If we take the goals stated by public officials and prohibition proponents as sincere, the question is whether or not current drug policies achieve these goals.

To this end, economic thinking offers valuable insight by examining how drug prohibition alters the incentives faced by individuals on both the supply and demand sides of the illicit drug market. In turn, this analysis allows us to trace the chain of consequences associated with drug prohibition.

Proponents of drug prohibition argue that by banning certain substances, they can reduce or eliminate both the demand and the supply for drugs, thereby significantly reducing or even eradicating the drug market. What these arguments fail to appreciate, however, is that making markets illegal fails to reduce, much less eliminate, the market for drugs. Instead, these mandates mainly push the market for drugs into underground black markets.

In addition, prohibition acts as a “tax” on sellers in the drug market. Would-be and current drug vendors must now incorporate fines, possible prison time, and the cost of evading capture into their business models.15 This tax drives higher-cost sellers (i.e., those unwilling or unable to incur these additional costs) out of the market.

Such a change in the drug market does align with the goals of prohibition. If sellers are pushed out of the market, this limits the supply of drugs and raises prices.16 These higher prices, in turn, reduce the quantity of drugs demanded. However, these higher prices and the changes in the market structure caused by prohibition generate unintended consequences, ones that work against prohibition’s stated goals.

Prohibition, Tainted Drugs, Illness, and Overdose

The first consequence of drug prohibition is more overdoses and drug-related illness. This is perhaps best illustrated with an example comparing how information is transferred when a drug is legal versus how it is transferred when a drug is illegal. Consider, for instance, a mislabeled or impure version of a legal, over-the-counter medication. Once a consumer becomes ill or overdoses on this medication, this information is reported, collected, and analyzed by relevant institutions. In addition, information about product quality, or lack thereof, is relayed through other channels, including media outlets, social media, and word of mouth. Consumers can therefore adjust their consumption accordingly. On the supply side, suppliers of a legal medication face the incentive to recall the product and correct the error to retain their customers and prevent legal repercussions.

These quality control mechanisms and information regarding purity are weaker or absent in a black market for drugs. First, underground markets provide less information about products and vendors because transactions occur in secret. Second, consumers in the market avoid reporting defective or impure substances because this might implicate their own law-breaking. Third, consumers of illegal drugs have no legal recourse should they purchase a substance of inferior quality, in contrast to individuals who bought tainted headache medicine or contaminated food in a legal market. On the supply side, producers and sellers of impure or tainted products face weak incentives to remove these products, knowing that buyers are unlikely to communicate with one another and unlikely to report their problems. Taken together, these factors allow more poor-quality drugs onto the market, which increases the chance of poisoning and overdose.

This is not the only way that prohibition can increase overdoses. On the supply side, prohibition leads sellers to create, transport, and sell more potent materials because prohibition’s added costs incentivize higher-potency drugs and their higher value per unit. For example, under prohibition, suppliers will tend to offer heroin compared to marijuana, since heroin is more valuable per unit (heroin sells for around $450 per gram, while marijuana sells for between $10 and $16 per gram in the United States). Likewise, drug dealers will tend to sell more potent versions of all drugs. For instance, someone selling marijuana will likely provide a product with higher concentrations of tetrahydrocannabinol (THC), the psychoactive component of marijuana, as they can earn more money per unit.17

A similar shift to more potent substances occurs on the demand side. Because prohibition raises drug prices, users seek more bang for their buck. That is, since the overall cost of obtaining drugs is higher, more potent drugs look relatively cheaper than weak drugs. If we assume that drug users rationally respond to risk and look to maximize their satisfaction or high from every dollar spent, this has three important implications.

First, users will likely switch from lower potency to higher potency within a given type of drug (for example, from marijuana with lower to higher concentrations of THC). Second, users may switch from low-potency drugs to harder drugs (such as from marijuana to cocaine). Third, users are likely to employ ingestion methods that increase the effectiveness of drugs (such as injecting rather than smoking a drug). Taken together, these information and potency effects mean that prohibition likely increases drug overdoses.

Prohibition and Drug-Related Disease

By raising drug prices, which pushes people toward harder drugs, prohibition increases disease transmission. As mentioned above, higher prices encourage more intense methods of use, such as injection. Law enforcement’s desire to promote prohibition generates restrictions on legal needles and syringes. In many states, it is illegal to buy and sell needles and syringes without a prescription. These two effects combine to encourage the reuse and sharing of dirty needles. (Repeated use of needles even by the same individual is unsafe. Needles dull with each use and may break off under the skin, thus causing infections or other problems.) The sharing of needles drastically increases the risk of transmitting blood-borne diseases such as HIV/AIDS and hepatitis.

Prohibition and Violence

Proponents of prohibition claim that banning the manufacture, sale, and use of drugs will reduce drug-related violence. This claim rests on the assumption that drug use leads to violence. But violence in drug markets may instead result from the institutional context created by prohibition.

When drugs are illegal, users cannot use formal legal channels to resolve disputes or seek legitimate protection for their business transactions. Neither buyers nor sellers in the illicit drug trade will turn to the police or other legal dispute-resolution mechanisms. Instead, individuals must solve their own problems, which often means they use violence to solve issues as opposed to more peaceful means of legal dispute resolution.

In addition to pushing individuals in the drug trade toward violence, prohibition means that those involved in the drug market are automatically criminals. This lowers the cost of committing a subsequent crime, such as assaulting a rival drug dealer, relative to a scenario in which drugs are legal. Moreover, prohibition may increase the benefits of using violence. By gaining a reputation for using violence, those involved in the drug trade may exert more effective control over the market. One result is that those with a comparative advantage in violence and criminality will be attracted to the market for drugs since these skills are necessary for long-term success.

Taken together, the lack of legal channels combined with automatic criminalization lowers the cost of engaging in criminal activity and increases the benefit of using violence. It follows that the prohibition of drugs may be the primary cause of crime in the drug market, not the physical effects of use.18

Increased violence in the drug market may generate additional unintended consequences. As a result of violent drug interactions, police are more likely to adopt more intense techniques and stronger equipment. As these practices become ingrained in everyday policing, citizens outside the illicit drug market will also be affected. Furthermore, prohibition means police are granted increased power over the lives of citizens. Absent the appropriate checks, these changes may disproportionately impact particular groups. The disproportionate number of black and Hispanic individuals incarcerated in the criminal justice system, for instance, has led to protests and social movements, such as Black Lives Matter.

Prohibition and Cartels

Proponents of prohibition argue that these policies disrupt and dismantle drug cartels. In practice, however, prohibition appears to promote cartelization of the drug industry. Recall that drug prohibition keeps some suppliers out of the drug market—those unwilling or unable to take the risks associated with operating in an illicit industry. Those individuals and groups that remain are those more comfortable with using violence and engaging in illicit activity. In a legal market for drugs, not only would the costs and benefits of using violence change (violence would be less attractive), but new entrants could more easily penetrate the market. Over time, monopoly power would be eroded as in other competitive markets. As such, cartels would be unlikely to form and would be extremely difficult, if not impossible, to maintain.

Under prohibition, however, the cost of maintaining a monopoly is reduced, as government policies effectively drive out would-be competitors, making it easier for cartels to form and maintain their dominant market position. Moreover, these effects are self-perpetuating. Under a cartelized market, monopoly power leads to an increase in prices, which further increases the benefits to dominant producers using violence to maintain their market position. Indeed, the rise of cartels in the drug industry is remarkably well documented, with researchers arguing that “cartelization in the drug trade appears to exist at every stage of production.”19 Examples abound: Chinese opium gangs dominated the opium trade during early prohibition efforts. Colombian drug cartels controlled the flow of cocaine into the United States throughout the 1980s and 1990s. Today, Mexican drug cartels provide a variety of drugs—including marijuana, cocaine, and methamphetamine—to U.S. markets. In each of these cases, the violence associated with the drug markets has been substantial.

Prohibition and Corruption

The cartelization of the drug industry under prohibition helps give rise to yet another unintended consequence: the corruption of public officials and civil servants. The illegal nature of the market, desire to avoid capture, and potentially high profit margins create a strong incentive for those involved in the drug trade to avoid being captured and punished. As a result, these individuals are more likely to attempt to bribe public officials (including police officers, military personnel, judges, and other elected officials) involved in drug interdiction.20 While some officials may take these bribes willingly, the violent tendencies of people involved in the drug trade provides additional motivation for public officials to accept bribes. Indeed, we observe that those who refuse to take bribes are often threatened with violence against their families. Consider Mexico, in which lawyer and Mexican senator Arturo Zamora Jiménez notes that “Enforcing current laws to prosecute criminals is difficult because members of the cartels have infiltrated and corrupted the law enforcement organizations that are supposed to prosecute them, such as the Office of the Attorney General.”21

Consequences of the War on Drugs: Evidence from the United States

Until the turn of the 20th century, currently outlawed drugs such as marijuana, heroin, and cocaine were legal under federal and virtually all state laws. In 1906, Congress implemented the first restrictions on the sale and use of some substances, including cannabis, morphine, cocaine, and heroin, with the Pure Food and Drug Act, labeling many substances as addictive or dangerous.22 In 1914, the Harrison Narcotics Act further regulated the market for opiates, cocaine, and other substances, resulting in a surge in drug offense charges. By 1938, more than 25,000 American doctors had been arraigned on narcotics charges; some 3,000 served time in prison.23

While these early laws are important for understanding current drug restrictions, the strictest and most relevant polices began in the 1970s when Nixon declared drugs “public enemy number one.”24 In 1970, Congress passed the Comprehensive Drug Abuse Prevention and Control Act (CDAPC), which brought many separate federal mandates under a single law and established a schedule of controlled substances. In 1972, the House voted unanimously to authorize a “$1 billion, three-year federal attack on drug abuse.”25 The Drug Enforcement Administration (DEA) began operations the following year, absorbing other agencies, including the Bureau of Narcotics and Dangerous Drugs (BNDD) and the Office of Drug Abuse Law Enforcement (ODALE). The DEA was tasked with enforcing all federal drug laws, as well as coordinating broader drug interdiction activities.26 Under the direction of the DEA, what is now known as the War on Drugs quickly expanded in scale and scope.

Overdose Deaths and Drug-Related Illness in the United States

Under prohibition, poor information quality and flow, combined with potency effects on both sides of the market, would predict an increase in drug-related deaths. This is precisely what we observe. In 1971, two years before the creation of the DEA, the Centers for Disease Control and Prevention (CDC) reported that slightly more than 1 death per 100,000 people in the United States was related to drug overdose. This figure rose to 3.4 deaths per 100,000 people by 1990 (see Figure 1). By 2008, there were 12 overdose deaths per 100,000 people.27

Figure 1

Overdose Deaths per 100,000 People, 1980–2008





Source: Centers for Disease Control and Prevention, “Data Brief 81: Drug Poisoning Deaths in the United States, 1980–2008,” https://www.cdc.gov/nchs/data/databriefs/db81_tables.pdf#4

These numbers have continued to climb. According to the CDC, more than 47,000 overdose deaths occurred in the United States in 2014, representing 14.7 deaths per every 100,000 people in the United States, the most overdose deaths ever recorded in the country. Between 2000 and 2014, more people in the United States died from drug overdoses than from car crashes.28

As economic reasoning predicts, the majority of these deaths are related to consumption of more potent drugs. In 2014, for instance, 61 percent of all overdose deaths were caused by opioids. The rate of opioid overdoses increased significantly in the first 15 years of the new millennium. Between 2013 and 2014, overdose deaths involving synthetic opioids nearly doubled, and the rate of all opioid overdoses has more than tripled since 2000.29

The spread of drug-related disease in the United States has also seen a sharp increase since the launch of the War on Drugs. In 2000, nearly 60 percent of all new hepatitis C infections and 17 percent of hepatitis B infections occurred in drug users.30 While the majority of new HIV/AIDS cases result from unprotected sexual encounters, 6 percent of all new infections result from intravenous drug use.31 As of 2012, an estimated 91,000 Americans live with HIV/AIDS acquired via drug use.32

Violence in the U.S. Drug Market

Just as overdose deaths and drug-related illnesses increase under drug prohibition, so, too, does violence related to the market for drugs. In one study of New York City homicides, researchers found that while only 7.5 percent of murders committed during the period analyzed were related to the physical effects of drug use, 40 percent were related to the “exigencies of the illicit market system.”33

Other studies over the past four decades have reached similar findings. A 1998 study found that increased drug enforcement was positively and significantly associated with increases in violent crime.34 Another study from the same period found that variance in drug enforcement accounted for more than half of the variation in homicide rates between 1900 and 1995, with more drug enforcement correlating with more violence.35 The International Centre for Science in Drug Policy conducted an extensive survey of the literature related to violence in the drug market, finding overwhelming evidence that prohibition has led to an increase in crime as opposed to a decrease.36

Cartelization of the Drug Industry

Just as alcohol prohibition gave rise to the American Mafia, the early prohibition of opium and other drugs in the late 1800s and early 1900s fostered the formation of Chinese drug gangs. From the 1890s to the 1930s, for example, the Tong Wars took place in New York’s Chinatown. These tongs, or fraternal organizations, acted as gangs, and they profiteered from opium, gambling, and prostitution, using violent tactics ranging from stabbings to bombings.37 The tendency of prohibition policies to foster organized crime is not limited to these historical cases.

The modern War on Drugs promoted the creation and strengthening of violent cartels. Colombian economist Eduardo Sarmiento Palacio, for example, argued that the U.S. War on Drugs led directly to the rise of Colombian drug cartels.38 The best illustration of the cartel problem can be observed in Mexico and along the southern U.S. border.39 As a result of frequent crackdowns on drug sellers in the United States, Mexican drug cartels have seized the opportunity to export hard drugs such as heroin, cocaine, and methamphetamine.40 The incentives facing these drug syndicates are clear: consider that a kilo of raw opium produced in Mexico sells for about $1,500 there, but will sell for between $40,000 and $50,000 in the United States.41 Likewise, a kilo of cocaine costs around $12,000 in Mexico, but will fetch around $27,000 in the United States. There is further evidence that cartel-controlled operations are replacing domestic drug producers. According to the DEA, methamphetamine lab busts have fallen from almost 24,000 in 2004 to 11,573 in 2013. At the same time, however, border states have witnessed a marked spike in methamphetamine seizures as Mexican “super labs” ship drugs across the border.42

These cartels have helped fuel violence within both the United States and Mexico. Since 2006, more than 85,000 people in Mexico have been killed as a result of the drug trade.43 In the United States, Mexico’s Sinaloa Cartel has effectively taken control of many markets, such as the market for heroin in New York City, and has overtaken traffickers from Colombia and Afghanistan. According to the DEA, about 50 percent of all heroin sold in the United States is produced in Mexico. However, almost all heroin sold in the United States, regardless of its country of origin, is supplied by Mexican cartels. It is estimated that Mexican traffickers operate in more than 1,200 U.S. cities.44

Drugs and Corruption in the United States

Corruption in the United States related to the drug war is well documented. A 2009 report from the Associated Press found that “U.S. law officers who work the border are being charged with criminal corruption in numbers not seen before, as drug and immigrant smugglers use money and sometimes sex to buy protection.”45 In July 2016, a jail guard in Alabama was charged with trying to smuggle drugs into the jail by concealing them inside a Bible.46 That same month, a deputy with the Cherokee County Sheriff’s Office in Georgia was charged with stealing narcotics from the station’s evidence locker.47 Four days before the deputy was charged, a former jail guard in Philadelphia was sentenced to four years in federal prison for selling drugs to inmates.48 Just a week prior to this sentencing, two Detroit police officers were convicted of conspiring to steal drugs and money seized during police raids instead of reporting them as evidence. One officer was sentenced to 12 years and 11 months in prison, while the other was sentenced to 9 years.49

One particularly insidious component of the War on Drugs is civil asset forfeiture. This policy allows police, prosecutors, and other law enforcement agencies to seize assets (such as cash, cars, and homes) used or thought to be used in commission of a drug crime. In many cases, a portion of the confiscated assets flows to the budgets of the confiscating agency. In Philadelphia, for example, authorities have seized more than $64 million in assets over a 10-year period, with $25 million of these assets funding the salaries of public officials. In Hunt County, Texas, some law enforcement officials received $26,000 for their efforts in seizing assets related to the War on Drugs.50

The perverse incentives created by civil forfeiture are obvious. If an agency’s budget or an individual’s pay is directly tied to forfeited assets, then those agencies and individuals will seek out opportunities to seize assets. This makes corruption more profitable and more likely. In many cases, the payoffs can be large. In 2011, for example, Virginia state police kept 80 percent of $28,000 confiscated from the car of a church secretary.51 Because he was traveling with such a large amount of cash, he was suspected of being involved in the drug trade. However, the man was transporting cash needed to buy new property for the church. In a similar scenario in Houston, one couple was threatened with jail and the removal of their children by the state if they refused to turn over the cash in their car to the local District Attorney’s Office. They had been planning to use the money to buy a car.52 In total, the Department of Justice’s Asset Forfeiture Fund confiscated nearly $94 million in assets during 1986, its second year of operations. By 2011, this number had ballooned to approximately $1.8 billion. State and local seizures have followed similar trends.53

Police Militarization and the War on Drugs

The standard unintended consequences predicted by the economics of prohibition are not the only problems faced by the United States as a result of its drug policy. In addition, the drug war has engendered racial tensions and substantial changes in a variety of political, social, and other institutions, particularly policing.

The first drug prohibition laws were enforced by preexisting government agencies, specifically the Bureau of Internal Revenue. Today’s drug laws are imposed by a cadre of federal agencies including the DEA, the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), the Federal Bureau of Prisons (BOP), the Central Intelligence Agency (CIA), the CDC, and the U.S. Coast Guard (USCG). In addition, Customs and Border Protection (CBP), Immigration and Customs Enforcement (ICE), the Department of Health and Human Services (HHS), the Department of Homeland Security (DHS), the Federal Bureau of Investigation (FBI), the National Drug Intelligence Center (NDIC), the Office of National Drug Control Policy (ONDCP), the Office of Juvenile Justice and Delinquency (OJJDP), and the Substance Abuse and Mental Health Services Administration (SAMHSA) also work to carry out the War on Drugs.

Federal agencies are not the exclusive enforcers of drug policy. In fact, the enhanced weaponry and tactics so frequently seen as hallmarks of modern U.S. drug policy are often carried out not by the ATF or FBI, but by state and local law enforcement. Historically, the United States has attempted, in theory if not in practice, to separate the functions of the police and the military.54 State and local law enforcement are tasked with upholding domestic laws and protecting the rights of all citizens, both innocent bystanders and those accused of committing a crime. Military personnel, meanwhile, engage with external threats to the United States and its citizens.55 Although a variety of factors blurred these distinctions and eroded the laws intended to enforce this distinction, U.S. drug policies have been integral in the militarization of U.S. domestic police, in which domestic law enforcement officials have acquired military weapons and training and have used military tactics in their normal operations.56

The War on Drugs is particularly important from the perspective of police militarization in that this “war” differs from other conflicts throughout U.S. history. In WWI, WWII, and Vietnam, for example, enemy combatants were clearly definable and external to the United States. The “enemies” in the War on Drugs however, consist not only of external threats (such as the Latin American drug cartels), but also American citizens on domestic soil. This addition of a domestic “enemy” links a variety of government agencies, including state and local law enforcement, to the broader missions of the U.S. federal government. Domestic law enforcement, recognizing that linking their missions with the drug war could increase their discretionary budgets and number of personnel, would benefit from joining the operations. Federal authorities would have additional personnel to fulfill their goals. The War on Drugs has created a domestic battle zone where U.S. citizens are viewed as potential enemies to be defeated by an array of government agencies working in conjunction to enforce prohibition.

The militarization of U.S. domestic police is readily apparent from the legislation passed since the early 1970s. As noted above, those involved in any aspect of the drug market, interdiction included, are now more likely to encounter individuals with a comparative advantage in violence and face an increased frequency of violent actions. For police, this provides a strong incentive to adopt more forceful tactics.

One of the best examples of how the drug war has blurred the line between police and military is the Military Cooperation with Law Enforcement Act (MCLEA) of 1981. The MCLEA allowed the Department of Defense (DOD) to share information with local police departments and to participate in local counter-drug operations. Plus, the Act allowed DOD to transfer excess military equipment and other materials to domestic law enforcement for the purposes of combating illegal drugs.57

Other programs provided further opportunities for police to adopt military tactics and equipment in the name of combating drugs. For instance, the National Defense Authorization Act of 1990 (NDAA) created the 1208 Program. This program, building on the MCLEA, authorized additional transfers of military equipment to state agencies to combat drugs. In 1997, Program 1033 subsumed and expanded upon Program 1208. This incarnation of the program allowed the DOD to transfer aircraft, armor, riot gear, surveillance equipment, and weapons to state agencies. Armored vehicles were made available for “bona fide law enforcement purposes that assist in their arrest and apprehension mission.”58

The 1122 Program has channeled additional weapons and tactical gear to domestic police by providing state and local law enforcement with new military equipment. Once again, this program started with the goal of using domestic law enforcement to combat illegal drugs. According to the program’s manual, it “affords state and local governments the opportunity to maximize their use of taxpayer dollars by taking advantage of the purchasing power of the Federal Government.” Any “unit of local government” is eligible, meaning that any “city, county, township, town, borough, parish, village, or other general purpose political subdivision of a State” could apply to receive the weapons.59

The use of these programs has expanded immensely since their creation. In the first three years following the MCLEA’s passage, for example, the DOD granted nearly 10,000 requests from state and local law enforcement.60 According to the American Civil Liberties Union (ACLU), more than $4.3 billion in materials has been transferred through Program 1033 alone. The program involves more the 17,000 agencies. The value of the property transferred from the federal government and military to state and local authorities was about $1 million in 1990. By 1995, this number had climbed to $324 million. As of 2013, nearly $450 million in equipment was transferred on an annual basis.61

The breakdown of the distinction between local and military forces is also evident in the programs offered by federal agencies such as the DEA and FBI. The DEA, for example, was a single bureau in the 1970s. Now the agency works with more than 350 state and local law enforcement agencies, providing specialized training in drug interdiction. The agency also manages more than 380 task forces throughout the country, which coordinate information and resource sharing among state, local, and federal agencies.62

The impact of these programs and relationships is not trivial. Equipment and tactics once exclusively used by military or federal agencies abroad are now commonly used by state and local law enforcement against civilians.

Consider “no-knock raids,” which involve law enforcement personnel entering a property without first notifying residents by announcing their presence or intention to enter. This style of raid, once used exclusively by the military, is now common practice by domestic law enforcement. Hundreds of botched no-knock raids have been documented throughout the country.63 In some cases, police raided the wrong residence or killed or injured innocent civilians or nonviolent offenders. In other cases, police officers have been injured executing the raids. Moreover, these raids are frequently conducted by Special Weapons and Tactics (SWAT) teams or Police Paramilitary Units (PPUs), groups of domestic law enforcement personnel with specialized military equipment (like that obtained through the 1033 and 1122 programs) and training. The SWAT teams and PPUs are deliberately modeled after specialized military teams.64

The number of no-knock raids has increased dramatically as a result of the War of Drugs (and the War on Terror). In the mid-1980s, approximately 20 percent of small towns employed a PPU or SWAT team. Eighty percent of small-town police departments now have a SWAT team.65 By 2000, almost 90 percent of police departments serving populations of 50,000 or more people had some kind of PPU. Approximately 3,000 SWAT deployments occurred in 1980. By the early 2000s, SWAT teams saw about 45,000 deployments a year.66 Data from 2005 indicates that SWAT teams were deployed 50,000 to 60,000 times that year.67 Current estimates place the number of deployments as high as 80,000 annually.68

The War on Drugs and Racial Bias in the United States

The unintended consequences of the War on Drugs do not affect all groups equally. In the United States, it is well documented that these policies disproportionately impact minority communities, particularly blacks and Hispanics. Attorney and legal scholar Graham Boyd has referred to the drug war as the “new Jim Crow.”69

Recent reports indicate that this may not be an accident. In early 2016, Harper’s magazine published part of a 1994 interview in which former Nixon domestic policy chief, John Ehrlichman, stated that