NCJ Number
203921
Date Published
July 2003
Length
9 pages
Annotation
This executive summary offers an economic analysis of addiction in order to inform public policy.
Abstract
Any person addicted to a drug begins with a first use of an addictive substance. The decision to buy and consume the addictive substance is presumably a rational choice based on various factors such as price, risk of addiction and other adverse health outcomes, and the perceived benefits of use. Once a person becomes addicted to a substance, the substance is no longer a luxury and becomes a necessity. As this occurs, the Price Elasticity of Demand (PED) for the drug drops. This means that use of the drug is no longer contingent upon its price. The author examines and analyzes the economic and medical research literature in order to inform public policy on best methods of combating drug abuse. The primary findings indicate that policies that lower the price of addictive substances result in an increase in first time use, which in turn increase addiction rates. On the other hand, raising the prices of addictive substances lowers first time use; although higher prices have no effect on consumers who are already addicted. When prices of addictive substances are high, substitutions of one substance for another become more likely. Substitution may include treatment to overcome the addiction, but usually only when treatment is accessible and affordable. Most arguments for the legalization of addictive substances do not take into account the predictable long-term growth in the population of addicted persons or the long-term costs associated with higher addiction rates. Two key conclusions emerged from the analysis that inform public policy on drug abuse. First, the existence of a high PED for addictive substances, coupled with the high costs of addiction, suggest policies that have the effect of creating and maintaining high prices in order to deter first time use and have the effect of educating first time buyers about the deleterious effects of addiction. Second, the existence of a consistently low PED among addicted consumers, coupled with the adverse economic effects of this consumer group’s behavior, suggest policies that will have the effect of restoring rational consumer decisionmaking, reducing consumer dependence on these substances, and restoring the group of consumers back to their positions in the economic system. Notes, references