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Drugs, Economics & Policy

PROLOGUE

Drugs, Economics, And Policy

With so many crosswinds threatening to blow the policy process off course, the following papers represent an effort to steady the debate with careful economic analysis. Philip Cook and Michael Moore explain that drinkers are subject to economic laws and tend to consume less as prices go up. But drinkers, as well as some researchers, underestimate the extraordinarily high costs to themselves and others brought on by deaths and injuries attributable to alcohol use. The taxes currently levied on alcohol sales do not come close to matching these costs, Cook and Moore conclude.

Jonathan Gruber finds that "existing taxes vastly exceed traditional estimates of the costs to society imposed by smoking." Yet economists’ traditional assumptions about addictive behavior may be misleading, and the price paid by individuals who can’t control their addiction is staggering. The increase in youth smoking that resulted from a drop in cigarette prices in the early 1990s, for example, could result in 3.2 million years of life lost, Gruber estimates.

Illegal drug users, too, are sensitive to prices, according to Michael Grossman, Frank Chaloupka, and Kyumin Shim. Like young smokers, younger users of illegal drugs are more likely than adults are to be deterred by high prices, and a policy of legalization and high excise taxes may be more effective at curtailing use than is the current strategy predicated on interdiction and penalties. Notwithstanding political obstacles, the argument that legalization would reduce prices is flawed, they argue.

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