“when demand for a good is inelastic, the cost of making consumption illegal exceeds the gain”
From Drug War Rant:
Via Marginal Revolution, I see that a new paper in the Journal of Political Economy by Gary Becker, Kevin Murphy, and Michael Grossman called “The Economic Theory of Illegal Goods: The Case of Drugs” will attempt to explain it to our political leaders.
From the paper:
In an important new study, world-renowned economists–including a Nobel Prize winner and a MacArthur “genius”–argue that when demand for a good is inelastic, the cost of making consumption illegal exceeds the gain.
…
“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.”
Need I say more?