NCJ Number
158407
Journal
Cato Journal Volume: 10 Issue: 3 Dated: (Winter 1991) Pages: 691-701
Date Published
1991
Length
11 pages
Annotation
In the drug war context, many economists have concentrated on such issues as lost productivity associated with drug use, the effect of drug use on poverty rates, and costs versus benefits of drug illegality; at the same time, economists have tended to neglect the "industrial organization" of the drug industry.
Abstract
The ostensible purpose of antidrug legislation is to reduce the supply of drugs available to drug abusers. As often happens in other markets subject to government regulation, however, antidrug laws have complex economic consequences. In a completely free market, drugs like cocaine, heroin, and marijuana can be sold at lower prices, be available in larger quantities, and be of relatively high quality. Despite the severe legal penalties for the possession and sale of certain drugs, drug producers or industries exist to provide goods to drug consumers. The current war on drugs is probably not capable of eliminating the drug industry, and drug law enforcement activities have had some unintended effects on the structure of the drug industry. In reality, the War on Drugs keeps the "black market" drug industry highly competitive. As a result of drug laws, new entrants into the industry do not have to overcome investments by existing suppliers in brand name capital. Further, drug law enforcement actually promotes greater competition in the drug market. The significance of industrial drug cartels and government-subsidized drug advertising are discussed, and the importance of drug abuse education to counter the strong economic incentives associated with the drug industry is stressed. 7 references