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DrugsandCrime.pptxDrugs and Crime
Introduction
Psychoactive substances have been used by man for thousands of years. Advances in chemistry has greatly multiplied the number of these substances.
These substances act on the central nervous system and affect brain function in ways that alter mood, perception, consciousness, reasoning, and, consequently, behavior.
Introduction
This chapter considers a range of topics on psychoactive substances that have been the object of research by economists including
Rationale for criminalization
The effect of drugs on crime
The gateway drug argument
The elasticity of demand for drugs
Market Analysis of Standard Drug Policies
There are four common policies for dealing with the production and exchange of psychoactive substances
Permit exchange in markets without taxation or regulation
Taxation and/or regulation
Criminalization of production and sale
Criminalization of both production and possession
Economics of the Decision to Criminalize a Psychoactive Substance
The rationale for criminalization of a psychoactive substance is that its use and possession lead either to significant externalities or to harm to vulnerable populations that cannot be addressed adequately by application of the civil law. Heroin, cocaine, marijuana, and methamphetamine have been criminalized based appeals to these arguments
The primary argument for significant externalities from drug use is that these substances cause criminal behavior. The causal link relies on the argument that these substances alter brain function in ways that are associated with criminal behavior.
Economics of the Decision to Criminalize a Psychoactive Substance
The argument isn’t that they cause externalities directly, but that they cause externalities indirectly through criminal behavior.
One piece of evidence is that urine tests of accused individuals at arrest indicates that a substantial fraction of offenders use these substances.
This, of course, indicates correlation and not necessarily a causal relationship. It is possible that the relationship exist because people who use psychoactive substances are more likely to be caught. More analysis is needed in this area.
Economics of the Decision to Criminalize a Psychoactive Substance
The second rationale for criminalization is that they harm vulnerable populations particularly juveniles.
For example, juveniles are unable to make informed decisions about the use of heroin or methamphetamine.
The argument for marijuana would be that it is a gateway drug which will lead to use of future use of heavier drugs.
Measurement of Externalities
The economics of crime model suggest that in order to maximize welfare, some analysis must be done to understand the magnitude of externalities from drug use.
Unfortunately, little economic cost-benefit analysis has been performed in the discussion on the criminality of drugs.
In the United States, the FDA determines the classification of controlled substances. Their primary criteria is possibility of the substance to be addictive and ability to harm the health of the user. Their determination has little to do with externalities.
Measurement of Externalities
The one exception to this is when the substance has medicinal purposes, then it is regulated by physician prescription.
Linking Drugs and Crime
As previously stated, correlation between drug use and arrests does not imply a causal relationship.
The best evidence for linking drugs to crime is from the effectiveness of drug therapy at reducing recidivism rates.
Lipton (1995) evaluated drug therapy programs in California for high-felon-rate offenders who were seriously addicted.
His results show that 63% of the control group were rearrested within 15 months of release, while 49.3% of the treatment group were re-arrested. This suggests that lowering addiction or participating in drug treatment lowers recidivism by 14 percentage points.
Linking Drugs and Crime
The major impediment to testing the relationship between drugs and crime is the lack of data on drug use and intensity of use.
However, there are two proxy variables that can be used to approximate drug use.
These two variables are drug deaths and/or hospital admissions for drug overdose, and the market prices of drugs
Corman and Mocan (2000) found a positive relationship between drugs deaths and robbery and burglary, but not murder, aggravated assault or automobile theft.
Linking Drugs and Crime
Using drug prices as a proxy for drug use rests on the assumption that high drug prices means there is less drug consumption. This is thought to be true, since higher drug prices are correlated with less drug deaths.
Data on drug prices can be found from a DEA database called STRIDE.
Linking Drugs and Crime
Markowitz (2005) estimates the effect of beer taxes, cocaine prices, and the availability of marijuana on crimes rates using the National Crime Victimization Survey.
She observes a negative relationship between beer taxes and assault, and a negative relationship between cocaine prices and assault and robbery.
This test assumes that the population of offenders does not change based on beer taxes and the price of cocaine.
The Gateway-Drug Argument
Some would argue that some substances should be criminalized on the grounds that they lead to heavier addiction to other drugs with greater externalities.
They would cite surveys which show that people addicted to cocaine first began using substances such as alcohol, tobacco, and marijuana. While this sequencing is necessary for their argument, it is not sufficient. Surveys also show that violent felony offenders also had a high probability of violating school rules as children.
The Gateway-Drug Argument
Pudney (2003) used the Youth Longitudinal Survey of British youth aged 12-30 to study the gateway hypothesis finding that a 10 increase in use of amphetamines, marijuana, and tranquilizers lead to a 3% increase in of cocaine and ecstasy.
Bretteville-Jensen, Melberg, and Jones (2008) tested for the effects of drug accessibility as well as individual background and sequence of drug use using survey data from Norwegian adults aged 21 to 30 years. They found that early marijuana use increased the probability of using hard drugs from 8% to 36%.
These studies show that even after controlling for demographics, some link between earlier use of softs drugs and later use of hard drugs remains.
The Gateway-Drug Argument
These results seem to indicate that adolescent drug use progresses from using weak to strong psychoactive substances.
The important question for police purposes is whether removing marijuana would stop the progression of drug use or would other psychoactive substitute for marijuana?
Price Elasticity of Demand for Drugs
Elasticity of demand =
In words, how does the quantity demanded respond to a one percent change in price?
Cross price elasticity of demand =
This tells use whether these good are substitutes or complements. If cross price elasticity if positive, they are substitutes. If cross price elasticity is negative, they are complements
Price Elasticity of Demand for Drugs
It is difficult to measure price elasticities of demand for drugs since there is no reliable data on consumption. One method involves asking drug addicts what quantity of drugs they would buy at various prices.
Jofre-Bonet and Petry (2008) illustrated the difficult of obtaining elasticities. The problem is that addicts consume several drugs, but they are often seriously addicted to a single drug. The demand for the drug to which they are addicted is much less elastic than of the other drugs. Thus, the overall own price elasticity of demand for a single drug depends on the fraction of all drug users in the population who are addicted to each drug.
Price Elasticity of Demand for Drugs
They estimate an own price elasticity of demand of heroin for heroin addicts at -0.9 and -1.05 to -0.9 for the elasticity of demand of cocaine for cocaine addicts.
For heroin addicts, marijuana, valium, and cocaine were substitutes and alcohol and cigarettes were complements.
For cocaine addicts, alcohol is a complement, valium and marijuana are substitutes.
Economic Strategies to Raise Drug Prices
Enforcement of sanctions can be used to reduce the amount of substance sold, however, different types of enforcement will have different effects.
Seizure to 50% of drug production doubles the cost of production because suppliers have to produce twice as much to deliver the same amount to the market. This need to double production is a real resource cost to society.
Alternatively, enforcement could arrest and sanction employees of the drug producers. In response, workers will require higher wages. This increases the cost of the production, but this is a pecuniary cost and does not consume real resources.
Increasing pecuniary costs without increasing real resource costs is going to have a lower social cost. It is not clear that these distinctions are made by current enforcement policy
Review from Yesterday
Rationale for criminalization of drugs
Main argument is that is drug use alters people’s behavior causing them to engage in criminal behavior.
Economic analysis of criminalization should consider the social costs and benefits.
There is a correlation between drug use and criminal behavior, but assigning causation is a more difficult challenge. We looked at some evidence linking drugs and crime
Drug therapy programs reduce recidivism rates – this is the strongest evidence for causal relationship.
Drug deaths and low drug prices are correlated with crime rates.
Legalization of Marijuana
Sabia et al (2021) estimates the effects of legalization of recreational marijuana on various outcomes
Arguments for legalization
Reducing violence by allowing civil law to function and reducing profits to illegal criminal cartels.
Public health gains as users substitute away from alcohol and opioid use.
Substantially reduces the cost of enforcing prohibition and increases tax revenue.
Convictions for marijuana-related crimes cost substantial labor market penalties.
Legalization of Marijuana
Arguments against legalization
Gateway effect could lead to increases in harder drug usage such as cocaine, heroin, methamphetamine.
Harder drugs usage could lead to increase in crime.
Increases in adverse health effects.
Negative effects on cognitive development of youth.
Legalization of Marijuana
From an economic social welfare perspective, the argument against legalization rests on the social costs of legalization(mostly the gateway effect) being larger than the sum of benefits from
The utility gains from consumption
The costs savings from reduced incarceration and enforcement
Increased tax revenue
Potential reductions in illegal drug market violence
Legalization of Marijuana
Sabia et al (2021) estimates the effect of marijuana legalization on drug usage and arrests rates.
They find little evidence of an increase in harder drug usage or of increases in arrest rates.
