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Prohibition vs. Taxification: Drug Control Policy in the USA

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  • James A. Roumasset

    ()
    (Department of Economics, University of Hawaii at Manoa)

Abstract

It is generally thought that legalization of the sale and use of currently illegal drugs would lead to a dramatic increase in drug use and social costs associated with drug abuse and criminal behavior. In this paper we show that it is not necessarily the case that legalization of drugs would be followed by an increase in use. Specifically, if drugs were legalized and taxed, then drug use can be held constant by spending a small fraction of the tax revenues (10.8 per cent in the case of cocaine) on treatment programs. Even if none of the tax revenues are spent on reducing the demand for drugs, the external cost associated with the increase in use from legalization (i.e., costs to society caused by users but borne by others) is only a small fraction of the tax revenues collected (13.2 per cent in the case of cocaine).

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File URL: http://www.economics.hawaii.edu/research/workingpapers/88-98/WP_96-8.pdf
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Bibliographic Info

Paper provided by University of Hawaii at Manoa, Department of Economics in its series Working Papers with number 199608.

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Length: 17 pages
Date of creation: 1996
Date of revision:
Handle: RePEc:hai:wpaper:199608

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  1. Jeffrey A. Miron & Jeffrey Zwiebel, 1991. "Alcohol Consumption During Prohibition," NBER Working Papers 3675, National Bureau of Economic Research, Inc.
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