David R. Henderson  

Endogeneity and the Drug War

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Why the things that happened during the drug war are not a good argument FOR the drug war. And the things that happened BECAUSE of the drug war are a fortiori not an argument for the drug war.

Last fall, for example, when Mr. Paul attended a Republican National Committee fund-raiser at the Central Park West penthouse of the New York Jets owner Woody Johnson, the senator launched into his standard speech about how Republicans could appeal more to younger voters by abandoning a no-tolerance approach to drug crimes. Some in attendance were taken aback, given that Mr. Johnson's brother died of a drug overdose and his daughter, who battled drugs and alcohol, died at age 30 in 2010. Mr. Paul's staff had not briefed him on the background.

This is from Jeremy W. Peters and Jonathan Martin, "Paul Has Ideas, but His Backers Want 2016 Plan," New York Times, March 22, 2014.

Here's what I find interesting. The bad things that Johnson's brother and daughter went through happened while drugs were illegal. In other words, they were endogenous to the drug war. So Rand Paul questions a policy that prevailed while those bad things happened and yet he is, presumably, regarded as insensitive for talking about them. What if Rand Paul had been a strong believer in the drug war and what if he had known about Johnson's family tragedies? Would it then have been appropriate for him to have talked about his belief in the drug war? Maybe the idea is that you just shouldn't talk about anything that could trigger any negative feelings in your host. If so, I get that. That's a judgment call, but at least I get it.

But what so few people seem to understand is that virtually all their horror stories about drugs occurred during a time when drugs were illegal. That is not in itself a slam-dunk argument for legalization. Much more is needed to make the case against the drug war. But if all these horror stories occurred during the drug war, it is hard to see how people can so easily think that these horror stories are an argument for the drug war.

Hillary Clinton made the same mistake in making her case for the drug war. She argued that "There is just too much money in" the illegal drug industry. What she seemed to have no concept of is that the price, quality, and quantity of illegal drugs, plus the identity and behavior of the sellers are all endogenous. They all are results of the drug war. So she can hardly argue for the drug war on the basis of its results when she sees those results as being bad.

About 10 or 15 years ago, I met economist who had spent a large part of her short (at that time) professional career studying illegal drugs and advocating that they be illegal. When I found her impervious to my arguments for legalization, I asked her if there had been some personal tragedy in her family that had influenced her thinking about legality. She admitted that there had. This was an emotional issue for her, not one where the results in her family should clearly lead to her advocating and reinforcing a system under which those results occurred.


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CATEGORIES: Economics of Crime



COMMENTS (28 to date)
Insight writes:

"This was an emotional issue for her, not one where the results in her family should clearly lead to her advocating and reinforcing a system under which those results occurred."

Interesting point but we must ask the question why people so commonly (almost universally) respond this way.

Daniel Kuehn writes:

Insight -
re: "Interesting point but we must ask the question why people so commonly (almost universally) respond this way."

Well we have to remember that the drug war still imposes a cost on drug users and dealers. All the reasons why we think it is misguided are second order effects. Very important second order effects, but I don't think it's THAT hard to understand why someone affected by this would want to make drug use harder rather than easier.

And I say this as an opponent of the drug war.

I would imagine most addicts do not seek out drugs because of the drug war. The endogeneity is not involved in that stage of the process. Someone with relatives caught up in gangs or the justice system WOULD be more involved in the stages where society is really negatively affected by the drug war.

MingoV writes:

The argument against the drug war is easy: It's not the government's business what individuals put into their bodies. The negative impact of drug use is born by the individual users and their loved ones.

The argument in favor of the drug war is hard: It must be highly effective in preventing the distribution and use of banned drugs, and the negative impact of the war must be less than the positive impact of having a healthier population.

Our war on drugs never came close: it was completely ineffective at preventing use. The negative impacts have been massive, with the biggest impacts being militarization of local law enforcement and the difficulties of treating chronic pain with the DEA hassling patients and clinicians. Drug use now is as high as when the war on drugs began, so there have been no health benefits. And, of course, the negative impacts of alcohol use exceed those of all illegal drugs combined, but prohibition is not politically acceptable.

Tom West writes:

I suspect that this is another case where the counterfactuals are so unknowable, that we all get to project our own prejudices upon them.

If you think of drugs in the same fashion as the enemy in WWII, you don't think "We're failing even though we fight", you're thinking, "Good Lord, if we stop, hard core drug use will kill *everyone*".

Certainly, my prejudices are that in the event of legalization drug use wouldn't increase all that much, but given I also failed to predict the industry's ability to get most of us to eat far more calories as we should, obviously industry is far more effective in changing our behaviour in ways that favor short-term pleasure over our long-term health far more than I give it credit for.

(And obviously I don't subscribe to MingoV's "if someone can persuade you to pay for killing yourself, that's your problem".)

Andrew_FL writes:

Another argument that falls into this category: "But the drugs are so much stronger now!"

Uh, yeah, that's what economic theory would predict would happen, as a result of making them illegal.

gwern writes:

> The bad things that Johnson's brother and daughter went through happened while drugs were illegal.

You're forgetting the adult daughter's struggles with alcohol. Alcohol is, last I checked, not illegal for adults. Even if we claimed that the other negatives were 100% due to the War on Drugs (which of course would not be granted by most people inasmuch as the harms of legalized drugs are the supposed reason for the War), the example would still be relevant (as much as anecdotes can ever be).

David R. Henderson writes:

@gwern,
You're forgetting the adult daughter's struggles with alcohol. Alcohol is, last I checked, not illegal for adults.
Good point: not that I forgot, but I should have noted that.
Here’s what I’m willing to bet, though: (1) at the reception at the Woody Johnson penthouse, alcohol was served, and (2) Woody Johnson wants to keep alcohol legal for adults.

Politics Debunked writes:

re: "Another argument that falls into this category: "But the drugs are so much stronger now!""

This is getting a bit tangential, but the unfortunate thing is that if drugs were legal then there might be competition to improve drugs based on different attributes than "strength", for example ones which reduce the potential for harm. For instance the creation of a drug with an anti-dote pill which removes all impairment by turning off the active ingredient quickly. That would let people who do use drugs later safely drive, work, and care for children when needed.

Most research scientists seem more likely to work for legal entities to pursue such "better" drugs than for illegal entities. They would likely compete on reduced danger of negative side effects, reduced danger of overdose, reduced addictive potential (if such a thing is possible), and not merely on making them more "potent" per unit quantity. Unfortunately there might be public outcry among those who don't want to see features that might lead to increased use.

James writes:

If Hilary thought there was too much money in the drug trade, I don't think she's guilty of ignoring endogeneity.

Yes, the amount of money currently in the drug trade is influenced by the drug war, but if the drug war were abandoned tomorrow, the amount of money would almost certainly go up, not down. The drug war consists of policies that make it more costly to produce, consume or distribute drugs. Abandoning those policies would lead to more production, distribution and consumption of drugs.

I don't disagree with the broader point, that many of the social ills associated with drugs arise precisely because those drugs are illegal. But Hilary's comment is not an example of ignoring endogeneity.

BC writes:

Without taking any position on the drug war, I don't think David's point here is quite right. Suppose you were talking to a member of the French Resistance during WWII. (I claim exemption from Godwin's Law because I will not be comparing anyone to Nazis; I will be making a comparison to a resistance movement. Substitute some other occupation if you want.) If you told the person that you thought the Resistance should end, that person would probably be aghast and point out all the terrible things that the Nazis have done. It would not actually be a valid argument to say that all those things happened during the Resistance so those aren't good reasons for the Resistance to keep fighting.

Some people may believe that the drug war can be "won" and that winning will stop all of these bad things. You may not agree that the war can be won, but that's a separate issue. Not having won the drug war yet is a different state from having won the drug war, so bad things that happened during the former state can be valid reasons for trying to bring about the latter state.

NZ writes:

Daniel Kuehn hit the nail on the head when he said: "I would imagine most addicts do not seek out drugs because of the drug war."

Libertarian legalization advocates like to use the argument that drug laws have little or no impact on demand, but this reveals why David Henderson's (implied?) argument is wrong.

That said, I actually disagree with Kuehn's statement. I think that the illegality of drugs results in a culture in which moderate use is disincentivized. Many people who may otherwise have used only once in a while are instead led to become addicts. (Of course drug addicts are a tiny minority of drug users, but they have a significant role in driving demand--it's the 80/20 rule.)

Randomly responding to a few other comments...

MingoV: "The argument against the drug war is easy: It's not the government's business what individuals put into their bodies. The negative impact of drug use is born by the individual users and their loved ones."

That argument is only true if you accept the inherent libertarian first principles, which most people don't (myself included).

Additionally, MingoV, I disagree with you about the biggest negative impact (I say it's how our drug laws, hard-coded to be globalist from their origins a century ago, have permanently embroiled us in the affairs of countries all over the world) though I guess it's a matter of taste. Also, who knows if drug use might have been higher but for the drug war?

@Politics Debunked: I think your idea of a "drug effects antidote" coming to market is far-fetched, since there isn't even one of these for alcohol or caffeine, but I also think it's a bad idea. It would lower the social costs of drug use, which would lead to an increase in use--most of which I'm betting would not be coupled with the antidote. The best combination for drugs is legal permissiveness with cultural restrictiveness. Right now we have the worst combination: legal restrictiveness with cultural permissiveness.

@James: I think you might be right about there being lots of money in drugs even if they're legalized, but the money would be less concentrated, and for any short time that it was concentrated it would be in the hands of legitimate business-owners rather than career criminals and terrorists. Snarky comparisons between the two are tempting, but ultimately we have to admit there are two very different cultures there.

@BC: Like all Progressive and Neocon causes I can think of, the drug war was started without any clear definition of what would be considered having won. There was no mission statement, or if there was, it was suitably vague that a drug war could reliably be waged forever. So, while there may be people out there who believe the drug war can be won, no two of them will agree when that time has come.

Tom West writes:

I had the impression that the war on drugs is like the war on crime. It's never won.

David R. Henderson writes:

@James,
Yes, the amount of money currently in the drug trade is influenced by the drug war, but if the drug war were abandoned tomorrow, the amount of money would almost certainly go up, not down. The drug war consists of policies that make it more costly to produce, consume or distribute drugs. Abandoning those policies would lead to more production, distribution and consumption of drugs.
I think it’s clear from context that Hillary is saying that the amount one can make selling drugs is high. Legal competition would drive the price, and profits (though, not risk-adjusted profits) down. You’re right that production and consumption would rise (which is why the price would fall). But if the elasticity of demand in the relevant range is less than 1, then total revenue would fall.

NZ writes:

@David Henderson:

I'm curious what you think about the Spanish method of controlling opium use in the Philippines before the US took it over in 1898: they gave a monopoly on sales of opium to the ethnic Chinese, who mostly sold it to Filipinos.

(This part of the history is interesting but not essential to my question: Republican W.H. Taft, who took over governorship in 1898, was happy to keep this monopoly in place, but progressive Bishop Charles Brent basically nagged Teddy Roosevelt into forcing Taft to shut down the monopoly and outlaw opium altogether. Smuggling immediately shot sky high.)

Anyway, since they had a monopoly, the Chinese had an incentive to keep the price high, while not so high as to encourage smugglers. The moderately high price kept consumption reasonably low and stable, while it was in place.

As a libertarian who I presume opposes state-sanctioned monopolies, do you think a similar method could work for us if we were to ever legalize drugs (or a drug)?

NZ writes:

Oh yeah, to all those who say the drug war is lost because it hasn't brought down demand:

When the Neocons took over the drug war from the Progressives after WWII, they made it pretty clear that their new emphasis was on locking up drug users, not getting them to stop being users. Shortly after that came the emphasis on locking up drug dealers (thanks in large part to Joe Biden and his unconstitutional expansion of civil forfeiture).

The Neocons were so effective in this rebranding campaign that they convinced paleocons like Pat Buchanan and Steve Sailer to go along with all or part of their scheme. (A generation before the postwar era, most conservatives were opposed to or at least skeptical of drug prohibition.)

Sailer, for instance, often points out that a feature of drug prohibition is that it gives cops an easy way to apprehend thugs "by proxy", since the violent crimes they've probably committed are harder to prove.

(I haven't yet heard Sailer explain exactly what happens once these thugs plea-bargain their way back onto the streets after the master class in drug dealing they received while behind bars.)

Politics Debunked writes:

re: "Politics Debunked: I think your idea of a "drug effects antidote" coming to market is far-fetched, since there isn't even one of these for alcohol or caffeine, "

The issue is that this would likely require modifying the active ingredient that causes the impairment to make it able to be turned off, which likely requires the sort of production process used for pharmaceuticals, and not the traditional production process for those beverages mentioned. The sort of researchers likely to be involved with pharmaceutical type drugs who could manage such research seem unlikely the sort to be working with those beverages now, but are from the sort of fields that would be involved in legal production of drugs. If you think it is "far fetched" I suspect you don't know much about the relevant sciences (though I won't speculate about a timeline).

re: "but I also think it's a bad idea"

Yes, I already mentioned that I figured some misguided folks hate drugs so much they would object. They would prefer to for instance see people die in car accidents due to impairments, or see children suffer from child neglect, than see harm reduction strategies pursued. If drugs are legalized, fortunately entrepreneurs would pursue such things seeking competitive advantage regardless of what short sighted people think. Unfortunately some people who desire to control others may try to ban such research.

It seems a relevant topic for an economics blog to suggest people should have basic property rights regarding their own body, such as what to ingest. It is also an example of the fallacy of central planning, that you seem to imply your view of it being a "bad idea" means it shouldn't be allowed to happen. It seems you feel you (or those elites you wish to see in control) should dictate what varieties of products are produced&sold (or banned). I personally am concerned about overusage of drugs being bad for society, but the answer is education, not keeping drugs illegal or ensuring they remain harmful.

Politics Debunked writes:

Minor correction (should have been more awake before posting). I shouldn't have referred to it as the central planning fallacy, I meant an example of the negative aspects of a central planning mindset (the issue is those who feel they know what is best for others dictating products be banned, not anything to do with efficiency).

Jameson writes:

I agree with BC's argument on why this type of thing is a social faux pas. Many if not most people are convinced that we just don't fight hard enough against drugs, and that's why people still suffer from drug problems. In my opinion, it's an insane point of view to hold after looking at the facts, but oerhaps those who have experienced personal loss due to drug abuse have a hard time shaking that natural inclination even after they see and analyze the data. To me, that's understandable, even if it's not right.

Daniel Kuehn writes:

NZ -
re: "That said, I actually disagree with Kuehn's statement. I think that the illegality of drugs results in a culture in which moderate use is disincentivized. Many people who may otherwise have used only once in a while are instead led to become addicts. (Of course drug addicts are a tiny minority of drug users, but they have a significant role in driving demand--it's the 80/20 rule.)"

Oh I agree with that. I'm not making a blanket statement so much as saying that we have to remember that the drug war isn't all unintended consequences. It does discourage things that some people may legitimately want to discourage, and that explains support for it by reasonable people (even if we think there are lots and lots of other unintended consequences that outweigh that).

NZ writes:

@Politics Debunked:

I don't see your point about the "antidote pill". Right now, alcohol is legal and driving drunk is not. Therefore there's a huge latent demand for something that would quickly undo the cognitive effects of alcohol, whether via pharmaceuticals or otherwise. Nothing has been developed, and I'm a layman but I think the reason is that the causes of the drug's intoxicating effects are not as simple as isolating one chemical or anything like that.

I don't "hate drugs" (see my other comments--this should be clear), but I do hold the rather non-controversial view that less drug use is preferable to more drug use. I strongly prefer that the disincentivization of drug use be implemented through culture rather than through laws.

The disincentivization of any undesirable activity means that given a choice between raising or lowering its costs, the former is chosen. The fallacy is to believe that choosing the latter would save lives.

Most people don't have the forward time orientation to drink a glass of water with each drink of alcohol, let alone to take an antidote to their heroin when it's time to drive home. Knowing that an antidote is out there would give many of them the extra incentive to shoot (or in the case of legalized opiates, more likely smoke) up when they might otherwise have abstained or at least waited until they were in a more appropriate setting. Many of them would then just forget or feel unmotivated to take the antidote. The result would be many more tragedies than if no antidote was available.

This is similar to the case of no-fault divorce: lower the costs, and consumption rises drastically. If all you care about is hollow feel-good stuff like "autonomy" and "liberty" then you rejoice, but if you care about the real tangible effects on families and on societies, then this is nothing short of an atrocity.

@Daniel Keuhn:

Yes, I agree.

Daniel Artz writes:

Before you can get to logical arguments with many people concerning the war on drugs, you first have to debunk the notion that illegal=not present. Just because you make a product or service illegal to sell does NOT mean that there won't be a market of willing buyers and willing sellers; it only means that you have driven that market underground, where it is harder to monitor, harder to regulate, and harder to police.

The skeptics may assert that, with sufficient enforcement efforts, government can indeed make illegal drugs disappear from the market. That's wishful thinking. There will always be a demand for the drugs, trying to stamp out the supply is like trying to slay the Hydra with only one arm.

Once you accept the inevitable presence of drugs, with or without the legal ban, then it becomes easier to try to separate the bad consequences arising from the drugs, which will need to be dealt with in any case, and those arising from the prohibition regime, which can be avoided altogether by adopting a more rational legal regime.

Politics Debunked writes:

re: "Therefore there's a huge latent demand for something that would quickly undo the cognitive effects of alcohol, whether via pharmaceuticals or otherwise. Nothing has been developed, "

There are important differences between the two problems. Picture it like the concept of designing a man made virus with an off switch, rather than trying to produce an off switch to a natural virus.

The technical challenges are very different. Unlike alcohol producers, pharmaceutical makers in some cases design a delivery system for a drug (what it takes to get it to its target, to make it through the digestive system and into cells, etc), as well as things like time release in a wrapped container, and they design the active ingredient itself. There are many avenues of attack to design such things in a way they can be turned off. The scientists involved in creating such drugs are the type of scientists who would be involved in designing off switches.

The active ingredients of caffeine and alcohol weren't designed and there are cost advantages to not tinkering with what can be produced cheaply in bulk using the existing production processes. The delivery mechanism is for the most part direct. In theory perhaps that could be changed, but that would require different sorts of production processes, dealing potentially with impacts on taste, etc.

The technical difficulty of something impacts its likelihood of production, as do human favors like whether the appropriate people are exposed to the problem or working on related problems. Such things may arise eventually, but there are limited investment dollars, not every product that is technically feasible and superior to existing ones yet exists, progress isn't instantaneous. Investment by alcohol producers is more likely to be along the lines of taste and other competitive attributes, whereas much of the sorts of research that would go into producing better drugs, i.e. tinkering with active ingredient composition, would be more closely related to the sort of research required to do things like add an off switch.


re: "strongly prefer that the disincentivization of drug use be implemented through culture rather than through laws."

Except if drugs are legalized there will be effort to produce safer drugs unless such efforts are outlawed (just as the end of alcohol prohibition led to safer alcohol than some of the products sold during prohibition). There didn't seem to be much reason for reiterating that such a thing would be a bad idea (as I had suggested some might think) you seemed to be imply that therefore something that should be done about it (like if drugs were legalized, making it illegal to try to produce safer ones).

Unless of course you are saying that you would use a voluntary approach and urge people to boycott life saving new drugs and protest them, which indicates you'd prefer to see people die rather than have access to safer ones. That preference calls into question your level of hatred of them and whether like the topic of the blog post you might have some some emotional reaction to them going on. I personally have never used recreational drugs and think overuse is bad for society but would prefer to see people who do use them have safer options.

David R. Henderson writes:

@Daniel Artz,
Before you can get to logical arguments with many people concerning the war on drugs, you first have to debunk the notion that illegal=not present.
I agree, and you stated it well. But that’s why I found this story so striking. One of the things you would not have to convince Woody Johnson of, given his tragic family experience, is that illegal = not present.

NZ writes:

@Debunking Politics:

I see your point, put that way: it's hard to engineer antidotes to naturally occurring intoxicants. But that would only seem to cover amphetamines, MDMA, LSD, and a few designer drugs. The psychoactive ingredients in opiate and coca derivatives (which enjoy much wider use) are naturally occurring.

I don't have a problem with legalized drugs being made safer than they are now as illegal drugs--I see a kind of Pareto efficiency there. I just don't think we should wander too far past that optimal efficiency point. To put it very simply, it is possible to have too much of a good thing.

As to your ad hominem, I used a lot of drugs as an adolescent and never experienced any seriously bad consequences--and in fact a lot of good ones, though I also don't think I'm a good example of an Everyman. I no longer use any intoxicants except caffeine and alcohol. I don't have much emotionally invested in the issue except that I find many of the current discussion rather frustrating in its myopic rejection of history and reality.

Daublin writes:

Mingo, it's even harder: you have to argue that the drug war is making people healthier even when it works.

This is far from obvious. Psychiatrists are routinely prescribing mind-altering drugs to their patients, and in many cases the results lead to a patient that intuitively seems healthier. Psychiatry, in its poor ill-founded current state, makes plenty of mistakes. It is not clear that self medification does worse. On the contrary, if you approach the subject with an open mind, there is plenty of evidence that most people will make perfectly good, self-improving choices, just like most people already do with coffee, alcohol, and sleep aids.

This example brings up a larger, more chilling thought to me. What if drug enforcement was actually effective? Nobody would even know, for sure, what we are missing out on.

Floccina writes:

Tom West worte:

I also failed to predict the industry's ability to get most of us to eat far more calories as we should, obviously industry is far more effective in changing our behaviour in ways that favor short-term pleasure over our long-term health far more than I give it credit for.

Wow! Just wow!

Politics Debunked writes:

re: the issue of manufacturing antidotes to drugs. The issue is partly that different drugs have difference mechanisms of action, some of which may be easier to develop counter agents to than others. The fact that a counter agent to alcohol hasn't been developed doesn't rule out ones for other drugs. Some drugs may be able to be altered from their usual molecular structure to produce chemicals which have the same biological impact, but also include extra bits that are added that will allow them to combine with counter agents.

Investment in gaining a competitive advantage in beverages is more likely focused on things like taste and branding and cost, whereas with pharmaceutical type drugs research would be focused on other aspects to compete. You likely wouldn't compete on the taste of a pill, you'd compete on other aspects of the drug, likely researching into its effects on the brain and tinkering with the active ingredients. Alcohol producers are unlikely to be tinkering with making a chemical similar to alcohol but with different impacts.

Pharmaceutical production techniques focusing on mostly on just dosages of the active ingredients have different production techniques than producing beverages where the active ingredients are just one component, and different sorts of researchers involved (currently at least) than typical beverage production focused on taste and quantity.

Again, I don't know the timescale to produce such an approach using antidotes, or other harm reduction factors such as lower likelihood of overdose, and there is no guarantee they can be done quickly. However I would suggest people not underestimate the speed at which certain types of pharmaceutical research can advance. Obviously some areas go slower than we would hope, surprisingly so, others move quickly. (the FDA likely being the major holdup, as it is today, which might preclude such things).

Tom West writes:

Daniel Artz:

you first have to debunk the notion that illegal=not present.

Is there really anyone claiming this? Pretty much anyone I know who defends the drug laws defends them on the same basis as laws against murder or theft. Without the law, there would be more of it, and that's a bad thing.

I agree with that. However, my claim is that the social cost of increased drug use would be easily outweighed by the removal of the huge damage that the drug war causes.

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