Arnold Kling  

Drug Tax

PRINT
Welfare State Free Lunch?... Health Care Productivity...

Glenn Reynolds pointed to an interesting talk by Charles Whitebread on the history of the drug war.


In the face of possible Constitutional opposition to what they wanted to do, the people in Congress who supported the Harrison Act came up with a novel idea. That is, they would masquerade this whole thing as though it were a tax...

let's say that in 1915 somebody was found, let's say, in possession of an ounce of cocaine out here on the street. What would be the Federal crime? Not possession of cocaine, or possession of a controlled substance. What was the crime? Tax evasion.


This is interesting in that economists frequently argue that a tax on illegal drugs would be more efficient than prohibition. Of course, we do not advocate a prohibitive tax!

Elsewhere in Professor Whitebread's talk (which I strongly recommend reading):


What is the iron law of Prohibitions? Prohibitions are always enacted by US, to govern the conduct of THEM. Do you have me? Take the alcohol prohibition. Every single person who has ever written about it agrees on why it collapsed.

Large numbers of people supported the idea of prohibition who were not themselves, opposed to drinking.


He argues that prohibitions typically are aimed at a group that is associated with the act, rather than the act itself. For example, marijuana laws were enacted out of prejudice against Mexicans. Gambling laws are meant to restrict poor people from gambling, but not to impede rich people's "sport." He does not mention the example of crack cocaine vs. powder, but it obviously fits the theory.

In his blog post, Reynolds discusses the point that if drug prohibition were ended, then this would call into question the requirement for prescriptions for medication. I think that economists would support getting rid of that requirement, although huge opposition would result from rent-seeking physicians and pharmacists.

For Discussion. Reynolds points out that people might over-purchase antibiotics, leading to the growth of drug-resistant bacteria. Why is this is a classic case of an externality, and what sort of policies does it justify?


Comments and Sharing





TRACKBACKS (6 to date)
TrackBack URL: http://econlog.econlib.org/mt/mt-tb.cgi/72
The author at Venturpreneur: Law, Entrepreneurship & Other Esoterica in a related article titled Carnival of the Capitalists! writes:
    Welcome to the Carnival of the Capitalists! I am thrilled to be hosting this week and invite you to take a look around Venturpreneur as long as you are here. (Apologies to Netscape users, as I am still trying to... [Tracked on April 25, 2004 9:32 PM]
The author at Deinonychus antirrhopus in a related article titled Carnival of the Capitalists writes:
    The Carnival is at Venturpreneur this week. Lots of good posts there. For me some of the posts I hope to have time to read (pretty busy now) are this one by Arnold Kling which looks at the drugs and prescriptions and how ending the war on drugs would e... [Tracked on April 26, 2004 8:49 AM]
COMMENTS (8 to date)
Anthony Suruda writes:

I'm a physician who has treated umpteen children with colds and ear infections whose parents demanded the latest third generation cephalosporin because amoxicillin "didn't work" for their kids. My first reaction to your posting was to agree that deregulation of prescription drug purchases would lead to overuse of the latest antibiotics and early emergence of drug resistance.

On second thought I would prefer to see data comparing countries with effective prescription laws like the U.S. to countries where these drugs can be purchased easily without a prescription or with a bogus prescription such as Mexico. Is there any evidence for more rapid emergence of drug resistant strains in the latter?

dsquared writes:

Anthony: Not really much evidence of drug-resistant strains in VIetnam, where antibiotics are freely sold OTC. On the other hand, I'm not sure how this might translate to the US, where incomes are much higher ...

Eric Krieg writes:

Can't you get drugs from a pharmacy Europe without a prescription? I thought you didn't need a prescription in France.

Boonton writes:

Having someone close to me who is a herion addict brings a different perspective to this argument. That drug, at least, is horrifyingly powerful in its ability to literally change the person's moral center. Every action is predicated on obtaining a daily fix (not even getting high, just keeping from getting sick from withdrawl). Even the smallest functions of a 'normal' person like paying their cable bill become impossible.

I just don't think lifting all sanctions against drug use (except for some taxation) is the answer. At least a few drugs like herion do seem so bad that they overrride the free will of their victims. I would be much more sympathetic to legalizing 'soft' drugs but maintaining prohibitions on harder ones.

Trent McBride writes:

I recently wrote an article on the subject of doctors and their gatekeeping status. Trackback wouldn't work so I'll post the link here:

http://trentmcbride.blogspot.com/2004_03_01_trentmcbride_archive.html#108061200453642942

Shank writes:

I certainly understand the externality argument -- if another person takes an antibiotic, it affects me because it leads to the mutation of highly resistent germs. The person taking the antibiotic receives benefits (no longer being sick), and harms others in the process. As individuals, we do not have an incentive *not* to take an antibiotic, so of course over-consumption would be a problem.

Do we have a right to purchase drugs that may lead to worse diseases in the future? It's like asking if a factory has a right to pollute a stream. We all share the same air, and any germs that may be present in the air.

Until we are better at developing means to combat drug-resistant bacteria, I think current regulations are warranted under the "provide for the common defense" clause.

Eric Krieg writes:

How much cheaper would drugs be if you didn't need a prescription to get them?

Just wondering, I live on Prilosec, which costs $20 for a months supply OTC. What was a months supply before it because OTC?

I fully support making any drug that doesn't have serious side effects OTC. For example, Ritalin and Prozac are pretty benign, they should be OTC.

Prescriptions should be for drugs that have "externalities", like antibiotics.

David Thomson writes:

“Having someone close to me who is a herion addict brings a different perspective to this argument.”

Heroin may actually be less dangerous than serious alcohol abuse. Somebody addicted on this particular drug would probably be better off obtaining it under legal auspices. In this way, they will know its potency ---and the price will be reasonable. Heroin users have been known to lead rather ordinary lives. They can be productive citizens.

Comments for this entry have been closed
Return to top