Will Legalizing Illicit Drugs Save $85 Billion?

Harvard economist Jeff Miron argues that legalizing marijuana, cocaine, heroin, and methamphetamine would save $85 billion. UCLA professor, Mark A. R. Kleiman, says not so fast — but he does expect marijuana to be legalized in the not too distant future. I think Mr. Kleiman makes the better case.

A July 4 article in the New York Times mentioned that Mr. Miron, a Harvard University Economics Senior Lecturer and Director of Undergraduate Studies, estimated the benefits of legalizing illicit drugs at $65 billion.

In a July 8 interview, Mr. Miron told me that his estimate was $85 billion — the Times did not interview him. His calculation was based primarily on government budget reductions associated with not arresting, trying, and incarcerating people for violating the laws.

However, Mr. Miron does not consider this to be the full cost-benefit analysis. For that he would take into account other factors, such as the cost of corruption, quality control, and disruption of other countries that would be eliminated if legalization took place.

Mr. Miron, who teaches a Harvard course on Libertarianism, thinks it is worth considering how legalizing these drugs would benefit users, by eliminating the costs of having a criminal record and going to jail – the cost of which is much greater to the user than the use of the drug itself.

Mr. Miron believes that if legal, the retail prices of illicit drugs would drop. But the amount of the drop depends on the drug. He thinks marijuana’s price would drop up to 50% — this market would be changed the least by legalization since there are countries like Portugal and the Netherlands where it’s partially legal already, and in the U.S. there are states, like California, where it’s legal under specific conditions.

With cocaine, heroin, and meth, Mr. Miron believes that current prices would be slashed. Meth’s price would drop by a factor of 10, cocaine’s by a factor of four or five, and heroin would drop in price by a factor of 20.

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