Key Government Study Estimating Economic “Cost of Drug Abuse” Debunked

A National Institute on Drug Abuse (NIDA) study which purports to measure the yearly economic cost of drug abuse in America, cited frequently by Bush administration officials and other advocates of the war on drugs, is both flawed and irrelevant to policy decisions, warns a report by economist Jeffrey Miron of Boston University.

“Citing COI studies is not serious analysis, it’s a cheap drug war sound bite,” said Professor Miron.

“Bringing Honest Cost-Benefit Analysis to U.S. Drug Policy,” the new report issued by the Drug Policy Alliance, systematically critiques the NIDA cost of illness (COI) study, which puts the total price tag for drug abuse – in healthcare, premature death, lost productivity, crime, etc. – at $143 billion. Prof. Miron documents methodological flaws in the COI study and explains why it cannot correctly be used to support current drug policy. Among the flaws:

• The COI study mistakenly includes numerous costs of drug prohibition–such as prison construction, preventable overdose deaths, and the crime related to drug sales–as costs of drug abuse. The criminalization of drugs is what drives incarceration and creates a violent illegal market–so these should be counted as prices we pay for the punitive policies we have chosen, not prices we pay for drug abuse itself.
• The COI study fails to compare the costs of the current system–the war on drugs–to the estimated costs and benefits of alternative systems. To assess the economic costs and benefits of any policy, it is necessary to compare it to other possible policies. The COI study makes no attempt to do so.

Drug policy reformers have been highly critical of the NIDA report since its release in 1998.

“This $143 billion figure is just a tool the drug warriors use to perpetuate public confusion,” said Ethan Nadelmann, executive director of the Drug Policy Alliance. “Many of the drug-related evils that most people identify as part and parcel of ‘the drug problem’ are in fact the costs of drug prohibition policies. When Americans see this, the confusion is over — and the drug war is in trouble.”

In the early 1930s, the work of the Wickersham Commission and the Rockefeller Foundation helped distinguish between the costs of alcohol abuse and the costs of failing prohibitionist policies. Prof. Miron’s report “follows in that tradition, making clear a distinction that the government has fought hard to obscure,” according to Nadelmann.

“Professor Miron’s serious economic analysis lays the groundwork we need for an informed and honest debate,” he added.

In his report, Miron points to a better way for the U.S. to judge the success or failure of its drug policies, based on a rational assessment of the real costs and benefits of the current system and possible alternative models. According to Miron, a valid analysis of prohibition must specify an alternative policy, such as decriminalization, and compare prohibition to this alternative with respect to each of three issues.

1) It must consider the costs of enforcing prohibition relative to the costs of enforcing the alternative policy;

2) It must account for the degree to which prohibition has auxiliary consequences — corruption, black market crime, curtailed civil liberties, etc. — that would be smaller or non-existent under the alternative policy;

3) It must determine the degree to which prohibition reduces or increases the

the harmful effects of drug use — including preventable overdoses or fatal poisonings from black market impurities — relative to this alternative.

“Policymakers need economists to present them with a comparative analysis of two policies — the status quo and a proposed alternative,” said Prof. Miron. “The COI study fails on all fronts: it isn’t comparative, and it’s analytically flawed.”

“Drug abuse has serious costs, and drug war policies have serious costs,” added Prof. Miron. “The first step toward reducing both as much as possible is to be absolutely clear about which is which.”

Download Bringing Honest Cost-Benefit Analysis to U.S. Drug Policy