New Cato Paper Sees $88 Billion Annual Budgetary Benefit From Calling Off the War on Drugs


In a new Cato Institute paper, Harvard economist (and Reason contributor) Jeffrey Miron and NYU graduate student Katherine Waldock estimate that ending the war on drugs would save more than $40 billion a year in enforcement costs (about $16 billion federal, $26 billion state and local) while allowing collection of some $47 billion a year in new tax revenue. Although marijuana is by far the most popular illegal drug and accounts for half of all drug arrests, Miron and Waldock calculate that legalizing it would yield just one-fifth of the $88 billion in total savings and revenue:

Only about $17.4 billion in budgetary improvement can be expected to come from legalizing marijuana in isolation. Yet the current political climate gives no indication that legalization of other drugs is achievable in the short term. So the budgetary impact from the politically possible component of legalization—marijuana—seems fairly modest.

Marijuana accounts for a relatively small share of the savings largely because offenses involving other drugs are more likely to result in prison time and tend to trigger longer sentences. Cocaine and heroin, with something like 6 million past-year users (according to the government's survey data), account for 15 percent of state felony convictions and 10 percent of state prisoners, compared to 10 percent and less than 2 percent, respectively, for marijuana, which is consumed by maybe 26 million Americans a year. Cocaine and heroin, though much less popular, also account for a bigger share of the U.S. black market's estimated dollar value—$87 billion vs. $18 billion.

Miron and Waldock's paper considers only the budgetary impact of repealing drug prohibition. Many other costs of the war on drugs—including the basic loss of control over one's body and brain, the erosion of Fourth Amendment rights and other civil liberties, interference with religious rituals and medical practice, black market violence, official corruption, lives disrupted by arrest and incarceration, terrorism subsidized by drug profits, and deaths and injuries from tainted or unexpectedly strong drugs—are not so easily expressed in dollars.