Prohibition and Legalization: Lessons for Policy Change

Prohibition and Legalization:
The Way Forward
Mises University—2021
Dr. Mark Thornton
Peterson-Luddy Chair in Austrian Economics
July, 20
th
, 2021
The Way Forward?
How did we prohibition?
How did we get legalization?
What can we learn from this experience? Does it apply to other
issues?
We will concentrate on economics, but it should be stressed that the
Austrian school has been focused on real world solutions.
Austrians have a different approach, method, and result.
Austrians general view ideology as a critical feature of social change.
Policy Success?
Most policies issues (e.g., taxes, budgets, deficits, money,
regulation, healthcare, welfare, etc.) have had minor victories or
mostly significant worsening during the Austrian Revival.
In the United States, socialism seems to be very popular.
Policy change is driven by ideology and other factors.
Ideology is 
a system of ideas and ideals, especially as the basis of
economic or political theory and policy.
The Way Forward = science and ethics = change the world.
Prohibition is a policy where there has been some libertarian
success, that is the 21
st
 Amendment and the Marijuana
Legalization movement now.
Prohibition
Prior to Narcotics, Alcohol and Cannabis Prohibitions there was
little in the way of “medicine,” a void filled by Patent Medicines and
herbal remedies, including concoctions of opium, alcohol, and
cannabis.
Alcohol, including heavy consumption, was an integrated part of
American life.
The concept of addiction was only realized in the late 19
th
 century.
Prohibitionists targeted minorities and foreigners, not the drugs
themselves.
Generally, these drugs did not inflict enormous social problems.
Naïve Model of Prohibition
Prohibitionists and Economists
Agree
Prohibition reduces Supply
Prohibition increases Price
Prohibition decreases Quantity Demanded (Demand?)
Therefore, Prohibition is beneficial(?)
Addiction, Crime, Corruption, Violence, Health Problems, etc.
Prohibition also increases Government Budget and
Taxes
How much to spend? (MC = MB) [cost benefit analysis]
Both now recognize Corruption, Crime, Cost, etc.
Prohibition is the result of Ignorance,
Racism, and Government Propaganda
Harrison Narcotics Act (1914)
Alcohol Prohibition (1920-1933)
Marijuana Tax Act (1937)
Reefer Madness 
(1936)
Outrageous Claims about minorities
WASPs easily fooled
Marijuana Gateway Theory
Prohibition's Legal and Economic
Framework
 
No Rule of Law
Violence to enforce contracts, sales territories
Crime to finance addictions
Bribery and Corruption
Undermines “Civil Society”
Stymies economic development in urban areas, Central
American countries
Finances terrorist groups
Iron Law of Prohibition
Based on the Alchian-Allen Effect STGAO
Good Apple =$1 Bad Apple =50₵ 1GA=2BA
Transport=$1/A  $2GA, $1.50BA, 1GA=1.33BA
Maine Lobster, Idaho Potato, Wine?
Pot in S.A, HP=$10/lb., LP=$5/lb., 1HP=2LP
Pot in S.C, HP=$1010/lp,LP=$1005/lp,1HP≈1LP
Stronger Prohibition = More potent drugs
Cannabis Legalization
1972 12%
Today 65+& legalization, 90+% Medical Marijuana
Medical = 40, DeCrim = 27, Legal 19
High Potency Legal Cannabis Problem?
Cannabis $8-9 B Vs Hemp flowers and CBD $1.5-2 B
Pc 6-7X Phf so 1.5 * 6 = so Qc = Qhf
Average potency consumption has probably fallen,
and consumption has shifted somewhat from
harder drugs to these two products
Conclusions
There are no socially desirable benefits from
Prohibition, only costs.
The costs associated with Prohibition are much larger
than many people think.
However, more and more people understand that
Prohibition is completely counterproductive.
More importantly, they understand that legalization
would not be an “utter disaster,” but would actually
address many “social problems.”
This is the ideological shift that has taken place, which
in turn, is changing policy at the state level.
What about other issues? How do we stop the FED, the
Empire, Au?
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Explore the journey from prohibition to legalization in the context of economics and policy change, delving into the impact of ideology, success of different policies, and the historical background of prohibition on narcotics, alcohol, and cannabis. Discover how prohibition has been influenced by ignorance, racism, and government propaganda, leading to crucial insights for societal progress.

  • Prohibition
  • Legalization
  • Policy Change
  • Economics
  • Ideology

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  1. Prohibition and Legalization: The Way Forward Mises University 2021 Dr. Mark Thornton Peterson-Luddy Chair in Austrian Economics July, 20th, 2021

  2. The Way Forward? How did we prohibition? How did we get legalization? What can we learn from this experience? Does it apply to other issues? We will concentrate on economics, but it should be stressed that the Austrian school has been focused on real world solutions. Austrians have a different approach, method, and result. Austrians general view ideology as a critical feature of social change.

  3. Policy Success? Most policies issues (e.g., taxes, budgets, deficits, money, regulation, healthcare, welfare, etc.) have had minor victories or mostly significant worsening during the Austrian Revival. In the United States, socialism seems to be very popular. Policy change is driven by ideology and other factors. Ideology is a system of ideas and ideals, especially as the basis of economic or political theory and policy. The Way Forward = science and ethics = change the world. Prohibition is a policy where there has been some libertarian success, that is the 21stAmendment and the Marijuana Legalization movement now.

  4. Prohibition Prior to Narcotics, Alcohol and Cannabis Prohibitions there was little in the way of medicine, a void filled by Patent Medicines and herbal remedies, including concoctions of opium, alcohol, and cannabis. Alcohol, including heavy consumption, was an integrated part of American life. The concept of addiction was only realized in the late 19thcentury. Prohibitionists targeted minorities and foreigners, not the drugs themselves. Generally, these drugs did not inflict enormous social problems.

  5. Nave Model of Prohibition 60 50 40 Supply 30 Price Demand 20 Prohibition 10 0 Quantity

  6. Prohibitionists and Economists Agree Prohibition reduces Supply Prohibition increases Price Prohibition decreases Quantity Demanded (Demand?) Therefore, Prohibition is beneficial(?) Addiction, Crime, Corruption, Violence, Health Problems, etc. Prohibition also increases Government Budget and Taxes How much to spend? (MC = MB) [cost benefit analysis] Both now recognize Corruption, Crime, Cost, etc.

  7. Prohibition is the result of Ignorance, Racism, and Government Propaganda Harrison Narcotics Act (1914) Alcohol Prohibition (1920-1933) Marijuana Tax Act (1937) Reefer Madness (1936) Outrageous Claims about minorities WASPs easily fooled Marijuana Gateway Theory

  8. Prohibition's Legal and Economic Framework No Rule of Law Violence to enforce contracts, sales territories Crime to finance addictions Bribery and Corruption Undermines Civil Society Stymies economic development in urban areas, Central American countries Finances terrorist groups

  9. Iron Law of Prohibition Based on the Alchian-Allen Effect STGAO Good Apple =$1 Bad Apple =50 1GA=2BA Transport=$1/A $2GA, $1.50BA, 1GA=1.33BA Maine Lobster, Idaho Potato, Wine? Pot in S.A, HP=$10/lb., LP=$5/lb., 1HP=2LP Pot in S.C, HP=$1010/lp,LP=$1005/lp,1HP 1LP Stronger Prohibition = More potent drugs

  10. Cannabis Legalization 1972 12% Today 65+& legalization, 90+% Medical Marijuana Medical = 40, DeCrim = 27, Legal 19 High Potency Legal Cannabis Problem? Cannabis $8-9 B Vs Hemp flowers and CBD $1.5-2 B Pc 6-7X Phf so 1.5 * 6 = so Qc = Qhf Average potency consumption has probably fallen, and consumption has shifted somewhat from harder drugs to these two products

  11. Conclusions There are no socially desirable benefits from Prohibition, only costs. The costs associated with Prohibition are much larger than many people think. However, more and more people understand that Prohibition is completely counterproductive. More importantly, they understand that legalization would not be an utter disaster, but would actually address many social problems. This is the ideological shift that has taken place, which in turn, is changing policy at the state level. What about other issues? How do we stop the FED, the Empire, Au?

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