Tuesday, September 16, 2008


An interview with Professor Gary Becker, winner of the Nobel Prize for Economics, about the War on Drugs.

What are the problems and costs of the current way of regulating drugs, in the USA and also in Colombia?

Well, the big problem, I think, is that it’s very costly, for reasons I think we understand now. The difficulty is getting any change in US policy, it’s been pretty much the same since Nixon declared the war on drugs thirty or some odd years ago. There may have been some decline in drug use in the United States, but we’re spending an enormous amount, maybe tens or even more than a hundred billion. We’ve made some estimates of the general cost of the war on drugs when you take account of direct spending of police, judicial system, incarceration, and things you can’t measure that well, such as effects on communities and countries. I don’t know as much about other countries except that we’ve been involved, of course, in trying to eradicate some of the sources of drug use in Colombia and elsewhere in Latin America, and now in Afghanistan, and that’s very difficult to do because drugs can be grown in many different parts of the world, not all. It tends to move. I think it’s a losing war.

What’s your proposal exactly?

I think you have to legalize drugs. That will eliminate most of these costs, the incarceration costs, the judiciary costs, the police costs. You’ll be able to reallocate the police to better activities, reduce the effects on neighborhoods, and so on. Critics would say you’ll get a big increase in drug consumption. We estimate the effects, it may be pretty large, but you can always handle that in the way we attack cigarette consumption and alcohol consumption: namely, it’s legalized and we impose a tax and we can then concentrate on reducing the amount of underground activities, which is much easier to do than reducing all activities.

What effect do you think legalization would have on Colombia and the Andean region?

I think it would be a significant improvement for Colombia and these other countries. It may increase the amount of activities that go into drugs, but I think it will greatly weaken the cartels because now this would be more of an open competitive market, so drug cartels would be less important. Now you need cartels to fight the legal system. If it’s legalized, you don’t need it. So if you go back to experience of the war on alcohol, prohibition, in the United States, we had Al Capone and a lot of gangsters involved in that industry, as soon as we legalized it again it pretty much all disappeared. I think it would be a great boon, maybe more important for Colombia and the other countries in that Andean region than even for the United States.

You said in your paper that the “elasticity of demand” of cocaine is 0.5. Could you explain, for non-economists, what this means?

That means that if you increase the price by 10%, you will reduce consumption, after a while, by 5%. It tries to tell you something about the relationship between quantity consumed and the level of the price. It’s important because when that elasticity is low it means every time you increase the war on drugs, by putting more resources into fighting it to try to raise the price of drugs, you get really little effect on quantity, but a big effect on total cost, which is product of quantity and price. That is what we emphasized in our paper.

So suppose Colombia succeeds in eradicating 10% of the coca, what effect would that have on the finances of guerrillas, paramilitaries, drug traffickers, etc.?

It’s a little tricky. First of all it depends how much of that coca shifts to other areas, that will determine how much it affects the price. Let’s suppose, for the sake of our discussion, that you eradicate 10% and you raise the price by 20%: in some sense that makes the cartels and the guerrillas better off, because the price rises by more than the fall in quantity, and if they avoid getting captured, they’re making more profits as a result of that. So in that sense it acts perversely for those who succeed in evading capture. They are doing better, rather than worse than before.

According to the United Nations Office of Drugs and Crime, coca cultivation in Colombia fell from 163,000 hectares in the year 2000, to 80,000 hectares in 2004. This should have caused a massive spike in the price, and yet prices remained low (although they did go up a bit). What do you think is happening?

I don’t know exactly, but what I suspect, and some evidence suggests, is that there is a shift from Colombia to some of the surrounding countries. You have to look at the total effect on coca production, not the effect on Colombia alone. Maybe that effect was pretty small because there are other countries that are good substitutes for production, then we would predict that it would be a small effect, it wouldn’t be a surprise. If total coca production went down that much it would be more surprising, but I doubt very much that’s what happened.

What is your opinion of Plan Colombia, spray-ops, US military aid to Colombia, etc.?

I don’t know how effective the spraying is, and, again, you have to worry about how easy it is shift out of Colombia into the surrounding areas. Therefore you have to distinguish the effect on Colombia and the effect on surrounding areas. You’re hurting the farmers in Colombia if you’re affecting their profitable crops, it depends what they can shift into. And what you’re doing to the criminal element in this, the organized crime element, depends a lot on how much shifting there is into neighboring regions, how powerful they are in these countries, and what happens to price. All our attempts in the past to go into Colombia, be pro-active and cut back things, I think is a strange use of the US military that I’m very uncomfortable with. I don’t think that’s what the US military should be engaging in, in fighting the war on drugs.

Surely, at any given price, demand would be higher in a legal market than in an illegal one? Is that the case?

Well, you say “surely”... it may be true, but you have two forces that go in opposite directions. Law-abiding people, clearly, if it’s legal they’d be more likely to do it. What about teenagers? A lot of drug use is by young people, and they often like to do things that adults don’t want them to do, and so that effect goes in the opposite direction. So the question is what’s the net effect of that? I’m not sure what the answer to that would be. I’d be comfortable with the conclusion that there might be an increase in consumption at any given price. That might be possible, but it’s not logically necessary.

How would a legal market work in practice? Would people buy it in pharmacies, or how would it be distributed?

Look at how liquor has been distributed. Some states, but a declining number, have special stores licensed by the state, sometimes run by the state, that only sell liquor. Other states have pretty much free entry in that market. You can have Walgreens drugstore selling liquor as they do in Illinois and other states, and you have grocery stores selling it. I think that ultimately you’ll end up with something similar to liquor distribution. Maybe initially, because we’re moving into new territory, you’d be restricted to certain outlets, and if the system seemed to be working pretty well we’d then gradually, or quickly extend that, and make it more generally available.

And how would this affect the production side? Would it still be made in jungle laboratories?

No, it would completely alter that. That’s interesting. And I think the alcohol prohibition analogy in this respect is perfect. When it was illegal you had all these illegal stills and so on, criminals producing it. When it became legal you got perfectly legitimate companies involved in it, with their own breweries and the like. And I think you would have that with regard to drugs. And therefore the quality control, the safety of drugs, would be much better because these would be above-ground companies that would be sue-able and responsible for the quality of their products.

And how would legalization affect the price of coca? How would it affect farmers in the Andean region?

It ultimately depends on what happens to demand. If quantity consumed went up, let’s say, as is very likely, that would increase the demand for the crop and therefore would increase the incomes of farmers. The magnitude of that effect depends on a bunch of considerations, but that would be the direction of the effect for sure.

Do you think legalization is likely to happen at some point?

At some point, maybe. I don’t think in the near-term future in the United States (I’ll only speak for the United States, which I know best.) There’s a lot of political opposition among both Liberals and Conservatives, and there’s also support among both Liberals and Conservatives. It’s a very interesting mixture of both the advocates and the opposition, but the opposition is a lot stronger now than the supporters, so I don’t see it happening in the near future. Will it happen eventually? I tend to believe some form of it will happen eventually, as the costs become more apparent. It’s kind of shameful that of the new people going into federal prison, maybe 30% - 40% of them are going in on drug-related charges, mainly not consumption but distribution. A good fraction of these being from minorities, African-Americans and others, and therefore it’s been importantly responsible for the fact that we have over two million people in now prison in the United States, drugs are only part of it, but it’s an important part of it, and that prisons are disproportionately populated by minorities, again, drugs are only part of it, but it’s a significant part of it.

Your colleague Milton Friedman said that the United States is destroying Colombia because the United States cannot enforce its own laws. Do you think that’s fair to say?

Well, I think the United States is hurting Colombia. We can’t enforce it by controlling what comes in, so we try to enforce it by controlling the production. And that, I agree, is a very dangerous step, and it’s definitely had a negative effect on Colombia. But the ultimate negative effect on Colombia is making it illegal. US operations in Colombia add to those effects.

If it weren’t for the drugs trade, do you think there would be peace in Colombia?

To the extent there is ideological opposition, that has gone on in other countries without the drugs trade, but they frequently get financed by the drug trade. So I think, yes, the degree of conflict of that type would go down maybe very significantly.

Why did the crack epidemic end in the United States?

That I don’t know. We just had a paper today, that I wasn’t able to go to, about the crack epidemic. Crack started because it was a cheap way of using cocaine, but as people maybe became more familiar with some of the harmful effects of it, they seem to have shifted away in significant numbers from it. But I don’t know if we know exactly what they’ve shifted into, and what the aggregate is. Total drug consumption has gone down in the United States, there’s no question about that. The real question is whether it has gone down enough to justify the huge expenditures.

What are your main research interests? You write a lot about the economics of crime.

Aside from drugs, you mean? Drugs are only a small part of my interest. I’ve worked on crime; I’ve worked on what we call human capital, that’s investment in people’s education; health; training; I’ve worked on the family a lot, and some of the factors that make for family size, stability of the family, number of children, things of that type.

What were you award the Nobel Prize for?

For extending the boundaries of economics to cover some of these type of topics, such as education, crime, discrimination against minorities, and family. That was the citation.

What are the other main awards you’ve won?

The National Medal of Science. The Clark Medal, given by the American Economic Association to a young economist every two years. Those and the Nobel Prize are the ones I’ve been most proud of.

Do you advise the US government?

In an informal way I have advised the government from time to time. I’m not one of these people who commutes to Washington all the time, but I have given advice to various parts of the government, and I continue to do some of that.

Have you ever traveled to South America?

A number of times. I’ve been to Colombia, I’ve been to Argentina, Chile, Brazil, Venezuela. So, yeah, I’ve been to a number of countries more than once. Uruguay.

How was your trip to Colombia?

Well, I was only in Bogota. It was a number of years ago. I was there giving a talk on training. It was financed by a government agency. I can’t remember the details, it was a number of years ago. So I didn’t get to see a lot of Colombia outside Bogota. But I enjoyed my experience there. We’ve had a number of students from Colombia at the Department of Economics in Chicago, and I was re-united with a few of them. The conference was good. This was probably in the eighties. I enjoyed seeing my former students. In terms of seeing sights, I’m not a big sightseer.

Friday, September 05, 2008

Piece in the Telegraph about Breidis Prescott.