The basic question posed to the interviewee: Do drugs get cheaper when legalized? That depends on fundamentals, although my classmates and I once struggled with a particular fundamental related to this topic, namely, the elasticity of demand. 

The price elasticity of demand for any product or service simply measures how much consumers will increase or decrease their quantity demanded in response to a price change. This concept, from a technical perspective, will actually prove why demand curves slope downward to the right, justifying the law of demand. Fundamental economic theory would predict that if the supply of drugs increased, which is what would likely occur if legalization occurred, then the price would fall.To realize that would require assumptions that would leave me in a state of “analysis paralysis,” so for the sake of simplicity, imagine an outrageous example.

If crack cocaine were legalized and economies of scale were present, then the supply would increase but economic profits would fall to zero. Clearly, the government will not allow these free-market conditions to exist in the drug trade. The government would heavily regulate this industry. So then, ask yourself what would happen? My initial response is that the price of drugs would not decrease that much; they might actually increase.

Why? Well, take the example of crack cocaine mentioned above. I anticipate that crack would not have, nor does it currently have, any cheap substitutes. Thus, it will have an elasticity coefficient of something like .0001, i.e. the quantity demanded will not change by all that much, if true.  No doubt that this might be an exaggeration, but have you ever witnessed the measures crack users take to get “one more hit”?

Does the interviewee really think that the price of crack would fall? I seriously doubt that it would fall by much, if any. In some sense, one can even argue that crack cocaine is a Giffen good, a good with a upward sloping demand curve, but I would not want try proving it, but the price might actually rise, not drop.

I understand Dr. Miron’s claims though. Based on his research, I’m sure that the prices of some drugs would fall. A good case study would be an examination of methadone maintenance programs.

So here you have a drug that has been legalized and serves as a cheap substitute for heroin: methadone. Since the 1960s, methadone maintenance has been an effective, yet controversial treatment for heroin addiction. Proponents of methadone maintenance argue that this is the lesser of two evils; it’s better to let addicts remain dependent on a legal drug instead of an illicit one. Opponents will claim that methadone simply keeps people chained; governments should not be burdened with a “cure, which is worse than disease”. In this case it becomes a moral issue, one that is really outside the range of economic analysis.

For all its apparent benefits though, methadone maintenance does not have much virtue when the lab jackets are pulled off; methadone treatment can be full of vice. Despite reports of its success, the treatment does not have a clean bill of health. Heroin addicts come to clinics typically as poly-drug abusers.  (Why would HARM reduction programs get funded to educate methadone patients about how to clean their syringes?)

That makes no sense. Whenever patients at these clinics fail random drug tests, the level of methadone increases. It has been reported that some patients take as much as 400 milligrams per day. How can an individual who can not even keep from “nodding out” contribute to society much less make a better life for a family?

If cocaine were legalized, then MAYBE a methadone user would be able to stay awake longer than 10 minutes. I would like to hear a free-market perspective on how to value some of the implicit costs associated with the legalization of all drugs?

Jocelyn Woods, a neuroscience and pharmacology major, published a report on methadone-cocaine interaction at the neurological level. Her findings showed that cocaine use increased opiate receptors, resulting in a need for higher stabilizing doses. (Basic Pharmacology: How Methadone Works). A chemical balancing act in the lives of already helpless individuals is not a reasonable solution. Keep in mind that laboratory animals left to an unlimited supply of cocaine will impulsively use until they die from repeated injections as obsession increases.

I have a difficult time holding hands with a philosophy that emphasizes human freedom without limit. Why? Because my worldview suggests that humanity truly does not understand freedom from a moral point of view. The freedom to as if we do, creates a few problems. Assuming freedom is a great gift from the god of Ayn Rand is absolutely ridiculous, in practice, outside the ivory towers.

In sum, the interview was worth listening to. I did, however, want to ask the guest how he would value implicit costs resulting from the legalization of drugs. His conclusions were predictable based on his philosophy (blame the government all the time for all things bad).

I think he is somewhat short sighted. Legalization will likely create even more problem. He even posted a follow up in which he sets forth the distribution of revenues among the states if cocaine were legalized here. Seems a far-fetched policy prescription (legalize drugs), and I doubt this would ever make it to a floor debate, for good reason.

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