Want to Make Drugs Less Lethal? Legalize Them.

Mises Institute

Marijuana, i.e., cannabis, is now legal in eleven states for recreational use, thirty-three states for medical purposes, and another sixteen states have decriminalized it (usually fines for possession of small amounts). The upcoming election will see several legalization ballot measures, including recreational use legalization in Arizona, Montana, and New Jersey and medical use in Mississippi. South Dakota will have both medical and recreational legalization measures on the ballot and Oregon will have ballot measures that would decriminalize all drugs and another that would legalize psilocybin, i.e., “magic mushrooms,” for purposes of helping people with certain mental health issues.

In the mid-1980s, at the pinnacle of the war on drugs, I wrote a paper for one of my graduate classes on the potency of illegal drugs. The paper shows that the prohibition of drugs causes illegal drugs to be produced that are more potent and dangerous than if they were produced legally and commercially. It was a simple application of the Alchian–Allen effect, where a lump-sum cost like a tax or transport cost (in this case risk) is added to two different grades of the same product, such as high-potency and low-potency cannabis, decreasing the relative price of the higher-grade product. Some people refer to this as simply “getting a bigger bang for your buck.”

It did, however, get a good deal of attention. Richard Cowan later dubbed the effect “The Iron Law of Prohibition” in National Review in order to explain the new phenomenon of crack cocaine.1 Judge Jim Gray called it the “cardinal rule of prohibition,” in his 2001 book and noted that it is a most compelling argument for the legalization of drugs.2

This “law” certainly did seem to explain the illegal drug market that had consisted of a large low-potency cannabis market and small markets for cocaine and heroin prior to President Nixon’s declaration of a “war on drugs” in 1972. By the turn of the century, the market had evolved into high-potency cannabis, crack cocaine, crystal meth, high-potency heroin, and superpotent chemical narcotics such as fentanyl.

However, policy began to change around the turn of the century. Several US states and countries began to decriminalize cannabis, adopting medical cannabis rules, and eventually some states started to outright legalize it in opposition to federal and international authority. In 2000, Portugal decriminalized all illegal drugs.


The purpose of this article is to explore what happens when an illegal good is legalized, especially in terms of potency and safety. I have heard several anecdotes that legalized cannabis is now more potent than ever, but theory would argue otherwise, ceteris paribus.

The expected outcomes from legalizing a formerly criminalized good are straightforward. Obviously, costs, i.e., risk, will fall, and with competition price will decrease as well. This will increase the quantity demanded and sold.

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Source: Mark Thornton | Mises Institute

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