Supply and Demand (and Ecstasy)

One quarter of the world's prison population resides in US prisons.  Comparatively, 3% of the world's population lives in the US.  I think we are doing something wrong.  The prison population began expanding rapidly in the 1980s as a repercussion of President Reagan's War on Drugs.  Under the new policy, drug possession and trafficking took on severe penalties, leading to a boon in the prison population (not to mention the prison building and private prison industries).  The implications are particularly stark for the African-American population, where one in four black men will serve time during his third decade.

Much work on drug addiction and policy has been done in the realm of behavioral economics.  Behavioral Economics is a trans-disciplinary field, combining concepts from B.F. Skinner's Behavioral Psychology and Consumer Demand theory in microeconomics (For an introduction to Behavioral Economics, I highly suggest Dan Ariely's Predictably Irrational. It is a quick read, and it does a great job of presenting the science in a clear format.)  If protecting a population from the dangers of illegal drug use is our objective, then there are two sides that must be controlled - supply reduction strategies and demand reduction strategies.

From the beginning of the war on drugs, the US has focused a disproportionate amount of resources to supply reduction strategies.  We have flexed our foreign muscle to force countries into coca, reefer and opium eradication programs while neglecting the US demand for drugs.  Our foreign policy on drugs has resembled the imperialistic cowboy style that demands other countries to get in line.  However, we have neglected the cause of elastic demand for street drugs in the US - addiction.  The RAND Corporation 1995 table below shows US expenditures on drug policy.

The strategy has served to inflate street drug prices in the US as supply decreases and demand remains constant.  As risk increases, so to does price.  For reference, you can review recent Mexican history to understand the climate shaped by our drug policy.  Meanwhile, un-addicted but bored middle class white kids are steering clear of the heavy penalties associated with cocaine and heroine, choosing instead gray-market "herbal supplements" or new designer chemical substances they can get on the internet, or crystal meth they can make at home.