Three major concepts that shatter the myths surrounding drug legalization

This article was originally published by The Influence, a news site that covers the full spectrum of human relationships with drugs. Follow The Influence on Facebook or Twitter.

The arguments for the War on Drugs are collapsing all around us. Today, some 53 percent of US citizens think this war has not been worth the cost—while only 19 percent think it has. As I saw when I travelled to a dozen countries for my book Chasing The Scream: The First and Last Days of the War on Drugs, whenever a state or nation decides to move beyond the drug war, there’s a three-step dance. It is massively controversial, and there’s a lot of anxiety; then people see in practice what it means; and then support goes up, and stays up.

After Colorado legalized marijuana, and people saw the legal, tax-paying, kid-proof stores in practice, support went up—and now 58 percent support it, and only 38 percent want to go back to prohibition.

After Portugal decriminalized all drugs in 2001, and transferred all the money they used to spend on punishing addicted people to spending it instead on improving their lives, injecting drug use fell by 50 percent. Even the cop who led the opposition to the decriminalization publicly changed his mind, and told me he hoped the whole world would now follow Portugal’s example.

After Switzerland legalized heroin for addicted people over a decade ago (called heroin-assisted treatment, or HAT), literally nobody has died of an overdose on legal heroin, and crime fell significantly. That’s why even the Swiss electorate—who are highly conservative—voted to keep heroin legal by 70 percent in a nationwide referendum.

As this debate starts to become more mainstream in America, there are lots of misunderstandings and misapprehensions being passed off as fact. That’s natural—this is a complex subject, and the people who are anxious about it are overwhelmingly decent folk who want to protect their kids and prevent harm. But their fears are overwhelmingly unfounded. There are three major concepts that help dispel some of the concerns around legalization.

Concept 1: The Risk Premium

The worst aspect of the war on drugs—I believe—is the violence caused by drug prohibition, in precisely the way that alcohol prohibition created Al Capone. When a substance is illegal, dealers are forced to resort to violence to protect their turf.

As I wrote here, imagine you run a liquor store. If someone steals a bottle of vodka and you catch them, you can call the police—so you don’t need to be violent, or intimidating. But if you’re selling cannabis or crack, and someone tries to rob you, you have to fight them—you have no recourse to the law. And you have to fight them in a way that will make sure nobody else tries to mess with you ever again. The War on Drugs, as Charles Bowden put it, creates a war for drugs—fought out with guns and blood.

But many people respond by arguing that legalization will not, in fact, bankrupt drug-dealers, and they will, in fact, carry on in the same way afterwards. The conservative British commentator, Simon Heffer, made the case that legalization would still allow a black market of illegal traffickers and dealers to flourish because legal drugs would be more expensive. And Guardian commentator Deborah Orr says in an otherwise on-the-money piece that gangs will “always be able to sell cheaper ... than a taxed and regulated market could or should.”

Many people believe this. But both arguments are based on a failure to understand the “risk premium” involved in a prohibited market.

Many people believe this. But both arguments are based on a failure to understand the “risk premium” involved in a prohibited market.

The best way to explain it is with another thought experiment. Imagine if I asked you to carry a bottle of rum across your city, to deliver to my aunt for her birthday. You wouldn’t ask for much money—it’s a fairly menial task. Now imagine I asked you to carry her not some rum, but a bag of cannabis, or a bag of cocaine. You’d be pretty wary. You’d likely say no. And if you were going to do it, you’d want to be paid a lot more than for carrying the rum—to cover the risk you are taking of getting a criminal record, or of going to prison.

That difference is called the “risk premium”—and it happens at every link in the chain when a drug is illegal. The farmer who grows the cannabis, or opium, or coca—in Colombia or Afghanistan or Morocco—has to be paid a higher premium for the risk he takes. The guy who then makes it into your drug in a lab has to be paid a higher premium for the risk he takes. The people who transport it across borders—usually a chain of people—have to each be paid a higher premium for the risk they take. And the guys who sell it to you directly have to be paid a higher premium for the risk they take.

Each time, that risk premium pushes the price up, and up, and up.

When you legalize—and transfer the market to legitimate businesses—there’s no risk premium for legal businesses. They aren’t taking any more risks than they would if they were selling potatoes, or copies of the Bible. And once the risk premium is gone, the legal product will be significantly cheaper than the prohibited product.

This shows us why the picture Simon Heffer and Deborah Orr (and, to be fair, many others) are promoting isn’t right.

Now, there’s a different and opposite concern they don’t raise. You don’t want there to be a big collapse in price when you legalize, because that might increase use. (If you make something cheaper, more people can afford it: If I halved the price of beer tonight, more of you would drink it.) So you make up the gap with taxes on those drugs—just as they have in Colorado and Washington. This is how you hold the price steady while bankrupting the criminal gangs. You also get the bonus that you can then spend on lots of great things, like schools, and proper compassionate care for addicted people to turn their lives around.

And if you doubt that legalizing this way bankrupts cartels, ask yourself: Where’s the Pablo Escobar of gin? Where’s the El Chapo of Bacardi? Since the end of alcohol prohibition, there has been no such person. When alcohol prohibition ended, the Al Capones of alcohol ended. Illegal businesses didn’t persist in supplying the drug because the risk premium meant legal businesses undercut them every time.

Concept 2: Prohibition, a Vast Investment Bank for Crime

Many people argue that when you end the war on drugs, criminal gangs will simply transfer to other forms of criminality—whether it’s human trafficking, or prostitution, or kidnapping, or even more depraved “trades,” like child pornography.

In fact, there are two arguments that should help us to think about this differently.

The late 1920s and early 1930s are widely regarded in the US—darkly—as the golden age of kidnapping. Everybody remembers the kidnapping of Charles Lindbergh’s baby and his eventual death. But it was one of a widespread rash of kidnappings at that time, one which has long since ebbed away.

Why would there be a sudden spike in kidnappings at that time?

In trying to solve this puzzle, it’s worth noting that Colombia had a big spike in kidnappings in the late 1980s and the early 1990s. And today, Northern Mexico is the kidnapping capital of the world.

Why did they also spike at that time?

There’s one reason that’s pretty clear. Let’s imagine you and I decided to kidnap a rich person’s child, and hold them for ransom. (Before you call the FBI, I’m only thinking out loud here.) We need to spend a lot of time scouting out where the victim goes, and where he can be snatched. We need a car. We need a driver. We need a place to keep the child where nobody will hear him. We need a team of people to watch the kidnappee round the clock. We need a detailed plan for how to demand the money, and where the drop will be. And on, and on.

Kidnapping, it turns out, is a capital-intensive business. You need to invest a lot up-front.

You have to get that money from somewhere. There are no kidnappers’ loans at your local Bank of America. You have to get it from other criminals.

Now you can begin to see why it spiked up in the US at the peak of alcohol prohibition, and in Colombia and Mexico at the height of drug prohibition.

When you ban a popular substance—alcohol or cannabis or cocaine—it doesn’t vanish. It’s transferred from legal businesses to criminals. Suddenly, those criminals have a lot more money than they had before—billions more. What do they do with their money? Some they take home as profit—and, like any businessmen, they invest some of the rest in other business enterprises. Like, for example, kidnapping.

Prohibition, in effect, creates a vast investment bank for crime. They use that investment bank to spread criminality to other spheres.

And that’s why reclaiming drugs from criminal gangs likely won’t increase kidnapping and other forms of crime; it’ll decrease it. When alcohol prohibition ended, the famous kidnapping cases in the US bled away. When the center of the drug trade shifted from Colombia to Mexico, the eruption of kidnapping moved with it. That should tell us something.

Concept 3: Why Criminals Commit Crimes

Some people will respond to this by saying, “Yes, but some people are just inherently criminal. If they can’t commit one form of crime, they’ll just commit another form of crime because that’s their nature.” There’s a certain quantity of the population who are inherently criminal, and all we can do is catch and detain them. You could call this the “quantity theory of crime.”

So after we legalize, the criminals will move onto another area of crime—like the ones I listed above.

But there’s a different way of thinking about crime. It suggests that criminals are people who are motivated like the rest of us—by incentives. If I asked you to smuggle a bag of cannabis or cocaine across the US-Mexico border as a favor to me, I bet you’d say no. If I offered you a million dollars, you might think twice. If I—as some weird drug-obsessed deity—offered you a billion dollars, I bet you’d think very hard about doing it. Think of this as the “incentive theory of crime.”

Which of these theories is right? It turns out we can, in fact, test them, to see. And the evidence is very clear. There’s a whole field of sociology known as the “economics of crime,” and we know its findings.

Criminals are, in fact, human, and they do, in fact, usually respond to incentives. It’s why when youth unemployment goes up, generally crime by young people goes up: Crime seems more financially appealing when there are fewer alternatives. It’s why when wages go down for low-skilled workers, crime generally goes up too: You can earn more, Walter White-style, through crime. And on, and on: There’s a good summary of the evidence by two professors at the London School of Economics here. The evidence that crime is affected by incentives is overwhelming.

So if you take away control of one of the biggest industries in the world—with a 300 percent profit margin from production to sale—you take away a large incentive to commit crime. And this evidence suggests that means lots of people will transfer out of crime. They’re not doing it out of some criminal essence buried in their bones, but because they want a slice of the cash, and the excitement, provided by a prohibited market.

If the amount of money to be made in (say) plumbing fell by 90 percent in 2016, would there be more or fewer people who were plumbers in 2017? The same principle applies to the drug trade. When you reduce incentives, you reduce numbers of people who take up the incentives.

Some of them will try to go into other forms of criminality, of course—but those markets are already (alas) being met. Let’s think about the most commonly-cited alternative to drug-dealing: pimping. There is already a market among men who want to pay for sex, and it is already being met. The day after a drug is legalized, there won’t be more people who want to pay for sex than there were the week before. That market already has a group of (vile) criminals who control it. Without an increase in demand, there won’t be a big increase in incentives, so there won’t be a big increase in people taking them up.

Again, this isn’t theoretical. In Switzerland, after they legalized heroin for people who were already addicted to it, they didn’t see an increase in prostitution and pimping. In fact, as I learned when I reported there and interviewed people on the ground, the opposite happened. Because women working the streets were given legal heroin and support to turn their lives around, street prostitution virtually ended, and has never gone back to the level it was before, when heroin was in the hands of criminals.

If the people who believe in the Quantity Theory of Crime were right, that would make no sense—the drug-dealers would have transferred to being pimps. But pimping was in reality radically reduced. It is there for us to learn from.

There’s a lot, of course, we still don’t know about ending the War on Drugs. To paraphrase what Barack Obama said when he was running for the White House about ending the war in Iraq, we need to be as careful getting out of this war as we were careless getting in. But there are plenty of things we do know, from the experiment with alcohol prohibition, and the experiments with ending drug prohibition that are now happening all over the world, from Uruguay to Washington to Switzerland.

But there is one thing I learned above everything else—one that led me to these concepts. As we end the drug war, we have to be guided not by fear, but—at last, at long last—by cool, hard facts.

This article was originally published by The Influence, a news site that covers the full spectrum of human relationships with drugs. Follow The Influence on Facebook or Twitter.