Are you an economist?

[Epicurus]

If you understand about world economics could you try and explain the financial effect of legalising drugs?

From what I have read it would seem to be one of the biggest business in the world and is the main means of earning money for millions of people if you follow it from growing/producing right down to street sellers.


(If this thread look familiar it is because I tried to ask before but that thread seems to have turned intro a thread about legalising drugs and doesn’t deal with the economic situation at all)

 

[NoEgo]

One of the effects would be that it would make the criminal gangs who currently shift drugs feel financial pain because they would not be able to compete as efficiently as a privately run enterprise.

The state would collect tax revenue sure, but that doesn't gurantee that they will spend it efficiently however.

 

[Gmart]

The effects of legalising drugs from an economics point of view would be to immediately cut the price as the black economy moves to the white economy and competition begins. Assuming that you mean that the drugs would be sold through Boots, then probably there would be a tax on them, and a control system to keep up with who is actually doing what. There would assumedly be restrictions on the basis of age and for some drugs there might even be compulsory registration with a doctor (such as heroin and crack) so that help can be provided if needs be. The quality would be improved with a statement of the percentage on the packaging (as is now the case with legal drugs).

From a worldwide point of view the areas such as Afghanistan and Columbia would probably go through a recession as the market price would collapse, and farmers would through necessity thus either live with the lower price or would switch to other crops. The market would become more open and thus the financing for the gangs currently controlling it would become more difficult as they also moved into the white market and set up companies.

The transport market would of course grow with some companies needing to take on more staff etc. While the police would suddenly have an awful lot more time to actually run after real criminals, maybe resulting in some job losses in the police, (an inevitable result of any liberalisation move).

All the arguments against drugs are to do with moralising. Addiction is a great problem for the individual, and thus laws are created to save people from themselves!

 

[.r.u.i.n.e.d]

I am not an economist by profession

But, I'll have a go at this, thinking from first principles,

It depends whether we're talking about a worldwide legalisation of drugs, or legalisation of drugs in this country alone.

As each country would in fact have to legislate separately to legalise drugs, I'll consider the effects of legalising drugs in this country.

The thing is it's a totally different question if you think of the utterly unrealistic situation that the government just legalises drugs without trying to control their supply and sale.

My guess is that if a government in this country were to legalise all drugs, their motivation would be to raise some money from tax, and so they would be likely to try to keep the drugs sold at roughly the prices they are now. They might even grant themselves a monopoly on selling them. But more likely, they'd consult to find out how much it would cost to legally manufacture or grow the drugs, and then set the tax rates on manufactureres and growers, so as to to keep the price roughly as it is.

So all in all, probably, the effect would be we'd supply ourselves with drugs more efficiently, which would mean fewer people would make money out of it. Rather than a lot of people making a bit of money, you'd have just a few people making quite a lot of money, the consumers spending roughly the same amount of money, and the government making quite a lot of money.

The question then would be what the government did with the extra revenue.
They could use it to cut public borrowing, they could use it to cut taxes, they could use it to increase social security payments. They could even pay everyone a dividend. And clearly without numbers, this game all starts to get a bit vague

The other aspect to the whole thing, is that if drugs are now legal but heavily taxed, maybe there's still going to be money to be made from black-market drugs. Now the government's going to have a problem controlling this, if it completely deregulates the whole importing growing manufacturing thing, so my guess is they'd be more likely to grant licences. Which would mean you'd continue to have an illegal drugs market competing with the legit drugs market, if they could undercut them.

This is the problem with economics. It's not any kind of science, because they operate on totally incomplete information, and the scenarios they envisage never happen in some pure idealised fashion but always within a social and legal context.

 

[.r.u.i.n.e.d]

But in almost any case, whether it was worldwide, or just country wide, what you'd see would be, big fish trying to swallow up smaller fish, in order to ensure that the market wasn't too competitive. So gradually big companies would start to monopolise the drugs trade.

And I doubt the prices would rise or fall much. It would be most unusual if governments didn't step in to take advantage of any money saved by a more efficient process of manufacture and distribution.

In the extraordinarily unlikely event that the governments stood back and watched the price of drugs plummet, and didn't tax them back to their starting point, then all it would really mean would be that some big companies would make a whole lot more money, and there'd be a whole lot less work for various law enforcement agencies. While a lot of consumers would either buy more drugs or have more money spare.

But in the more likely event that the governments do tax it. Then the question is what they spend the dividend on.

Whether it would be a good thing or not economically speaking to have a legit drugs trade is a difficult question. Depends whether you think governments making more money is better than having a lot of small businesses round the place.