Drugs, Economics of Illegal

Douglas A. McVay

Many believe the nonmedical use of intoxicating drugs is a natural part of human behavior. Whether legal or illegal, drugs are a big business. Governments use many different mechanisms to control nonmedical drug use. In the United States, some substances, for example, alcohol and tobacco, are subject to a regulatory scheme in which the government controls quality, oversees authorized channels of distribution, and imposes taxes. The government bans other substances. Prohibited drugs (such as marijuana, heroin, cocaine, and methamphetamine) are still produced, marketed, and consumed illegally by millions of Americans, creating a sizable, unregulated, untaxed business. The United States imposed national alcohol prohibition in 1917 through a constitutional amendment. “Prohibition” was successful at reducing overall rates of alcohol production and consumption. The societal cost of that prohibition was quite high: criminal organizations made fortunes through control of alcohol production, distribution, and sales. Competition between performers in the market was usually ...

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