Drug Policy

Americans Spend Nearly As Much on Illegal Drugs As They Do on Booze, Which Shows What a Ripoff Prohibition Is

A new RAND report puts spending on marijuana, heroin, methamphetamine, and cocaine at $146 billion in 2016.


Americans spent nearly $150 billion on marijuana, heroin, cocaine, and methamphetamine in 2016, according to a RAND Corporation report released today. Total spending on illegal drugs, including psychedelics and MDMA, would have been even higher. By comparison, Americans spent $227 billion on alcoholic beverages in 2016.

The fact that the illegal drug market and the alcohol market are in the same ballpark is pretty remarkable, given that drinkers outnumber illegal drug users by more than 4 to 1. The "risk premium" associated with prohibition helps explain why illegal drug users nevertheless manage to spend almost as much money as drinkers do. The near-parity in spending reflects the profits traffickers can earn thanks to prohibition and the welfare loss caused by artificially high prices. Prohibition enriches criminals and rips off consumers.

Of the four drugs considered by RAND, marijuana (including state-legal products), accounted for the biggest share of spending (36 percent), followed by heroin (29 percent), methamphetamine (18 percent), and cocaine (16 percent). Adjusting for inflation, the researchers found that cocaine spending fell by 59 percent from 2006 to 2016, while spending on methamphetamine, heroin, and marijuana rose by 23 percent, 39 percent, and 53 percent, respectively.

These numbers are based on multi-step calculations drawing on several data sources related to drug use and prices. Some of those sources are more dependable than others. As RAND's drug policy researchers have pointed out before, the National Survey on Drug Use and Health (NSDUH) misses a lot of heroin users, both because they are underrepresented in the sample and because people are especially reluctant to admit the use of this drug.

In 2016, according to NSDUH, there were fewer than 1 million heroin users in the United States, including not quite half a million who had used heroin in the previous month. By contrast, the RAND report, which includes extrapolations based on information about drug use among arrestees, puts the number of "chronic heroin users" (those who took heroin on four or more days in the previous month) at 2.3 million that year. Furthermore, the authors "estimate there were 1.5 million daily/near-daily heroin users in 2016," more than six times the number indicated by NSDUH's results.

The authors conclude that "NSDUH is not a useful measure of the level of heroin use in the United States." RAND's estimate of chronic methamphetamine users is also a lot higher than NSDUH suggests: 3.2 million in 2016, compared to 667,000 past-month users (a broader category) in the survey. The cocaine and marijuana estimates are higher too, although the differences are not nearly as dramatic.

One striking finding in the RAND report is that the number of chronic heroin users rose by 44 percent from 2006 through 2016, a period when heroin-related deaths more than doubled, according to the U.S. Centers for Disease Control and Prevention. In other words, heroin became substantially deadlier during that decade, partly because it was more commonly mixed with fentanyl and fentanyl analogs, which made potency even harder to predict. As of 2017, the category of drugs that includes fentanyl was involved in 60 percent of opioid-related deaths, up from 15 percent in 2006.

"The introduction of fentanyl into heroin markets…has increased the risk of using heroin," the RAND report notes. The authors do not mention that prohibition is responsible for this phenomenon, since it creates a black market where potency is highly variable and pushes traffickers toward stronger drugs, which are easier to smuggle.

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  1. IT is interesting to see the number and how relatively small it is compared to the larger economy. One hundred and forty six billion sounds like a lot but when you are talking about the entire economy this large, it really isn’t. We could legalize drugs and tax them at 20% and still only raise around $30 billion. So much for solving the deficit by legalizing drugs.

    1. Who argues that legalizing and taxing drugs would “solv[e] the deficit”? That sounds like a strawman.

      1. Stoners make the argument. I doubt that anyone who doesn’t get baked with some regularity takes it seriously.

        1. Well, okay. It’s not a serious argument and certainly not a pro-liberty argument for legalizing pot.

    2. I guarantee it’s not a small amount in the eyes of the criminal organizations who are making the profits, or in the eyes of potential legitimate businesses which are prohibited from this industry, or in the eyes of the customers making the purchases.

      Besides, potential tax revenue is tangential at best – a handy talking point to bring your typical statist politician on board. Every dollar we spend on enforcing prohibition is a collective moral failing. Every minute someone spends in jail or on probation for personal decisions made by consenting adults is a travesty. We should end prohibition entirely and tax at 0%.

      1. I wouldn’t make drugs special. They do come with social costs. They should be taxed like any other good or service.

        1. Oh great. More taxes?

          I am of the opinion that the government already takes too much of our money. Or, perhaps I should say, if the government (in general), wasn’t such a bureaucratic wasteland, as well as being intentionally unequal in how much some entities pay, or profit from, our tax monies, that maybe, just maybe, we could do much better than we are without more new taxes. Hell, maybe we could even cut taxes.

          1. How about we tax drugs and not tax something else?

        2. That’s fine, taxation is certainly preferable to prohibition from a moral standpoint. But that argument has nothing to do with whether or not tax revenues would have a significant impact on the overall federal budget.

    3. I would rather just legalize cannabis and tax it like tomatoes and cucumbers.

      1. Pot not legal yet?

        I don’t, really, can’t, but what is wrong with you folks. How have you not got that done yet?

        Well tomatoes and cucumbers. One thing I like is a good chopped salad with that. You can add some parsley, pepper, lemon juice, olive oil, where am I going here.

        So disappointed in the kiddos. Vote, advocate and get it done already. My generation we are fine with it and you know you did not invent weed.

    4. Well….let’s do some quick math. We could pay off that debt on the long range plan, heh heh. 🙂

      22T / 30B = A long fucking time (like 733 years or so)

  2. We are all free adults capable of killing ourselves however we wish. If drugs were legal and not over-taxed, those using them would be free from the risks of buying adulterated product, and addicts would have to spend far less time stealing people’s stuff, because you could buy known product for much less. Consider how people killed each other during prohibition over beer.
    This said, those who are seriously addicted should be treated as free adults and not as victims. Let them commit suicide without requiring free medical care for overdoses. Where I live there is one guy who has had 14 overdose hospitalizations in one calendar year. He can’t be so stupid that they were all mistakes. He wants to die. Let him.

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  4. Most folks that do drugs aren’t addicts but that isn’t the popular narrative. I know a fool is speaking when I hear the word stoner and stupid in the same sentence. Virtue signaling is more common with teetotaler than with inter-sectional zombies.

  5. What happens to the total Americans spend when you add all the various types of opioid pain medications, dextrostat, adderall, and other amphetamines?

  6. Cocaine use is down… And meth and heroin use is up… I guess Americans are just getting less classy nowadays?

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