Thursday, 23 September 2010

More Economics of Drugs (It's the incentives, stupid)

I've been reading a lot about the economics of drugs lately (again, I don't touch the stuff myself, but this stuff is fascinating!), and it was very interesting to see a blog post by Marginal Revolutions, a wonderful economics blog, discuss the groups most actively lobbying against the legalization of marijuana. Before you click, care to guess?


It's the Police and beer distributors. At first you might think there's a crime watch aspect from the police - good health and safety and all that. Instead, the cause turns out to be far more banal:
[...] Police forces are entitled to keep property seized as part of drug raids and the revenue stream that comes from waging the drug war has become a significant source of support for local law enforcement. Federal and state funding of the drug war is also a significant supplement to local forces' budgets.

Legalization means a cut in budget, and less material seized. Any economist would say that life is all about incentives, and in this case all the incentives are for police to oppose legalization. They must have done some form of calculus to find that the amount of money garnered for police budgets through taxation would be less than the amount they achieve from property seized. This is presumably because they would have to share tax revenue with other departments. This raises the question of whether incentives could be reworked to favour police departments (And that, of course, raises the issue of should incentives be re-worked at all, which is an entirely different question).

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