Heroin is a classic example of a demerit good:
- People ignore or underestimate the costs of consuming heroin. In other words people make bad choices about deciding to consume this very addictive good.
- Heroin consumption also has negative externalities for the rest of society. Heroin addicts become less productive, often unable to hold down a job. Also, heroin addicts are more likely to engage in crime to feed their habit.
Most governments take the decision that since the drug is very harmful for individuals and society, they will ban it and make it illegal.
However, the war on heroin is like many other drugs, a losing battle with no end in sight.
The United Nations Office on drugs and Crime estimated that opium production jumped to 8,900 tonnes in 2007, up from around 4,500 tonnes in the previous decade.
Of this estimated 8,900 tonnes produced, seizures of heroin rose to only 65 tonnes. Or 7.5% of annual production.
One solution would be to redouble efforts to clamp down on supply. Yet, even if a doubling of money did actually double the amount seized, that still leaves an awful lot of heroin on the market.
The failure to stem the supply of heroin is indicated by the market price. Reaching a peak of $300 in 1992, the price has fallen to $131. This market price is only $60 above wholesale prices indicating health competition in the street sale of heroin.
If stopping the supply of heroin is a doomed to failure, does this mean we should consider decriminalisation? Decriminalisation may not be as crazy as it first appears. Decriminalising heroin would have the following advantages.
- It would significantly harm the operations of organised crime and petty criminals. Decriminalising heroin would take many users away from crime.
- By legalising the drug the government could tax it and collect revenue.
- Government control could help reduce the spread of HIV and other infectious diseases.
- The reliability of the heroin could be assured. Many heroin deaths occur due to bad grade heroin.
The problem remains would legalisation encourage more people to try it and have their lives ruined by becoming addicted?
It is possible legalising heroin may take away the ‘glamour’ of taking something illegal, but, it is more likely that easier access may encourage more to try.
On the other hand, legalisation could be on a very strict basis with users having to undergo stringent interviews and plans to take them off the drug.
One thing is for certain the great ‘war on drugs’ will never be able to stop the supply.
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