 We haven't actually won the war on drugs But But we are winning The war on drugs and we will win the war on drugs and what I'm going to be talking to you about is Why we are winning the war on drugs and what's driving? that victory I've been working on this topic for 30 some-odd years and And we're winning this particular topic so in your other lectures about the Federal Reserve and the size of government and Various other things ask your professors why they aren't winning their area of specialization Okay, so why we are winning the war on drugs This is a very general phenomenon That we're talking about here, but it's the why the Austrians or how the Austrian economists Think that you can bring about social change in a particular area or for society in general And that is that you have to have the correct science About the way the world works and you have to have experience About how the world actually works and that combination of science and experience a lot of what you're Seeing here this week at Mises University is how you bring about ideological change and Once you bring about ideological change the political side of events will fall into place So you have to have science you have to have experience in order to achieve ideological change and as bad as things are in the United States In terms of the direction of the way things are going ie Hillary Clinton and The size of our government and the the activities of the Federal Reserve and our military adventures overseas The world has actually gotten a whole lot better Over the course of my lifetime in terms of the world becoming more free market in terms of the world becoming more Libertarian I mean for example the number of libertarians when I graduated high school Would easily fit into this room probably as a matter of fact we could probably Coordinate off the room with the barrier right where though is Standing and we could probably all get all of the libertarians in the world in that same room so what we've experienced Over the course of the last half century has been remarkable Of course West Germany and Japan after World War two they were totally obliterated and they started off with a free market economy back then And they be quickly became world economic superpowers and remain so to this day They become a lot more government oriented, but we've seen Experiences in Korea, Germany, China We've seen the breakup of communism in the Soviet Union and We've seen positive moves in the United States Great Britain and other places around the globe So that experience is pushing the world in the direction of freer markets generally and so we've seen the emergence of a libertarian ideology and of course It's not just here in the United States But it's around the world so where are we now in terms of Drug policy well, we're in better shape now than we have been in a very long time Marijuana is actually being legalized for recreational purposes in the state the states of Colorado Wyoming, Oregon, Alaska Washington DC we've seen legalized recreation excuse me medical marijuana and That's now Possible, it's not necessarily easy, but it's possible in 25 different states and several municipalities in the United States and in other countries and That's more science. We're finding out that not just is Marijuana for recreational purposes, but it has a whole host of medical purposes initially we found that Marijuana is good for helping patients sleep to eat more To be relaxed to be pain-free and As a result all of those benefits allow patients to heal From various illnesses like cancer and AIDS and so forth and also in more recent times they found that Medical marijuana is good for a whole host of different diseases including brain tumors tremors seizures So it has a lot of direct medical benefits for people and The experience is is that these type of benefits are going to Increase over time and there are a lot of entrepreneurs right now who are very busy Trying to make money off of healing people using various Marijuana type products Marijuana has also been decriminalized in various places like California so that Basically the majority of Americans if they're consuming pot and they get Detected by police. They're not going to go to jail at least a lot of other jurisdictions have reprioritized Marijuana in their list of police targeting people for example the city of Philadelphia Last year made marijuana the lowest priority For their police department in their court systems and they saved millions of dollars as a result in Portugal all Drugs have been decriminalized since 19 91 I Guess it's 1991, but it was in the 1990s when they formally decriminalized all drugs including heroin cocaine and so forth in Portugal They were basically forced to do this because they didn't have the money They weren't getting any positive results. They had the most most deaths overdose deaths per capita in all of Europe and So they decriminalized it in the social indicators In Portugal like dying from overdoses emergency room visits The number of people who are addicted All of those social indicators have improved since they decriminalized drug use So there was no disasters to report from all of these policy changes And as a matter of fact if you go back and look at Those social indicators what you'll find is at least some improvement Whether it's Colorado or Portugal whether it's Alaska or California There was always improvement when you look at the studies on needle exchanges And needle policies that the needles that are used to inject heroin and other dangerous drugs into your body One study for example They broke countries into countries that provided free needle exchanges and countries that basically made needles illegal prohibited them and Would even charge people With crimes if they had needles but didn't have a specific prescription for it And what they found was in the countries that were liberal and and sometimes they you know would actually give people free needles that the rate of the spread of HIV AIDS And other blood-borne diseases Was very low and the countries that made Needles themselves illegal That the rate of these blood-borne diseases was very high So again, this the science of economics and liberty is backed up with experience and also There's a demographic Things to report as well when you look at Surveys of people and whether that or not they think marijuana should be legal in 1972 only 12% of Americans thought that marijuana should be legal for recreational purposes now that percentage is over 60% and gaining Ground at survey after survey that number has been going up and if you break down the survey in term of ages the vast majority of younger adults support Legalized recreational marijuana and the only group that opposes it more than 50% Are senior citizens, which means that basically over time If time is the issue that more and more people will support legalized recreational Marijuana so The trend is good Now I've broken down how Economist and prohibitionist treat the issue of Prohibition and this is where you get into the differences between Austrian economists and regular economists now there are a lot of economists who support legalization of drugs and Some of them are mainstream economists Milton Friedman, for example has famously in his career argued against the war on drugs But not really for on the basis of economic principles He was a libertarian and he supported legalizing drugs for social purposes and as a matter of fairness because he saw that people were dying Who were not even using drugs but were caught in the crossfire of? the war on drugs and he argued on the basis basically on the basis of fairness and equity and in society So basically mainstream economist and prohibitionist have the same pretty much the same story Prohibition increases the price of a product therefore a higher price reduces consumption and Reduced consumption is a good thing because of all of the things that these illegal drugs are associated with such as addiction violent crime property crime corruption and health problems so it's a very simple equation in the minds of People who are for the war on drugs or from the standard economic approach The drugs are associated with addiction Violent crime property crime corruption and health problems and therefore Legalization of drugs in their minds would be an utter disaster because the price of these drugs would fall tremendously their use would increase Exponentially and therefore all of these other social problems Would increase dramatically and it would just be an utter disaster for society in their minds They can't see any reason whatsoever to even consider This kind of notion the Austrian analysis is a lot more complex and we see prohibition in the war on drugs as a matter of ignorance on how the market and society functions and So we have this war on drugs that's been building for over a century the Harrison narcotics act made heroin and cocaine and morphine illegal the marijuana tax act By imposing a prohibitive tax on marijuana made marijuana cannabis whatever illegal and Reviewing the congressional review of this enactment they had several people testifying and The people from the American Medical Association The American Veteran Aries Association argued that you shouldn't make this illegal because it's a standard product in Medical practice As a matter of fact my father was a pharmacist he owned his own pharmacy And he had bought the the pharmacy from his uncle who had bought it from somebody else and they still had all of the old pharmaceutical junk from a century ago and So my father and I when I was a little boy we dragged all this stuff out of the basement and we set up a like a Just sort of a positioning of all the various Pharmaceutical equipment including a lot of large glass vessels, I mean these were large and My father had put Like fake stuff in them. So there was one with blue water in it there was one with red water in it and there were these two large jars and one was Can period indy period and the other was can period ste period and He filled them up. I didn't know this at the time, but he filled them up with just leaves from our yard But a few years later. I realized that the jar was cannabis Indica and cannabis sativa This is right at the height of the war beginning the war on drugs with Nixon in 1972 And I thought to myself. Oh my god, my father has an enormous amount And So I was kind of freaked out and but eventually I got a Nerve I said, you know dad, what's all this stuff for what would they use this stuff for? He said, well, what do you mean? I said, well take this one, for example And I pointed to the cannabis indica jar and He said well it basically veterinarians Prescribe it for horses and they used to be used on farm animals before tractors when they start the season and the Horses would have to Start doing very heavy work after being Non-active throughout the winter They developed sore muscles in their legs and they so they would use a liniment made out of marijuana on their legs and they Still used it later on race horses So there was you know, there's a real need and everybody knew it back then There's a famous movie that helped get the marijuana tax act passed reefer madness in 1936 you I think you could see that on the internet if you Google it And then as we get to the modern war on drugs the Comprehensive Drug Control Act in 1970 and I think this is when marijuana was Classified as a class 1 or class a drug along with heroin and cocaine as something that has no medical benefits whatsoever and is also something that is extremely harmful to the user and That's where it remains today despite all the progress and so you know your average citizen was easily fooled by all this and and the Marijuana tax act when it was under review The medical representative and various other Scientists got up and said, you know, there's really Nothing in marijuana that's any more harmful or potentially more harmful than alcohol and Harry Ancelinger who was in charge of the federal government's war on drugs at the time got up and said well I know we said that it could kill people and drive them crazy and Make them violent and All of these other problems and we kind of lied about that but Marijuana he said he just made this up on the spot after hearing these scientists saying there wasn't anything wrong with it He said but marijuana is a gateway drug to these other drugs that will make you violent and crazy and murderous Turn you into a violent rapist and so on and so forth. Well that The gateway theory of drugs has been thoroughly discredited by scientists in a variety of different fields Okay, so in this view if you're going from the supply and demand Equilibrium point where you have a price and an equilibrium quantity in the market The prohibitionists and the economists say well if you prohibit something you Make supplying it more difficult and therefore you drive up the price and you reduce the quantity and therefore You reduce all of these social problems That the prohibitionists raise against These various drugs So you raise the price and if you Enhanced the prohibition You'll drive up the price even higher and you'll reduce the quantity That's going to be sold in the marketplace So that's their standard view straightforward simplistic View that prohibition makes things harder to supply Raises the price it reduces the quantity and so the social problems associated with drug use go down Now this is just one of many things that are going on in the war on drugs But I want to explain this one the iron law of prohibition Which is based on something called the Elchin and Allen effect and you can write that down and look that up later And you can look up the iron law of prohibition on Wikipedia as well But the Elchin and Allen effect looks at the effect on markets When you consider transportation causes costs. Yes, sir I'll get it. There you go. Although. I'm not sure what ST GAO means Yes shipping the good apples out so So in the Elchin and Allen's original description They were responding to a lady who wrote to the Seattle Times in the state of Washington you know why Can't you get a good apple in Washington? Given that they produced they were like the number one producers of apples in the United States and she was Basically upset the fact that she couldn't find any really good-looking good-tasting apples in Her state that was producing all of these apples and Elchin and Allen wrote back with this explanation that transportation costs of getting apples From the state of Washington to someplace like Alabama are relatively high Okay, so shipping an apple from the state of Washington to the state of Alabama is relatively high. I'm gonna be using a Cost here of $1 per apple. It's not actually that high, but just to give you a better Stress in terms of what's going on in this example So say in your home state of the state of Washington That a good apple cost $1 and a bad apple cost 50 cents So that one good apple is the economic equivalent of two bad apples If we add a transportation cost of $1 per apple then It costs two dollars for one good apple in the state of Alabama and One bad apple is a dollar fifty so that the relative cost of Going Bringing apples from the state of Washington to the state of Alabama it actually The cost of a good apple falls from two bad apples to only one and a third bad apples and So that's the economic rationale if you're gonna ship apples From Washington to Alabama the incentive is to ship the good ones And this is also true for a variety of products, especially fresh products that have to have Have a short transportation time so the lobsters from Maine Idaho potatoes Wine all of these things Because of their high transportation costs They tend to ship the good lobsters from Maine To Alabama so that if you go up buy a lobster in Alabama It's going to be prime lobster. It's gonna be one and a half to two pounds And they're all going to be very much The best quality lobsters I Was in Cape Cod many years ago And I went into this fish market and they had this giant lobster It weighed like 35 pounds. I said wow that must be great because I love lobster and he said no It's completely unedible So that that lobster is probably 50 years old and you wouldn't you'd probably puke If you tried to eat it So we get the good lobsters Idaho potatoes the same thing if you go to Kroger's or one of the local stores all the potatoes are really Roughly the same size good quality. They're not bruised or broken up The only time I had an Idaho potato in Idaho It was about this big and the and it was in out in edible in the interior of it So this transportation cost has a big influence and so when we apply this notion To the war on drugs we get a similar phenomenon Okay, say marijuana in South America The high potency very Variety would equal about ten pounds a ten dollars a pound where the low potency marijuana is only five dollars a pound so that the relative price of One pound of high potency marijuana is two pounds of low potency Now to get that same marijuana from South America into South Carolina You have to run the risk of being caught by law enforcement and Convicted and serving a long sentence and losing all your property and so forth So let's say that risk is the equivalent about a thousand dollars per pound Which it roughly is So that high potency marijuana in South Carolina is going to cost about One thousand and ten dollars the low potency marijuana is going to cost One thousand and five dollars So the relative price of high potency marijuana in South Carolina is going to be much less because the price of low potency and high potency are Roughly the same because of this high risk factor and so smugglers Are incentivized to only? smuggle the highest potency that's available in the market of origination and So there's a tremendous incentive To smuggle the strongest most potent versions of drugs now a long long time ago When Ronald Reagan became president and made the war on drugs a very high priority He assigned his vice president George Bush senior to be America's first drugs are and They made a big effort They enlisted the role of the military to help stop drugs from being smuggled into the country and They made a major push in 1984 to stop The importation of drugs into the state of Florida, which is the one of the main entrances of South American drugs into North America and it worked They've virtually dried up the market for marijuana in the state of Florida But what they did as a consequence of this is they started the marketplace for cocaine Because the marijuana smugglers all of a sudden switched from smuggling marijuana, which is big and bulky to smuggling cocaine, which is much smaller per dose especially if it's smuggled in at a 100% potency and So the reaction of the marketplace the black market if you will To stronger and stronger prohibitions has been to increase the the smuggling of higher potent drugs First it was started out in the 1970s marijuana was averaged of the stuff that they Stopped and and actually confiscated the average potency was about point four of one percent by 1984 they The average potency was already up to four percent and the government actually tracks this information and While I was working on my dissertation at Auburn. I wrote them and asked them for a copy of one of their reports and They sent it to me and then as I was finishing up my dissertation. I wanted to get some updated data For my dissertation, so I called them again. I said could you please Send me a copy of the report. I said you're not supposed to have a copy of that report I said well, I have one right here. They said well, you're not supposed to have it I said, okay, I'll send it back to you Which I did after I made four or five photocopies And so drugs have continued to get more potent Over time and as a matter of fact, let me just take it aside here. There's because there's currently a heroin overdose Problem in the United States It's not just urban junkies It's spread out into the suburbs and now it's spreading out into the hinterland so that people are dying from heroin in like fishing villages in Maine and coal mining towns in Pennsylvania and West Virginia and So this is an important warning to even people who would never consider using heroin because in 1999 the medical profession and the government medical bureaucracy started recommending that instead of the old pain relievers from the past that doctors now should start prescribing Oxy-Cotin and Vicodin for pain Because it's a more effective pain reliever than those used in the past and so The number of prescriptions for Oxy-Cotin and Vicodin which are very chemically similar to heroin the number of prescriptions Started rising very very quickly and the problem with these type of pain relievers is yes They do relieve pain But they're very similar to heroin and they can cause addiction and so Fishermen from Maine Who would be injured on the job? Coal miners from West Virginia who would easily get you know injured on the job break a leg Tarot shoulder or whatever it happens to be they go to the doctor and they get these prescriptions for Vicodin and Oxy-Cotin and then 30 days later, you know, they come back into the doctor their arm or their shoulder is fixed or their leg is on the mend and But they want another prescription for this stuff because they become hooked on it and The doctor says well, I can't I can't give you another prescription because your arm is better your shoulders better and so these average Americans go out and they're addicted to essentially heroin and The first thing they try to do is find friends or relatives who have some of these pills or they go to the black market They can find them on the black market The problem there is that it cost at least ten dollars a pill Maybe up to twenty five dollars a pill So they they do that for a while, but then they find that the twenty five dollar pills. They can't afford Now, but they can afford four dollars for a hit of heroin and so Many of them are Forced because of their addiction To to go that route the problem with heroin is of course, you don't know how much is in a particular dose You know how much is in an oxy cotton pill? You know how much is in a Vicodin pill? You don't know how much is in that bag of heroin that you got and so this has caused a cycle of addiction and overdose and death Okay, the actual legal framework and economic framework Really tells us where all of these negative social costs are coming from Why is there so much violence and crime? criminality Health problems, why is that a problem with the use of these drugs? Well, Austrians would argue that the problem is Not so much the drugs themselves But the economic and legal environment in which those drugs are produced sold and consumed There's no rule of law in the black market, you know if a drug dealer You know somebody steals his stuff he can't go to the police and say, you know, you better rest those those heroin stealers And then you're not going to get any credit there So very often drug dealers street dealers resort to violence to enforce contracts To enforce their sales territory They they don't have the rule of law they can't resort to the criminal justice system and Outside of organized crime Street dealers have to resort to violence weapons and so forth Little typo here Crime to finance addictions not additions Although I imagine you could come up with something there, but Because of the high cost of these illegal drugs It very often has the addicts resorting to various types of crime stealing Getting into people's houses taking their stuff prostitution and so forth in order to finance their habits a Similar economic thing happens From the potency effect the iron law of prohibition to bribery and corruption Instead of just trying to avoid the police They actively seek the protection of the police and so organized crime will bribe the legal system make it corrupt and The organized crime will turn in its competitors to the police So everybody's happy people are getting arrested The organized crime is making tons of money And they don't even have to worry about getting caught and all these kind of things undermine civil society You could definitely see this during alcohol prohibition in the United States in the 1920s and early 1930s before it was repealed Because alcohol was a much bigger market and people were simply Not paying any attention to the the prohibition of alcohol and There was crime and corruption everywhere So it really undermined the general rule of law in society because people didn't trust the police They didn't trust the courts or politicians Which is a good thing And it also stymies economic development In the area where the drug trade Commences, which is typically in urban areas And then of course Central American countries The US is basically shut down Openly transiting illegal drugs via air and via water And so most of the drugs that come into the United States do so on a land route from South America through Central America Mexico and into the United States so The cartel the drug cartel people have basically taken over vast areas of Central America Basically have paid off the police or threatened the military in those countries So that they get free transit basically through Central America This is completely undermined the local government law enforcement property rights and so forth and as a result Really undermining those economies because nobody wants to invest there People would prefer not even to live there Last year we saw thousands of children making their way from Central American countries like Honduras and Nicaragua on their own without adult supervision to try to get to relatives who had moved to the United States in Times past and it also finances terrorist groups so Really, I think the theory from Austrian economics and the experience that we've had with the war on drugs and alcohol prohibition and with Marijuana legalization decriminalization all points in the same direction basically that the social problems that are perceived as a result of drugs are actually almost entirely The result of the war on drugs itself in other words Drugs would be much safer The companies that sold them Would be legally liable for any harm That might result from a bad batch of drugs or something along those lines and so in the full analysis we don't find any Socially desirable benefits from prohibition we only see Costs properly perceived and these costs are actually much larger than We could put a dollar value on people often ask me, you know, what what's the cost of the war on drugs? What's the How much could we save? Well, that's That's not really possible to say if you're an Austrian economist. I mean, what's the cost? to society of a high school student or a college student dying from an overdose of Drugs What's the cost of? You know some fishermen or some coal miner Getting addicted and then dying from an overdose In terms of their family and their friends in their community It's not really possible to put a dollar figure on something like that But the good thing is that more and more people have a general perception That it is the war on drugs that's causing the problems that that's what's driving the effects and Most importantly we now know That legalizing drugs even all drugs Whether we You know put them into the marketplace or we can find them to Medical purposes or what have you that we would be much better off As a society Okay, we've got a few minutes for questions here Yes, sir Yes Yes Yeah Yeah, I think I think that's right and it's natural that people would put Assigned different benefits from individual to individual a lot of people would be persuaded by the fact of less crime less violence because they're more Affected by that and they place a greater value on on that Result in the night in 1932 Americans placed a very high value on the tax revenue angle as well as the the violence Avenue because in the late 20s and early 30s. It was very common to hear gunfire in your city All night long because of the alcohol prohibition The prisons were full The police were corrupt But they were also in the Great Depression and Schools were being closed down All sorts of social services were being cut back and they knew Because prior to 1920 and alcohol prohibition alcohol taxes were one of the major sources of revenue. So there are Multiple benefits and people will assign different Personal benefits to each one of those things Yes Yeah, how much of a role does you know the pharmaceutical issue Play here what plays an enormous role because the pharmaceutical companies that make these particular drugs They give lots of money to the people who sit on the government panel that makes these recommendations So the panel that recommended this and continues to recommend this At least Half of them received major grants from these pharmaceutical companies as well as paid vacations and things like that And so the pharmaceutical companies in terms of the OxyCot and Vicodin thing They are the primary pushers. That's what changed The government recommendations essentially so it's a very good excellent point. Yes, sir Well They're basically caught between a rock and a hard place because the US is the big global bully here Fortunately the UN is reconsidering its recommendations on drug policy and It's my opinion that they are going to recommend That we stop going the war on drug results and look at harm minimization policies, which would Essentially back the Portugal model a lot of European countries are already in the process Ireland for example they're ready to rewrite their whole war on drug policy and I think that once that's get started maybe next year When the UN says hey, you no longer have to go along with this war on drugs We're going to open up policy alternatives so that you don't have to follow the US role model here any longer and I think at that point once other countries start reforming their drug policy and many of them have wanted to for a long time that There will be a very Historically quick De-escalation in terms of the war on drugs so we have to hope that That the people at the UN Who are ironically located in Portugal so they've seen firsthand for many years The benefits and I'm I will take some other questions, but we're out of time right now. Thank you