Risks and Prices: An Economic Analysis of Drug Enforcement

Marijuana and cocaine, two mass-market drugs, have been the object of a major campaign by the federal government over the past five years. That campaign apparently has not led to a significant tightening in the availability of the two drugs, though the relatively high prices of these drugs historically are a consequence of enforcement. The reason for this lack of response to recent law enforcement pressures may lie in structural characteristics of these markets rather than in a failure of tactics or of coordination of law enforcement efforts. The federal effort aims at importation and high-level distribution, which account for a modest share of the retail prices of these drugs. Increasing the risks to importers or high-level distributors is thus likely to have modest effects on the retail price and is unlikely to have any other effect on the conditions of use. Street-level enforcement is hindered by the sheer scale of the two markets and because so few of the final purchases occur in public settings. Many of the risks associated with drug trafficking come from the actions of other participants in the trades themselves, and this also limits the ability of law enforcement agencies to act in ways that will cause prices to increase or alter market conditions. Law enforcement efforts directed at heroin have been much more effective at restricting drug use.