Understanding a Global Illicit Drug Market

Iraq tobacco
In the souq of a small Iraqi town, I saw bags of tobacco leaf for sale. But the real attraction for customers was as a booth stocked with well-known Western brands, of which I snapped this photo.

How did all these branded cigarettes make their way from the West to Iraq? They didn’t. They are among the more than one hundred billion fake Western brand cigarettes produced each year for the black market. What are the dynamics of the global tobacco black market, and what are its implications for public health, crime and taxation collection?

I answer these questions in my latest piece at Washington Post’s Wonkblog.

The Rarely Acknowledged Public Health Achievements of Obama’s Drug Policy

After initially accusing President Obama’s outgoing drug policy director Gil Kerlikowske of opposing public health measures in drug policy, Eric Sterling had the class to publically acknowledge Kerlikowske’s health-oriented reforms:

[Kerlikowske] recognized the importance of stopping the spread of HIV/AIDS among injecting drug users and recognized their humanity and dignity in the way his predecessors did not. Second, in the same spirit, he recognized that the dissemination of naloxone into the environments of opiate users, many of whom are using drugs illegally, would stop overdoses from becoming fatal.

Sterling also praised Kerlikowske’s support of opiate substitution therapies (e.g., methadone maintenance), which the administration expanded within the Tri-Care insurance program for military personnel and their families and spread internationally through the President’s Emergency Plan For AIDS Relief (PEPFAR).

In addition to the points Sterling raised, one could also note that the Administration’s signature legislation — the Affordable Care Act — mandates full coverage in Medicaid and health insurance exchanges for addiction treatment. That’s the biggest stride the federal government has taken towards health-oriented drug policy in at least 40 years and probably ever.

Sterling’s explanation for why his first article was inaccurate is powerfully honest and important:

I insulted Mr. Kerlikowske and dismissed his record on matters I did not review, relying on prejudices I formed regarding other subjects such as drug “legalization,” whether the Administration’s anti-drug program was “balanced,” as he claimed, and on marijuana policy. I deeply regret that I was unfair to Mr. Kerlikowske and misled the readers of Huffington Post regarding his support and commitment on important public health issues.

Sterling was by no means alone in his assumption that anyone who opposes drug legalization also opposes health oriented drug policy reform. But historically and cross-culturally, opinions on those two matters have not intersected in a consistent way. For example, among the people who identify themselves as “harm reductionists” around the world are many individuals who want all drugs legalized and many individuals who regard that idea with terror and hostility (Mainly because of the experience of legal tobacco). Among people who support legalization are individuals who favor increased availability of addiction treatment and individuals who are quite skeptical of the addiction treatment enterprise. And among people who oppose drug legalization –President Obama being a prominent example — are individuals who want to augment the quantity and quality of health services for drug users. Continue Reading…

Non-Violent Offenders Have Been a Declining Part of the State Prison Population for 20 Years

Prison is the subject of many myths in the public policy world. For example, many people believe that the size of the prison population has continued to rise under President Obama, when in fact it has fallen. Other observers maintain that prison populations drop during economic downturns, when in fact the reverse has generally been true. An even more widely embraced myth is that states have been increasingly incarcerating prison populations are increasingly composed of non-violent offenders. But as this chart from the Bureau of Justice Statistics (BJS) shows, the proportion of the state prison population that is serving time for a non-violent crime has been declining since the early 1990s.

The BJS data reveal that most state prison inmates today are incarcerated for a violent offense. Importantly, the data reflect current controlling offense only, and thus understate the proportion of prisoners who engage in violence: Many inmates currently serving time for a non-violent offense have prior convictions for violent crimes.

These data have at least three important implications. Continue Reading…

How Legalization Can Expand a Black Market

Human trafficking is one of the most revolting crimes on the planet, and it is therefore understandable that some governments have taken radical action to attempt to eliminate it, including legalizing prostitution. The argument, which seems sound on its face, is that expanding the supply of legal prostitution will draw demand away from the illegal market that relies on human trafficking. It is thus both surprising and important that new research from the London School of Economics shows that legalizing prostitution increases, rather than decreases, human trafficking.

This finding is stunning until one recognizes that demand for prostitution, gambling, drugs and the like is highly elastic. When the demand-suppressing effect of illegality is removed, demand can increase, sometimes dramatically. All of this new demand does not necessarily go to the legal market. Some new legal market entrants engage in the parallel black market some of the time (e.g., play legal slots at the casino by day and participate in illegal mob-run poker games at night). If the size of the newly legalized market is rapidly growing, these “fractional customers” can make the black market larger than it was in the pre-legalization period when all market participants were 100% reliant on the illicit market to meet their demand.

Other people may develop demands in a newly legalized market that over time lead them to move exclusively to the illegal market. For example, a man who begins going to prostitutes when sex work is legalized may realize over time that he wants to have sexual encounters in which he is physically abusive to prostitutes. He would then migrate to the black market where he can more easily indulge his violent propensities. Similarly, people who becomes addicted to a newly legalized drug may come to want to consume it so often and in such quantities that only the black market will meet their demands.

It has long been speculated that the phenomenon of legalization of a market growing a black market has already happened with gambling. There has clearly been an explosion of legal casinos, poker competitions, state-run lotteries etc., but no definitive research indicates whether the prevalence of illegal gambling has increased, reduced or stayed constant as a result. The new LSE research is I believe the first formal test of the possibility that legalization can grow a black market, and for prostitution it appears that it can (full paper here).

There is clearly more empirical work to be done in this area. But in the meantime, wise heads in the policy world will not take it as a given that legalizing something will necessarily shrink the black market.

h/t: Eric Voeten, who blogs at our sister site, the Ten Miles Square section of Washington Monthly.

Marijuana Policy and Traditional Liberalism

Former Congressman Patrick Kennedy, a long-time advocate for people with addiction and mental illness, is leading a new group calling for a different approach to marijuana policy.

Smart Approaches to Marijuana will advocate for alternatives to incarceration, expanded mental health and addiction treatment and the provision of non-smoked cannabis medicines to sick patients (without waiting for FDA approval) at taxpayer expense.

It will also oppose legalization, not wanting a Big Tobacco-like industry in the marijuana sphere.

From the viewpoint of traditional liberalism, which Patrick and his family have championed as well as anyone in my lifetime, this is the logical policy mix (see Adam Serwer in the same vein). Curbing incarceration and using the power of government to aid the sick are honorable pillars of American liberalism. Entrusting public health to corporations in contrast is both naive and much more in line with a libertarian/pro-business conservative mindset.

UPDATE: Comments are back on, thanks to Steve or whoever fixed that. I have re-titled the post to better reflect its content, our blogging interface has been chronically broken and frustrating lately but an upgrade is just around the corner.

Marijuana: The Most-Debated, Least-Important Illegal Drug

By most measures the majority of the drug problem in both the US and Mexico does not relate to marijuana, so nothing you’re going to do with marijuana is very likely to decisively change the character of the overall drug policy situation

So says Professor Jonathan Caulkins in Randolph Nogel’s unusually nuanced article on the potential impact of US marijuana policy on Mexico. What Jon is saying will surprise many people, but he’s quite correct. Marijuana gets outsized attention in US drug policy debates, yet it matters at most slightly for the security of Mexico (and not at all for Central and South America). Domestically, it does not contribute to overdose deaths nor account for even 1% of imprisonments. But its status as a culture war symbol — particularly for baby boomers — will keep it in the forefront of popular debate even as concern over cocaine, methamphetamine and heroin wanes.

Why Illegality Makes Drugs More Expensive Than Taxes Ever Could

One of the central rationales for making certain drugs illegal is to elevate their price and thereby reduce consumption. It’s astoundingly effective: illegality makes lightly processed plant matter (e.g., cocaine) more valuable by weight than gold.

It has long been understood that part of this price inflation occurs because individuals in the drug trade demand higher wages to compensate them for the risk of arrest. In the current issue of National Affairs, Jonathan Caulkins and Michael Lee note that an additional, less commonly appreciated mechanism is also at work:

…inefficiency stems from having to operate covertly. The precautions required to evade detection make the production of drugs very labor intensive. Grocery-store cashiers, for instance, are more than 100 times as productive as retail drug sellers in terms of items sold per labor hour. Similarly, hired hands working for crack dealers can fill about 100 vials per hour, whereas even older-model sugar-packing machines can fill between 500 and 1,000 sugar packets per minute. This labor intensity of drug production, combined with the high wages demanded for that labor, are what drive up the costs of drugs; by comparison, materials and supplies — glassine bags, gram balances, and even guns — are relatively cheap.

Caulkins and Lee provide a useful comparison point to appreciate the impact of illegality on price: If cigarettes suffered the same legal disadvantage as cocaine and heroin, they would cost about $2,000 a pack. This is a stark illustration of how taxes on a legal drug could never even remotely raise prices as high as does illegality. Even cigarettes taxes that attempt to raise the price per pack of cigarettes to one half of one percent of what their price would be under illegality are widely evaded and create huge black markets.

Debating the “Gateway Effect” of Youth Drug Use

Some people believe the ‘gateway effect’ exists because early drug use primes the human brain for more drug-seeking, others argue that the friends you make using drugs as a youth are a ready source for other drugs later, and still others argue that there are factors, like impulsivity, that causes both early and later drug use. Which camp is correct? Probably, all of them.

That’s a comment by an eminent scientist on a new Yale University research study showing that use of cannabis, alcohol and tobacco in adolescence predicts abuse of prescription medications later in life (though the effects are more consistent for males than females).

From an ideological standpoint, it is necessary to have one and only one gateway hypothesis. Many drug legalization advocates attack the idea that any part of the relationship between early and later drug use could be causal. Rather, they insist that the relationship is 100% explained by social network effects (i.e., friends who give a young person access to alcohol and cannabis become a source of other drugs) or by an unknown third factor, such as impulsivity, that causes both early and drug use. Many ideologues on the prohibition side do the reverse, claiming that 100% of the relationship is causal and that invocation of social networks and third factors as explanatory factors is flummery.

But from a scientific viewpoint, there is nothing wrong at all with saying that part of the effect is causal (early drug use in part truly causes later use), part of it is a social network effect, and part of it is a third factors effect. Science is thankfully more accepting of complexity than ideology, which is particularly important when trying to solve a puzzle as intricate as human development. And in any case it’s rather ridiculous that discussions about drug gateway effects are held captive to legalization debates when the key gateway drugs (alcohol and tobacco) are already legal.

How Substitutable are Marijuana Possession Arrests?

Many times in the history of the United States, rising prevalence of use of a drug has been responded to with increased arrests of people in possession of that drug. As Peter Reuter and Rob MacCoun pointed out some years ago, this makes the rise of marijuana possession arrests in the U.S. particularly puzzling: The rate of marijuana use was historically low and stable prior to the growth of arrests.

The trend began in the 1990s and has continued to the present day. It has been almost entirely an urban phenomenon, with the best example being New York City (For a wonderful series of charts on NYC’s arrest patterns, see this piece by Michael Keller).

No informed observer seems to believe that this rise in arrests resulted from heightened concern about marijuana use per se. Rather the explanations invoked range from the arrests being a side effect of stop-and-frisk policing, to them being a way for those police who are racially prejudiced to hassle people of colour, to them being a tactic to punish malefactors who have gotten away with something worse (e.g., someone who has repeatedly beaten a spouse who is too afraid to testify against the perpetrator). Some people are sure they know the explanation with absolute certitude, but if like me you admit the possibilities of your own ignorance and life’s complexity, please read on. Continue Reading…

One More Time…Drug Legalization is Not Decriminalization

Zack Beauchamp makes an extremely common analytic error in a post on drug policy. In an effort to refute Water Russell Mead’s argument that we can learn something about drug legalization from the legal opioid pain medication industry, Beauchamp responds by citing data from Portugal.

I am not going to get into the substance of their debate here. I am writing only to point out that Portugal hasn’t legalized drugs, it has decriminalized them. Pain medications are legalized, i.e., there is a legal industry, advertising, lobbying, a government controlled regulatory system, no civil or criminal possession penalties etc. None of this is true of marijuana, heroin, cocaine etc. in decriminalization regimes such as exist in Portugal, which simply remove criminal penalties (Portugal still has civil penalties) for possessing small amounts of drugs and for using drugs.

Everyone who understands drug policy, whether they advocate for legalization, decriminalization, or the status quo, knows that equating decriminalization with legalization is at best wrong, and at worst terribly misleading. Beauchamp is throwing apples at Mead’s oranges.

p.s. Part of the confusion of these two terms no doubt stems in part from the fact that U.S. alcohol “Prohibition” was what we would call today a decriminalization regime.