chart, though I have the odd question, so may I have the link?

  2. rauparaha
    rauparaha says:

    I know, the post should have been “here’s a cool chart, check it out!” 🙂

    Sorry for forgetting the links. I’ve added them in to the post now.

  3. MikeE
    MikeE says:

    Noone ever talks about the benifits of drugs when it comes to drug policy.

    Its always the harms that are measured, never the obvious utility that users gain from using them recreationally.

    Of course its kinda hard to quantify a good relaxing evening on the buds, or an unforgettable night pilling out of ones eyeballs.

    And thats before we even get to say, the obvious pychological benfits for say MDMA in some situations, or industrial uses of hemp.

  4. Nigel Kearney
    Nigel Kearney says:

    I agree with legalising cannabis.

    The basic argument for banning rather than taxing harder drugs is that they cause people to act irrationally, so drug users can no longer be treated as rational actors. Therefore just removing externalities will not necessarily lead to an optimum level of consumption. I have no idea how strong this really is but it seems plausible to me.

    I would suggest, for instance, that the optimum level of heroin consumption is zero. We can’t achieve that due to inability to enforce the law, but that’s a different issue.

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