In 1971, President Nixon declared a "war on drugs," a government initiative that aimed to reduce drug use in America. Over the decades, it became apparent that many of the problems facing America today can be attributed to Nixon's brainchild, such as the world's largest incarceration rate due to non-violent drug law offenses, or the increasing prominence of Mexican cartels in the US. This was the result of politicians failing to recognize the fundamental rules of supply and demand.
Supporters of the War on Drugs believe that drugs are regulated by elastic demand, or the belief that by increasing the price of drugs for consumers, there will be a proportional decrease in demand and consumption. In order to increase the price, the government banned precursor chemicals in the US and increased the severity of prison sentences to decrease the supply, which in their mind would ramp up the price and make drugs an unappealing choice for consumers. What politicians didn't realize is that drugs are regulated by inelastic demand, where increases in price have virtually no effect on demand and consumption. Addicts don't care about the price of the drug; their addiction has altered their brains on a molecular level, and for them, drugs are more important for survival than food. Increasing the cost through prison sentences for local producers or decreasing supply has no effect on the demand for drugs, and has only drawn in bigger players like the Mexican cartels to fill the vacant market.
https://www.huffpost.com/entry/demand-powerlessness-and-the-war-on-drugs_b_59a6b596e4b084581a14997b
https://www.insightcrime.org/news/analysis/the-struggle-to-ban-precursor-chemicals/
It's interesting to see that even the US government does not always understand the connection between these political issues and economics. Many factors contribute to changes in the market. In this case, they failed to see the biological factor behind the inelastic demand. At a molecular level, the addicts have no rational control over their desire for the drug. As a result, they continue to seek the stimulation, regardless of increases in price.
ReplyDeleteYour article makes an interesting point. During the spending analysis project, many of us also experienced inelastic demand where the price didn't affect our demand. However, the rationality in a drug addict's brain is different. While we can control our demand, an addict wouldn't be able to because their life basically depends on it. For example, if gas went from $3.50 to $5, I would be motivated to drive less and bike more. However, it seems like a drug addict wouldn't care of the price of a drug went from $10 to $100 since they rely on it.
ReplyDeleteIt's strange that the government hasn't figured this out by now, since the elasticity of brain-altering chemicals has already been made clear by the failure of Prohibition. Prohibition started 50 years before the war on drugs, but a nearly identical pattern can be seen. Since the demand for alcohol was so strong, people continued to buy alcohol, even with the added risk and price of the illegality. I guess that points to the importance of factoring in past events to economic models, since if Nixon had looked at the market factors behind addictive substances during the 1920s, he might have realized the mistake he was going to make.
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