Dr. DeLong points us to this summary of a new book by Gary Becker, Michael Grossman and Kevin Murphy. Their thesis is that because demand for illegal drugs is highly inelastic, their use cannot be effectively curtailed through standard law enforcement measures:

The authors demonstrate how the elasticity of demand is crucial to understanding the effects of punishment on suppliers. Enforcement raises costs for suppliers, who must respond to the risk of imprisonment and other punishments. This cost is passed on to the consumer, which induces lower consumption when demand is relatively elastic. However, in the case of illegal goods like drugs–where demand seems inelastic–higher prices lead not to less use, but to an increase in total spending.

In the case of drugs, then, the authors argue that excise taxes and persuasive techniques –such as advertising–are far more effective uses of enforcement expenditures.

“This analysis…helps us understand why the War on Drugs has been so difficult to win…why efforts to reduce the supply of drugs leads to violence and greater power to street gangs and drug cartels,” conclude the authors. “The answer lies in the basic theory of enforcement developed in this paper.”

To illustrate the principles outlined in Becker, Grossman and Murphy’s book, let’s use a concrete example from real life- namely, Kaye Grogan’s tragic addiction to rubber cement.

As long-time readers of this blog know, Kaye Grogan is a columnist for Alan Keyes’ website Renew America. In the proud tradition of Samuel Taylor Coleridge, William S. Burroughs and Ken Kesey, Ms. Grogan does much of her writing under the influence of an illicit substance, in this case a bottle of Elmer’s rubber cement.

Exhibit A: “The Demon Paste.”

After huffing this dangerous-but-legal drug, Grogan rushes over to her computer and furiously churns out political opinion pieces that are chock-full of laughable spelling, incorrect punctuation and highly dubious syntax. Examples can be found here, here, here, here, here, here, here, here… oh, what the hell, just scour the Google archives.

Now, because Kaye is strongly addicted to rubber cement, her demand is considered inelastic. In other words, increasing the price of rubber cement will not significantly alter the quantity she requires to write a column. While substitute goods are readily available- whippets, for instance- rubber cement is the only drug that really knocks her socks off.

Exhibit B: Kaye Grogan’s demand curve for Elmer’s rubber cement.

As should be evident from both the style and content of her columns, Kaye’s addiction is not beneficial to society. Indeed, you would have to read three nuclear physics textbooks from front to back just to recover the intelligence you destroyed from reading just one of Kaye’s 700-word editorials. The question we face, then, is, “What is the best way to end Kaye’s frequent inhalant abuse and thus stop her from being so danged goofy?”

We could simply ban rubber cement outright and jail anyone who’s caught selling it. But since Kaye has a perfectly inelastic demand for the drug, she’d be willing to pay whatever high price the black glue market happened to command. To pay for the high costs of her addiction, Kaye would turn to a life of crime, robbing banks and jewelry stores so she’ll have enough money to get her next fix.

Nyah, coppers, you’ll “never” take my glue… away, from “me!”

These increased prices also mean that revenues from rubber cement sales will skyrocket, thus providing more incentive for others to enter the seedy world of illegal glue cartels. In the end, then, society pays a higher cost through increased crime, the fat cat glue lords are even richer, and Kaye is still addicted and writing bad columns.

Another option is to keep rubber cement legal and slap an excise tax on it. The government would then use the revenues generated by the tax to fund Huffoholics Anonymous, a treatment program design to help those afflicted by the “demon paste.” Because demand is always more elastic over time, the long-run price increase resulting from the tax would give Kaye a future incentive to save money by seeking the free treatment provided by the government. This way, Kaye will eventually drop her addiction without the fear of facing legal action and without resorting to crime to pay for her fix.

Anyway, I hope this helped explain these basic economic concepts. I’m sure Kaye would appreciate it if she weren’t passed out in her local OfficeMax’s employee bathroom.