Thursday, December 04, 2008

The budgetary implications of drug prohibition

A report out this week by Harvard economist Jeffrey Miron looks at the budgetary implications of Drug Prohibition. It's funded by Criminal Justice Policy Foundation who co-authored the 'We Can Do It Again' report with LEAP - blogged here.

Miron's report concludes that ending drug prohibition would boost America's economy by $76.8 billion a year.

Executive Summary

  • Government prohibition of drugs is the subject of ongoing debate.

  • One issue in this debate is the effect of prohibition on government budgets. Prohibition entails direct enforcement costs and prevents taxation of drug production and sale.

  • This report examines the budgetary implications of legalizing drugs.

  • The report estimates that legalizing drugs would save roughly $44.1 billion per year in government expenditure on enforcement of prohibition. $30.3 billion of this savings would accrue to state and local governments, while $13.8 billion would accrue to the federal government. Approximately $12.9 billion of the savings would results from legalization of marijuana, $19.3 billion from legalization of cocaine and heroin, and $11.6 from legalization of other drugs.

  • The report also estimates that drug legalization would yield tax revenue of $32.7 billion annually, assuming legal drugs are taxed at rates comparable to those on alcohol and tobacco. Approximately $6.7 of this revenue would result from legalization of marijuana, $22.5 billion from legalization of cocaine and heroin, and $3.5 from legalization of other drugs.

  • Whether drug legalization is a desirable policy depends on many factors other than the budgetary impacts discussed here. Rational debate about drug policy should nevertheless consider these budgetary effects.

  • The estimates provided here are not definitive estimates of the budgetary implications of a legalized regime for currently illegal drugs. The analysis employs assumptions that plausibly err on the conservative side, but substantial uncertainty remains about the magnitude of the budgetary impacts.


Richard Jones said...

Don't forget the lost opportunities. All those lives squandered feeding a heroin habit which might have been productively used instead, either if you just gave them the heroin or if they'd been consuming milder opiates instead.

Steve Rolles said...

I agree - there are a lot of benefits (and potential costs) that Miron does not include. I think though, he makes it clear in his methodology what assumptions he has made and the limitations of the study, and uncertainties in the conclusions.

Anonymous said...

I only read this far before I realised this paper was likely to have substantial holes:
"If drugs were legal, enforcement costs would be negligible and governments could levy
taxes on the production and sale of drugs. Thus, government expenditure would decline and tax
revenue would increase".

Now are enforcement (and regulation) costs of the existing legal drugs "negligible"? And that is not even thinking about the health and mental health costs, additional policing costs (for excess alcohol), the loss of productive economic activity. Sorry the badges "Harvard", "Professor" (if he is) and "economics" do not necessarily mean that such people can write or think in common sense terms or even have a proper understanding of all the issues. When I get the time I might return to this.

ghhshirley said...

Some of you are disregarding the fact that the prohibition of drugs does not prevent people from having access to or taking them. The so called war of drugs has had ZERO impact in reducing the availability of targeted drugs. It is currently no more effective than the prohibition of alchohol was nearly a century ago. As long as there is a demand, there will be a plentiful supply, legally OR illegally. The question is who profits? Criminals or taxpayors? It seems we have chosen to ignore our own history and the realities of human nature.

Furthermore, the prohibition of drugs has our prison population exploding with people who have harmed no one. Drug users do not belong in prison, and taxpayors should not have to pay for locking up anyone for a victimless crime such as drug use. If anything, these people need help, not punishment. Finally, this is a right to privacy issue; what one chooses to ingest into their body is a private matter.

john-boi said...

what goodandplenty said couldn't have put it better myself.
Tobacco the most addictive and lethal drug freely available for adults. Yet by using education,limiting advertising and increasing proces millions have stopped without us wasting any money on imprisoning anyone.
The tax levied on those who use is almost twice the bill for the treatment who are laid waste by its use.Tobacco users pay for the health care of significant proportion of our non using population.