Mark A. R. Kleiman

Risks and Prices: An Economic Analysis of Drug Enforcement

Marijuana and cocaine, two mass-market drugs, have been the object of a major campaign by the federal government over the past five years. That campaign apparently has not led to a significant tightening in the availability of the two drugs, though the relatively high prices of these drugs historically are a consequence of enforcement. The reason for this lack of response to recent law enforcement pressures may lie in structural characteristics of these markets rather than in a failure of tactics or of coordination of law enforcement efforts. The federal effort aims at importation and high-level distribution, which account for a modest share of the retail prices of these drugs. Increasing the risks to importers or high-level distributors is thus likely to have modest effects on the retail price and is unlikely to have any other effect on the conditions of use. Street-level enforcement is hindered by the sheer scale of the two markets and because so few of the final purchases occur in public settings. Many of the risks associated with drug trafficking come from the actions of other participants in the trades themselves, and this also limits the ability of law enforcement agencies to act in ways that will cause prices to increase or alter market conditions. Law enforcement efforts directed at heroin have been much more effective at restricting drug use.

When Brute Force Fails: How to Have Less Crime and Less Punishment

Acknowledgments xi Introduction e How to Have Less Crime and Less Punishment 1 Chapter 1: The Trap 8 Chapter 2: Thinking about Crime Control 16 Chapter 3: Hope 34 Chapter 4: Tipping, Dynamic Concentration, and the Logic of Deterrence 49 Chapter 5: Crime Despite Punishment 68 Chapter 6: Designing Enforcement Strategies 86 Chapter 7: Crime Control without Punishment 117 Chapter 8: Guns and Gun Control 136 Chapter 9: Drug Policy for Crime Control 149 Chapter 10: What Could Go Wrong? 164 Chapter 11: An Agenda for Crime Control 175 Notes 191 Bibliography 207 Index 227

The dynamics of deterrence

Because punishment is scarce, costly, and painful, optimal enforcement strategies will minimize the amount of actual punishment required to effectuate deterrence. If potential offenders are sufficiently deterrable, increasing the conditional probability of punishment (given violation) can reduce the amount of punishment actually inflicted, by “tipping” a situation from its high-violation equilibrium to its low-violation equilibrium. Compared to random or “equal opportunity” enforcement, dynamically concentrated sanctions can reduce the punishment level necessary to tip the system, especially if preceded by warnings. Game theory and some simple and robust Monte Carlo simulations demonstrate these results, which, in addition to their potential for reducing crime and incarceration, may have implications for both management and regulation.

Quasi-legal cannabis in Colorado and Washington: local and national implications

In November 2012, ballot initiatives in Washington state and Colorado legalized large-scale production, commercial distribution and sale of cannabis for use by adults [1,2]. This is unprecedented; no jurisdiction— not even the Netherlands—has previously removed the prohibition on commercial production and wholesale distribution for non-medical use. The consequences will depend not only on state-level policies yet to be developed, but also on the responses of the federal government, which still prohibits cannabis. Federal and state governments have overlapping jurisdictions. Colorado and Washington state have eliminated their cannabis prohibitions for licensed businesses, but all cannabis-related activities—even possession of a single joint by someone with a medical recommendation— remain prohibited under the federal Controlled Substances Act. Historically, the federal government has confined itself to enforcement abroad, at the border, and of larger cases (usually not bothering to prosecute cases below about 100 kg of cannabis), but it remains to be seen whether producers and perhaps even retail stores in Washington state and Colorado will be subject to federal arrest and prosecution. Of the two states, Washington has higher taxes and stricter controls on production and sale. Colorado’s regulations make it potentially more hospitable to an ‘export’ industry that could serve—and potentially depress prices in—other states. Besides lower taxes, Colorado’s proposition allows any individual over the age of 21 years (no license necessary) to grow up to six cannabis plants and give away (but not sell) the product, and contains a ‘smurf protection clause’ that bans the state from requiring stores to ask for, or record, identification (beyond proof-of-age) from their customers. Voters in Colorado and Washington state have presented the Obama administration with difficult choices. Large businesses that follow regulations and pay taxes are entirely vulnerable to federal intervention; shutting down a known and named list of producers and sellers presents an easy enforcement task. But shutting down networks of unregulated ‘grow-your-own’ activity in Colorado might well prove beyond the limited capacity of federal drug-law enforcement. Furthermore, other states are now introducing legislation to legalize cannabis, and the question will likely be on state ballots in future elections. If the federal government shuts down regulated production in Colorado and Washington, billand proposition-writers in other states might respond with less-stringent policies: in the extreme, simple repeal of state cannabis laws with no requirement that producers register or seek any license. Another federal option is to allow the state-level regulatory schemes to go into effect. That would have hard-to-predict consequences. It is far from clear that acquiescence in state-level legalization would be consistent with the obligations of the USA under the Single Convention on Narcotic Drugs and its successor treaties, or whether other countries would perceive it as giving a green light to ending their own prohibitions, and perhaps not just for cannabis [3]. A third option would be for the federal government to exploit its considerable discretion to shape, but not eradicate, legal state markets by prioritizing enforcement against certain business practices (e.g. large producers that sell at low prices, passively facilitate interstate commerce, or market aggressively—particularly to youth or drug tourists from other states). As both the extent of the price decreases and the responsiveness of consumption to price—as well as to increased availability and reduced stigma—remain unknown, no firm prediction can be offered as to the extent of the resulting consumption increase [4]. Based on current knowledge, we do not even know what the order of magnitude would be in the near term or over time; however, one would expect changes in prevalence and dependence, and harms to health, to be smaller than would result from legalizing heroin, cocaine or methamphetamine, both because cannabis is currently easier to obtain (making legalization a smaller change) and because the consequences of even heavy cannabis use are, on average, much less dire than the consequences of heavy use of those other drugs. This is not to suggest that cannabis dependence is not consequential: more than two million Americans report that their cannabis use is causing them significant life problems [5]. Another major uncertainty involves the interaction with alcohol: whether the two drugs, when both are legal, will prove to be substitutes or complements remains EDITORIAL bs_bs_banner

Legal Commercial Cannabis Sales in Colorado and Washington: What Can We Learn?

Abstract Colorado and Washington were the first states to legalize the production and sale of cannabis without a medical recommendation; Oregon and Alaska have followed suit, and additional states will likely do so in coming years. The effects of legalization are multi-dimensional, hard to predict, difficult to measure, and dependent on policy details. The primary gains from legal availability (beyond personal liberty and enjoyment) are likely to take the form of reduced illicit activity and reduced need for enforcement, along with relatively modest revenues. The primary losses will likely involve increased problematic drug use, which may include use by minors. The extent of those gains and losses is likely sensitive to price; very high prices (substantially above prices in the illicit markets) will likely frustrate the aim of shrinking illegal production and dealing; very low prices – which are technically possible, given how inexpensive it is to produce cannabis under legal conditions – risk accentuating the increase in problematic use and generating illegal diversion of legally sold product for out-of-state sale and sale to minors. Because the systems of supply for medically recommended use in Colorado and Washington were sufficiently loose to make cannabis easily available to virtually any adult; because regulatory restrictions on commercial supplies have so far kept the commercial prices above illicit and medical-dispensary levels; and because those prices have now begun to fall and are likely to fall rapidly, the results in Colorado and Washington so far cannot be used to evaluate the effects of legalization, especially in states without readily-available quasi-medical supplies. Patience is required.

Heroin Policy for the Next Decade

The supply of heroin in the United States appears to have grown substantially in recent years, although it is not clear what impact this has had on consumption. Conventional indicators have shown only modest increases, but for a variety of reasons one would not expect increases even if we are in the early years of a new heroin use epidemic. It is even less clear what, if anything, should be done. Drug control resources are finite. Making heroin a new policy focus may impose substantial opportunity costs as resources are diverted from other worthy programs. On the other hand, the history of cocaine in the late 1970s and early 1980s demonstrates that “wait and see” can be an extremely expensive option. A prudent course may be to implement relatively low-cost interventions that one would not regret undertaking even if a new epidemic never materialized and to enhance monitoring. If these enhanced monitoring programs gave strong signs of increasing use, particularly by new users, bolder interventions might be warranted.

Unintended Consequences of Cigarette Prohibition, Regulation, and Taxation

Laws that prohibit, regulate, or tax cigarettes can generate illicit markets for tobacco products. Illicit markets both reduce the efficacy of policies intended to improve public health and create harms of their own. Enforcement can reduce evasion but creates additional harms, including incarceration and violence. There is strong evidence that more enforcement in illicit drug markets can spur violence. The presence of licit substitutes, such as electronic cigarettes, has the potential to greatly reduce the size of illicit markets. We present a model demonstrating why enforcement can increase violence, show that states with higher tobacco taxes have larger illicit markets, and apply the findings to discussion of public policy toward a potential ban on menthol cigarettes. The social calculus involved in determining public policy toward tobacco cigarettes should include the harms from both consumption and control. We conclude by highlighting areas where more research is needed for effective policymaking.

Toward fewer prisoners & less crime

from (at least) four perspectives: those of social science, cultural criticism, advocacy, and policy analysis. The social scientist wants to know about causes and consequences, to employ theories to explain events such as the explosion of incarceration in America over the past generation, and to use events to develop new theories. The cultural critic strives to elucidate meanings, asking about the intentions behind the actions of participants in the social, administrative, and political processes that produce a given set of results; about how they justify those actions to themselves and others; and about the character of the social order that produced those processes and their results. The advocate searches for persuasive means to the end of ameliorating an already identi1⁄2ed evil. The policy analyst tries to 1⁄2gure out what course of action would best serve the public interest, all things considered, trying to take into account unintended as well as intended consequences. Viewed through a policy-analytic lens, “mass incarceration” looks like only a partial problem de1⁄2nition; the other part of the problem is crime. If the crime problem were trivial, or if incarceration had only a trivial effect on crime, the solution to the problem of mass incarceration would be trivially obvious: release those currently locked up and end the practice of sending offenders to jail or prison. The policy analyst’s work would then be complete, and the task of persuasion could then be turned over to the advocate, guided by the social scientist and the cultural critic. But if crime is a real problem and if incarceration can be one means (among many) to control crime, then the situation looks more complicated. One would need to measure the harms done by crime as well as the harms done by incarceration, ask about the effects of alternative incarceration policies on the rates of different sorts of crime, and consider the likely results of making more use of other crime-control measures, including alternative forms of punishment, while reducing incarceration. For example, it seems clear that increasing police activity can reduce victimization rates. Thus it ought to be possible in principle, given some target level of victimization, to “trade off” policing against incarceration: adding police while reducing imprisonment. Whether that tradeoff would be desirMark A.R. Kleiman

Strategies to Control Mexican Drug-Trafficking Violence

Abstract Drug law enforcement in source and transit countries such as Mexico naturally tends to increase the incentives for drug-related violence, unless enforcement is configured deliberately to create disincentives instead. A program of focused enforcement aimed sequentially at the most violent drug-dealing organizations in Mexico might succeed in reducing the current intolerable level of violence there.

Commentary on Coulson & Caulkins (2012): Optimizing drug scheduling

Coulson & Caulkins [1] critically examine the past performance of administrative drug-scheduling processes in dealing with drugs that have emerged since 1971. The authors consider whether the existing drug-scheduling process slants toward over-scheduling, incurring costs including premature cessation of research on compounds that might turn out to have medical benefits. Evaluating dozens of decisions in the United States against the standards set by the international conventions and national laws, and relying on published sources for evidence of error, they find only two possible administrative ‘Type I’ errors (cases of overscheduling): the placements of the possibly non-addictive Propiram and the potentially useful 3,4-methylenedioxymethamphetamine (MDMA) in Schedule I. They identify four possible ‘Type II’ errors (cases where harmful drugs remained unscheduled). The authors also find that legislative action is responsible for one possible ‘Type I’ error: the placement of g-hydroxybutyric acid (GHB) in Schedule I despite potential medical benefits. Those results suggest a tolerably accurate administrative process, with no clear bias toward overscheduling. This undoubtedly useful analysis does not answer all of the questions that might be asked. As the authors note, it might be objected that counting decisions, giving each molecule equal weight, might not be appropriate. If, for example, it were to turn out that MDMA has value in the treatment of post-traumatic stress disorder [2], and that hasty scheduling in 1985 had the effect of delaying research into those benefits by a quarter of a century, that one error might outweigh, in terms of importance, scores of correct decisions to schedule drugs that never would have found substantial user populations. The authors chose to treat as fixed the scheduling provisions of the Controlled Substances Act (21 USC 812), which controls the scheduling process in the United States, but that law embodies an important logical lacuna. To fit the criteria for Schedule I, a drug must have ‘high potential for abuse’ and must not have any ‘currently accepted medical use’. Schedules II–V are for drugs that have recognized medical use, and reflect decreasing levels of abuse potential. There is thus no category for a drug of modest abuse potential but no currently recognized therapeutic value, nor for a drug with medical potential that waits to be determined. The proposal, mentioned by the authors, to make MDMA a Schedule III drug to reduce its commercial sale but facilitate medical research would not have been in accord with the statute, at least as currently interpreted. The United Kingdom, by contrast, recognizes three different classes of banned drugs, according to their associated levels of risk. Taking the current legal framework as given limits the analysis in other ways. As the authors note, the conventions and the Controlled Substances Act recognize only a single class of benefit from the use of any drug: the treatment of disease. The mere pleasure-giving quality of a drug does not count, or rather counts as a negative, as widespread voluntary non-medical use is treated as evidence of ‘abuse potential’. (As one administrator involved in the process summarized the matter: ‘If it’s fun, it’s Schedule One’.) Nor does the possibility that, under some circumstances, a drug can facilitate experiences resembling mystical epiphanies [3], with possibly lasting and beneficial personal changes as a result [4]. Relatedly, the possible conflicts between the drug laws and religious liberty and the recognized rights of indigenous peoples to pursue their traditional practices have no weight in the scheduling decision. As a purely logical matter, the fact that a given drug may induce abuse or dependency in some fraction of those who use it does not imply that all use of that drug is harmful. Indeed, for almost all drugs (the exception being nicotine in cigarette form) the majority of users never meet clinical criteria for abuse or dependency, and there is no good reason to think in general that use, without abuse, is harmful. The ordinary canons of economic analysis treat providing consumers with what they want as a benefit, and in the absence of clinical evidence of abuse or dependency there is no good reason to treat drug use differently. That being the case, a broader analysis of the scheduling issue might take a risk–benefit perspective, weighing the avoided costs of abuse against the foregone benefits of non-abusive consumption. An alternative, and necessarily more complex, analysis might use dynamic programming to consider scheduling not as a yes/no decision but as a series of choices over time: at each moment, the agency may choose either to schedule or to wait. Waiting allows for an eventual decision to be made with the benefit of additional information, but incurs some risk of allowing the growth of what may be dangerous practices around the substance in question. A dynamic-programming perspective would shift the discussion from one of accuracy to one of timing: of a set of decisions, how many were made too early and how many too late (including the possibility that the substance in question should not be scheduled at all)? Even, then, accepting the Coulson & Caulkins verdict of ‘not guilty’ with respect to the charge of administrative COMMENTARY