A Look at Drug Policy in Australia
May 21st 2009 15:21
Before I start, a quick note: My graphs from Word don't translate into Orble, so I have cut them (and all references to them) out. Therefore I require a little bit of trust... so if I say prices fall or quantity rises, I do have charts to back my assertions up, they just won't show here. For anyone interested, I would be more than happy to forward a full copy of the essay, charts included. Now, on with the show...
Introduction: Drug Use in Australia
The issue of drug restriction and prohibition is one that has become increasingly important in today’s society. After the (failed) war on drugs conducted by the United States, nations have been looking at alternative methods of combating the drug epidemic. This essay will seek to examine why current drug policies have failed, and explore some of the possible alternative methods that could be implemented to regulate drug markets, particularly in Australia.
The following graph shows the number of drug arrests in Australia from 1996 – 2007. Ceteris paribus, the growth or decline in drug-related arrests should be indicative of shifts in the total population of drug users. However, certain external factors must be taken into account, such as the reduction of possession of small quantities of marijuana from a criminal to a civil offence in the late 90’s.
As shown on this graph, the majority of drug arrests are related to cannabis, which according to the AIC between 1995 – 2005 fell from 80% to 71% of total drug arrests. The actual number of drug related arrests over this 10 year period fell by 22%. However, in all likelihood this is due to the changes in law regarding cannabis as mentioned above, given that cannabis-related arrests make up such a large part of total drug-related arrests.
Current Drug Regulation in Australia
Currently in Australia, the main illegal narcotics are Marijuana, Amphetamines (including Methamphetamines), Opiates (mainly Heroin), and Ecstasy (included in ‘other’ on the graph above). Presently, the Australian government uses both supply and demand side methods in order to control drug use in Australia.
In terms of demand-side policy, the Australian government has several initiatives in place. These initiatives include periodic advertisement campaigns, designed to inform/scare the public about the dangers associated with drug use, as well as government support for rehabilitation centers, etc.
Making participation in the drug market illegal greatly reduces the supply, resulting in a supply shift. As a result, quantity consumed fall, and price rises.
In theory, the combination of both the demand and supply side policies should result in a marginally lower price and a greatly reduced quantity consumed, which is the government’s aim. However, evidence has mounted up which calls into question the effectiveness of these policies.
According to the Sydney Morning Herald, based on a 2003 UN report, Australia was the number 1 ecstasy consumer in the world, and number 2 in methamphetamine use . Based on evidence such as this, it is apparent that the government’s prohibitionist tactics are not controlling the drug problem, and so should look at other alternative methods of control.
Alternatives to Complete Prohibition
The first important distinction to make is between the currently illegal drugs that should be legalized, and those that should remain illegal. The most apparent (and most often cited) reason for this illegality is the effect that it has on other people, such as the increased likelihood of committing a crime to fuel a drug habit. Research conducted in 2004 by the Australian Institute of Criminology found that 37% of detainees attributed at least some of their criminal actions to drugs, rising to 45% for those who had used in the last 12 months . However, research has also shown that drug-induced crimes are almost always the result of highly addictive hardcore drugs, such as heroin or methamphetamines, rather than ‘softer’ drugs like cannabis or ecstasy.
There are no positive externalities for goods like heroin, so the demand curve (or private benefit) is also equal to the social benefit. The private cost curve (supply) shifts to the social cost curve when the effects of negative externalities are accounted for. In a purely private market, the price will be lower and quantity consumed higher than is socially optimal.
However, the case for making those drugs with negative externalities illegal is not a logical one. The socially optimal amount is not 0, but simply less than would be found in an unregulated market. The role of governments in this instance should not be to ban these markets, but to ensure that the equilibrium reached is the social equilibrium rather than the private one.
Perhaps the best argument for illegality is that some drugs are highly addictive. Economic analysis relies on people behaving rationally, which allows markets to function. However, the sheer degree of addictiveness associated with some of these drugs means that users stop behaving rationally, and are driven by addiction, not reason. In economic terms, the effect that these drugs have is to dramatically increase the perception of private benefit to users. As a result, the addicts continue to use indefinitely, where any rational person would stop. Furthermore, markets rely on the price mechanism to influence the quantity demanded. However, the nature of addiction means that, to an addict, the product is completely inelastic. Furthermore, higher prices could result in higher instances of crime to pay for more expensive habits, and so manipulation of the price mechanism is not the best way to influence this market. Although markets are generally the most efficient way to deal with situations like these, an extra-economical solution is needed to deal with these highly addictive drugs, as a purely market-driven solution would not function.
In terms of ‘softer’ drugs like ecstasy and cannabis, which lack the addictive side effects of harder drugs, prohibition is the wrong answer. These goods, unlike their harder brethren, do not come with the same negative externalities. On the contrary, the feelings of calmness, serenity and euphoria commonly associated with these drugs means that they may in fact have positive externalities (such as reduced instances of bar-fights, for example). These drugs have health effects similar to cigarettes or alcohol, and so the best method of dealing with them is as these other 2 legal drugs are managed: through taxation.
The increase in price through taxation results in price rising, and the quantity consumed falling. At the new equilibrium, the price the supplier is receiving is reduced, with the government receiving taxation revenue.
When it comes to soft drugs that lack high negative externalities and addictive properties, the benefits of tax over prohibition are numerous.
Firstly, the government would be provided with an additional revenue stream, which is increasingly important in today’s climate of falling taxation revenues. This money should (ideally) be spent on combating the negative effects associated with the good being taxed (i.e. taxing smokers to pay for smoking-induced illnesses), but does not necessarily have to be.
Secondly, legalizing the market will allow the government to properly regulate it, including setting standards for quality. This should eliminate the deaths caused by impure ecstasy pills, which only occur because the market is unregulated. Strict government control of a legalized market would eliminate these quality hazards, and increase the safety of those consuming.
Thirdly, the government is currently seeking to disband bikie gangs in Australia. One major blow that the government could deal these gangs is to legalize at least some of the drugs that they trade in. Drug trafficking provides a large part of the funding for these gangs, and the recent trend of gang violence is mostly related to fights over drug trafficking . By legalizing these drugs, the government takes control of these markets, removing a large part of these gangs’ revenue.
Finally, by legalizing at least the softer drugs available, police in Australia will be free to concentrate on eliminating harder drugs and other forms of crime. According to the AIC, cannabis still accounts for well over 50% of all drug arrests, and so legalizing it would free up valuable resources for where they are more sorely needed.
Conclusion
Overall, prohibition has proven not to be the one answer when it comes to drug regulation. Although some drugs are too addictive and destructive to be dealt with purely through market mechanisms, a strong argument exists for allowing the market to control at least the less destructive drugs. Despite these shortcomings in supply-side policy, the government has also made use of demand-side policy as well.
Bibliography
The Australian Institute of Criminology Website
Available at www.aic.gov.au
Coulthart, R., 2009, ‘Bikie Wars Fuelled By Drugs and Crime’, The Australian, 28/3/2009.
Available at Really Long Link
Pollard, R., 2003, ‘Australia tops use of ecstasy: UN’ Sydney Morning Herald, 25/09/03. Available at Really Long Link
New South Wales Government Druginfo website
Available at Really Long Link
University of NSW Drug Policy Modelling Program – Australian Drug Data
Available at Really Long Link Drug Data
Introduction: Drug Use in Australia
The issue of drug restriction and prohibition is one that has become increasingly important in today’s society. After the (failed) war on drugs conducted by the United States, nations have been looking at alternative methods of combating the drug epidemic. This essay will seek to examine why current drug policies have failed, and explore some of the possible alternative methods that could be implemented to regulate drug markets, particularly in Australia.
The following graph shows the number of drug arrests in Australia from 1996 – 2007. Ceteris paribus, the growth or decline in drug-related arrests should be indicative of shifts in the total population of drug users. However, certain external factors must be taken into account, such as the reduction of possession of small quantities of marijuana from a criminal to a civil offence in the late 90’s.
graph courtesy of the Australia Institute of Criminology
As shown on this graph, the majority of drug arrests are related to cannabis, which according to the AIC between 1995 – 2005 fell from 80% to 71% of total drug arrests. The actual number of drug related arrests over this 10 year period fell by 22%. However, in all likelihood this is due to the changes in law regarding cannabis as mentioned above, given that cannabis-related arrests make up such a large part of total drug-related arrests.
Current Drug Regulation in Australia
Currently in Australia, the main illegal narcotics are Marijuana, Amphetamines (including Methamphetamines), Opiates (mainly Heroin), and Ecstasy (included in ‘other’ on the graph above). Presently, the Australian government uses both supply and demand side methods in order to control drug use in Australia.
In terms of demand-side policy, the Australian government has several initiatives in place. These initiatives include periodic advertisement campaigns, designed to inform/scare the public about the dangers associated with drug use, as well as government support for rehabilitation centers, etc.
Making participation in the drug market illegal greatly reduces the supply, resulting in a supply shift. As a result, quantity consumed fall, and price rises.
In theory, the combination of both the demand and supply side policies should result in a marginally lower price and a greatly reduced quantity consumed, which is the government’s aim. However, evidence has mounted up which calls into question the effectiveness of these policies.
According to the Sydney Morning Herald, based on a 2003 UN report, Australia was the number 1 ecstasy consumer in the world, and number 2 in methamphetamine use . Based on evidence such as this, it is apparent that the government’s prohibitionist tactics are not controlling the drug problem, and so should look at other alternative methods of control.
Alternatives to Complete Prohibition
The first important distinction to make is between the currently illegal drugs that should be legalized, and those that should remain illegal. The most apparent (and most often cited) reason for this illegality is the effect that it has on other people, such as the increased likelihood of committing a crime to fuel a drug habit. Research conducted in 2004 by the Australian Institute of Criminology found that 37% of detainees attributed at least some of their criminal actions to drugs, rising to 45% for those who had used in the last 12 months . However, research has also shown that drug-induced crimes are almost always the result of highly addictive hardcore drugs, such as heroin or methamphetamines, rather than ‘softer’ drugs like cannabis or ecstasy.
There are no positive externalities for goods like heroin, so the demand curve (or private benefit) is also equal to the social benefit. The private cost curve (supply) shifts to the social cost curve when the effects of negative externalities are accounted for. In a purely private market, the price will be lower and quantity consumed higher than is socially optimal.
However, the case for making those drugs with negative externalities illegal is not a logical one. The socially optimal amount is not 0, but simply less than would be found in an unregulated market. The role of governments in this instance should not be to ban these markets, but to ensure that the equilibrium reached is the social equilibrium rather than the private one.
Perhaps the best argument for illegality is that some drugs are highly addictive. Economic analysis relies on people behaving rationally, which allows markets to function. However, the sheer degree of addictiveness associated with some of these drugs means that users stop behaving rationally, and are driven by addiction, not reason. In economic terms, the effect that these drugs have is to dramatically increase the perception of private benefit to users. As a result, the addicts continue to use indefinitely, where any rational person would stop. Furthermore, markets rely on the price mechanism to influence the quantity demanded. However, the nature of addiction means that, to an addict, the product is completely inelastic. Furthermore, higher prices could result in higher instances of crime to pay for more expensive habits, and so manipulation of the price mechanism is not the best way to influence this market. Although markets are generally the most efficient way to deal with situations like these, an extra-economical solution is needed to deal with these highly addictive drugs, as a purely market-driven solution would not function.
In terms of ‘softer’ drugs like ecstasy and cannabis, which lack the addictive side effects of harder drugs, prohibition is the wrong answer. These goods, unlike their harder brethren, do not come with the same negative externalities. On the contrary, the feelings of calmness, serenity and euphoria commonly associated with these drugs means that they may in fact have positive externalities (such as reduced instances of bar-fights, for example). These drugs have health effects similar to cigarettes or alcohol, and so the best method of dealing with them is as these other 2 legal drugs are managed: through taxation.
The increase in price through taxation results in price rising, and the quantity consumed falling. At the new equilibrium, the price the supplier is receiving is reduced, with the government receiving taxation revenue.
When it comes to soft drugs that lack high negative externalities and addictive properties, the benefits of tax over prohibition are numerous.
Firstly, the government would be provided with an additional revenue stream, which is increasingly important in today’s climate of falling taxation revenues. This money should (ideally) be spent on combating the negative effects associated with the good being taxed (i.e. taxing smokers to pay for smoking-induced illnesses), but does not necessarily have to be.
Secondly, legalizing the market will allow the government to properly regulate it, including setting standards for quality. This should eliminate the deaths caused by impure ecstasy pills, which only occur because the market is unregulated. Strict government control of a legalized market would eliminate these quality hazards, and increase the safety of those consuming.
Thirdly, the government is currently seeking to disband bikie gangs in Australia. One major blow that the government could deal these gangs is to legalize at least some of the drugs that they trade in. Drug trafficking provides a large part of the funding for these gangs, and the recent trend of gang violence is mostly related to fights over drug trafficking . By legalizing these drugs, the government takes control of these markets, removing a large part of these gangs’ revenue.
Finally, by legalizing at least the softer drugs available, police in Australia will be free to concentrate on eliminating harder drugs and other forms of crime. According to the AIC, cannabis still accounts for well over 50% of all drug arrests, and so legalizing it would free up valuable resources for where they are more sorely needed.
Conclusion
Overall, prohibition has proven not to be the one answer when it comes to drug regulation. Although some drugs are too addictive and destructive to be dealt with purely through market mechanisms, a strong argument exists for allowing the market to control at least the less destructive drugs. Despite these shortcomings in supply-side policy, the government has also made use of demand-side policy as well.
Bibliography
The Australian Institute of Criminology Website
Available at www.aic.gov.au
Coulthart, R., 2009, ‘Bikie Wars Fuelled By Drugs and Crime’, The Australian, 28/3/2009.
Available at Really Long Link
Pollard, R., 2003, ‘Australia tops use of ecstasy: UN’ Sydney Morning Herald, 25/09/03. Available at Really Long Link
New South Wales Government Druginfo website
Available at Really Long Link
University of NSW Drug Policy Modelling Program – Australian Drug Data
Available at Really Long Link Drug Data
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