Understanding the Incentives that Underly and Perpetuate the Drug War

    When it comes to the issue of government attempts to prohibit non-violent criminal behavior, it's all about the incentives.  Individuals act in response to the perceived opportunities to profit from doing so, therefore regardless of the government's stated intentions for pursuing a particular policy of prohibition: drug smuggling, gambling, prostitution, or whatever; in the process of their attempts to do so they inevitably trigger a set of market singles that inspire the very sort of entrepreneurial activities they are aiming to end.  In layman's terms they only make problems worse.  For the purpose of this brief analysis I'll confine my account to the issue of drug prohibition, however I am confident that the same principles apply to other products and services, although the particulars may vary due for a variety of reasons.  Nonetheless, it's all about the incentives, even for politicians.  Thus, when politicians detect an opportunity to profit in terms of public opinion by attacking the “scourge of drugs”, they are acting in a way consistent with the idea of rational self-interest.  The public hears many speeches full of frightening rhetoric about the threat to public health posed by the newest wave of illegal drugs, and also about the illicit profits made from their sale and the nefarious purposes to which they often flow, even to terrorism!  But, thanks to the vigilance and goodwill of our tireless government  they soon see news reports of massive arrests, people, guns, and drugs seized, and they here how now their children won't face the risk of those dealers targeting them.  Finally, they see the prison population: proof that the bad ones are being caught.  “See?”  says the government, “The system works.”  This is what is seen and heard.
    Of course this is an overly simplistic account, but then, so too is the government's. Although politicians rationally pursue a policy for the sake of maximizing their own ends, what is lost is the fact that everyone else does, too. In the wake of government intervention into the drug market there arise massive opportunities to supply sought after yet illicit sets of products at great personal risk, thereby justifying the accompanying promise of lucrative profits.  Prohibitions increase the prices of the goods prohibited because they reduce the supply more sharply than the relative demand.  While the government and public may lament the violence that often occurs amongst those who seek to dominate these underground markets, nonetheless they must be understood to in fact be a direct result of the prohibition of those products.  This too, has a rational basis, for when a legitimate company has a contractual dispute with another party they can call upon government courts to enforce their rightful demands to just remedy.  In the case of a black market, however, no such option is available, and absent a third party opinion which will then be respected and enforced, physical violence is an unfortunate but unsurprising result.  Likewise with the issue of dangerous and tainted drugs in the market, absent the ability for an industry to regulate itself in the open view of the public, the opportunity for unscrupulous or otherwise unqualified individuals to maliciously or negligently supply their customers with dangerous or simply substandard products is greatly increased.  The most direct example would be the issue of toxic moonshine during the prohibition of alcohol and its disappearance after its end, along with the violence that supported the bootlegger's illicit trade.  We don't hear about Coors and Budweiser employees gunning each other down these days, do we?