DRUG ADDICTION

Drug Addiction

Abstract

There are many misconceptions about the consumption and control of illicit drugs, including that: drug users are unresponsive to price; controlling licit substance use may encourage young people to switch to illegal drugs; availability controls are likely to be more effective than measures to reduce demand. Economics provides both theories and empirical evidence to explore factors influencing current drug use, the costs to society of the harm they create and the cost-effectiveness of different policy options.

Drug Addiction

Introduction

The current consumption of both licit and illicit drugs is seen to have a range of economic impacts and there is general concern about costs arising both as a direct result of their use and from measures such as enforcement, education and treatment put in place in an attempt to reduce these problems. Economics has a set of tools whose application goes beyond simply quantifying the problem. This review aims to explore the role of economics in explaining changes in drug use, predicting expected and unexpected impacts of policy changes and evaluating the overall worth of different policy options (Schelling, 1980).

A wide range of psychoactive substances are used in society and most are subject to some legal controls. The focus of this review is the currently controlled psychoactive substances in the United Kingdom. Good data on illegal markets where such controlled substances are traded are hard to obtain. But useful insights can be drawn from theory, and from the empirical analysis of legal addictive goods such as alcohol and tobacco. Also, some studies have explored interactions between licit and illicit markets, in particular whether changes in restrictions on the use of legal drugs such as alcohol and tobacco affect the demand for or supply of illicit ones (Becker, 2001).

In the next section we will discuss the basic economic model and its application to addictive goods and then the three economic approaches of addiction.

The Basic Economic Model and Its Application to Addictive Goods

Economics is built on demand and supply, determined by rational, informed (but constrained) choice and reconciled by markets. In making choices, rational consumers are expected to take all current and future costs and benefits of their actions into account, but generally are not expected to take account of the impact of their actions on others, nor of the external costs (or benefits) of their choices. External costs make market-clearing consumption higher than is socially optimal. There is potential for government intervention to improve overall welfare, providing its costs do not exceed its benefits, by reducing external social impacts or by helping economic agents to internalise them.



Addictive goods challenge this simple model in two ways. In an extreme model of addiction, users would be incapable of effective choices, making them insensitive to price or their own income. The rational addiction model (Becker and Murphy 1988) explored below is an attempt to find a middle ground, suggesting how consumers can rationally pursue their welfare, even if they are aware of the nature of dependence and how this may influence their future ...