Wednesday, July 20, 2011

Drugs and Drug Policy

I'm currently reading Drugs and Drug Policy. I'm very impressed after two chapters: it's clear, accessible and well balanced. The lesson seems to be that decriminalization of consumption (not production) has little impact on prevalence, whereas retail prices have a huge impact.

I was disappointed to read that the authors do not believe in the legalization of the supply chain while maintaining elevated prices levels. Once the decriminalization of consumption becomes politically feasible, the supply chain of drugs that have a high markup could easily be nationalized.

In Quebec, decent quality alcoholic beverages are distributed exclusively by the government through the SAQ. The SAQ turns a decent profit with markups of two to one, and there is no large scale contraband of wine in Quebec. It should be trivial to run a similar organization for illegal drugs whose markup is significantly greater than two to one.

As an example, cocaine production costs around 1$ per gram; bulk cocaine smuggled across the border costs 20$ per gram, and retail cocaine is sold at 100$ per gram. I'm assuming that given current law enforcement spending, prices are close to as low as they can be to sustain contraband. Nationalized drug prices could be adjusted to prevent the bulk of contraband: in all likelihood that price would in the same order of magnitude as today's retail prices.

Nationalization does not seem to be a compromise at any level.

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