Missing from the discussion was an acknowledgment of the role of government in getting us into this mess in the first place. Following George Santayana's admonition about either learning history's lessons or repeating them, what can we learn from the episode of alcohol prohibition in the 1920s? Prohibition was successful in the short run, resulting in a 70 percent decline in alcohol consumption by 1921. But suppliers and consumers quickly found cost effective ways to lower the risk of punishment, and by the end of the decade, alcohol consumption was again above its pre-Prohibition level ("The Economics of Prohibition: Price, Consumption and Enforcement Expenditures during Alcohol Prohibition" See an Acrobat Adobe pdf version of this study at The Economics of Prohibition). All of this while enforcement expenditures skyrocketed from $7.4 million in 1921 to $37.9 in 1929.

The failure of the 18th amendment illustrates the vicious circle between prohibition enforcement effort and consumption of the outlawed product. The more is spent on enforcement, the higher the street price. The higher the street price, the greater is the gap between production costs and potential receipts. The price gap in turn invites innovation in the technology of evasion, including corruption of the legal system itself. The harder you enforce, the better the industry becomes at evasion. While the short-run effect is to decrease supply, the long-run effect is just the opposite. Unaware of this lesson, governments respond to their own failed programs by trying harder, i.e. spending more. But this just makes things worse, thus inviting more spending. This phenomenon is known as black-hole economics (See an Acrobat Adobe pdf version of a study called Black-Hole Economics).

Just as Prohibition resulted in the substitution of hard liquor for beer and wine, it is often suggested that operation Green Harvest was a major cause of the ice epidemic in Hawaii. Indeed crystal methamphetamine got a foothold in Honolulu immediately following the doubling of Operation Green Harvest in 1987 and the corresponding scarcity of pakalolo. Surveys of ice users suggest that this was more than a coincidence; users often cited the high price or non-availability of "paka" as the reason that they started smoking "batu" -- see http://www.dpfhi.org/Pages/archives/dt3pakicestarb.html and http://www.mpp.org/HI/news_1283.html

Stakeholders at the Drug Summit attempted to refute the ice-for-paka substitution hypothesis with two arguments. First, they repeated the familiar claim that marijuana is a gateway drug and that relaxing its eradication and interdiction would lead to more ice addiction, not less. Second, they noted that in spite of increased spending on eradication and interdiction, marijuana use was now higher than when these programs began, i.e. that pakalolo scarcity was a myth.

Consider the gateway hypothesis. There is indeed substantial statistical evidence that there is a kind of drug ladder. Users of hard drugs typically used marijuana before turning to hard drugs and used alcohol and tobacco before that. From this finding, marijuana prohibitionists jump to the conclusion that marijuana should be banned even if its direct effects are no worse than alcohol and tobacco. The logical fallacies of this reasoning almost jump off the page. First, there is no reason to believe that taking a rung out of the drug ladder will prevent users from climbing anyway. Sociologists tell us that some people have a predisposition to use drugs because of family violence, neglect, and sexual abuse and other causes. Leaving aside the fact that some individuals rise above these challenges, removing one rung from the ladder does not alter these underlying causes. If marijuana were to become unavailable, could not those predisposed to use hard drugs find another gate? Second, if taking out one rung is a good strategy, why not take out other rungs -- alcohol, tobacco, and even coffee?

Even if marijuana is a gateway, vigorous enforcement of prohibition can at best only temporarily remove the gate. Indeed, the second stakeholder argument -- that pakalolo scarcity was a myth -- inadvertently makes this point for us, although the stakeholders failed to distinguish short and long-run effects. The price in the short run did go up; indeed, marijuana was for a time more valuable than gold (Honolulu Star-Bulletin, 5/24/91; Star-Bulletin and Advertiser, 4/12/92). But the long-run effects are quite different. Not only does the high price induce substitution of other less costly and harder-to-detect substances, but the huge gap between the street price and production cost causes two kinds of innovation to occur on the supply side. First, innovation occurs in the production and illegal delivery of the substitute, in this case, ice. Second innovations occur in the production and delivery of the substance that was controlled, marijuana. Thus there was substitution of small-scale indoor production for large outdoor production and a shift to more smuggling from domestic production. So the well-intentioned marijuana enforcement effort ends up having the effect of giving a big boost to the ice industry while being ineffective in the long run. And once a new and successful industry is established, the return of the traditional product does not make the new product vanish.

There is one other, more subtle but equally pernicious, consequence of prohibition. The innovations in evasion are best made by organized crime and other criminal networks. With competition thus reduced, the remaining oligopolistic suppliers can afford to recruit new users, increasing the demand. The black-hole of prohibition is thereby rendered even more virulent.

At the federal level, the U.S. would be better off focusing the drug war on truly dangerous drugs, including ice and crack cocaine. For softer drugs, such as marijuana, cocaine and heroin, we would be better off allowing their legal sale, albeit subject to high taxes. Because of the high benefit-cost ratio of treatment programs, spending 15 percent of the tax revenue from the legal sale of cocaine on increased treatment would be sufficient to reduce cocaine use back to its level before legalization ("Prohibition vs. Taxification: Drug Control Policy in the USA," See an Acrobat Adobe pdf version of this study at Prohibition vs. Taxification). This leaves substantial revenue for enhanced treatment and/or enforcement expenditures on harder drugs. Prevention (education) programs could be similarly focused, possibly saving them from their current reputation of delivering benefits less than costs (see e.g. http://www.lindesmith.org/news/01_16_03gao.cfm ).

Even without reforms at the federal level, some progress can still be made. The logic of prohibition suggests that if you can't enforce a particular standard, lighten the standard and stiffen enforcement. For example, marijuana could be decriminalized and some of the enforcement resources shifted to ice. Within law enforcement, resources can be shifted from interdiction to confiscation of drug houses and more effective prosecution of dealers. This is not easy, and involves dicey social choices involving civil liberties, but the debate must be joined. Despite the impressive evidence on the effectiveness of treatment for cocaine addiction, existing approaches are apparently less effective with ice. New treatment designs should be explored. Community-based prevention is promising, especially given the poor performance of D.A.R.E. There must be a better way.

References: Conrow, J., "Marijuana's scarcity and rising price may be keys to "ice" boom," Honolulu Star-Bulletin. July 23, 1996 Dayton, K., "Survey: Hawaii war on pot pushed users to 'ice.'" Honolulu Advertiser, April 1, 1994 Dayton, K., "Prediction in '89 pot report is pointed out." Honolulu Advertiser. April 6, 1994

DiPietro, B., "High-tech war pushes pot price higher than gold," Honolulu Star-Bulletin, 5/24/91. Wright, W., "Pot prices go through the roof," Star-Bulletin and Advertiser, 4/12/92.

James Roumasset is a professor of economics at the University of Hawaii. He can be reached via email at: mailto:jimr@hawaii.edu

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