Libertarian Music Friday: Black Markets Increase Transaction Costs Edition

Lou Reed and John Cale perform Waiting for the Man. If Lou Reed came up with this song while waiting to buy smack, his time was well spent. I suspect, though, that the net effect of wating for drug dealers (they’re never early, they’re always late) is hugely wasteful.

A Lesson in Comparative Advantage and Liberal Tolerance from Star Trek: TNG

In S01E21 – Symbiosis, we are introduced to a planet which specializes completely in the manufacture of a single drug, all of which is exported to a neighbouring planet. The relevant part is about 6 minutes into this video:

The lesson continues in the following video. There is then a discussion of liberal tolerance. Dr Crusher finds the relationship distasteful and exploitative. Captain Picard reminds her that it’s not the Federation’s place to impose human values on other societies.

Unfortunately, the rest of the episode is a Saved by the Bell-quality sermon about the dangers of addictive drugs, ending with Picard cynically going against the spirit, if not the letter, of the Prime Directive in order to rid the planet of the scourge of narcotics.

Alcohol vs. Marijuana Prohibition

Those who favour legalizing marijuana often point out that both the personal and social costs of alcohol are much higher, and argue that it is inconsistent to prohibit pot but not booze on conventional ‘public health’ grounds. That’s fairly difficult to deny, but the further step is often made that it would be preferable to prohibit alcohol than to prohibit marijuana. I don’t think that’s right.

As things stand, many more people enjoy alcohol than marijuana. I don’t think this entirely depends on the fact that the former is legal, and therefore more available at lower cost and higher quality, than the latter. Alcohol is a stronger pro-social drug than marijuana and has more predictable effects. Nobody has unpleasant experiences with alcohol except when they overdo things and it’s pretty easy to regulate your alcohol consumption to ensure you have a good time. The peak experience of those who enjoy pot may well be more pleasant than that of alcohol, but it appeals to a smaller market.

My guess is that alcohol would garner a much higher aggregate willingness to pay than marijuana, even if both were legal. I’m not terribly comfortable making interpersonal utility comparisons, but I don’t think it would be unreasonable to say that alcohol prohibition would lead to larger welfare losses than marijuana prohibition. This is a good argument for the idea that marijuana prohibition could be justified and alcohol prohibition unjustified on utilitarian grounds*, but I doubt prohibitionists would view more people smoking pot as grounds for legalization.  

*Not that I think the prohibition of any recreational substance is ever justified, and I certainly don’t think marijuana prohibition is utility-enhancing.