Would legalizing drugs be good for economic growth? This is one of the suggestions on Richard Posner’s list of sensible actions the government could take to stimulate economic growth without increasing the deficit. Daniel Indiviglio finds Posner’s proposal to increase economic growth by legalizing drugs unconvincing, but I think Daniel’s critique is pretty far off base, and really misses the key issues.

Regarding the impact on federal and state budgets, Daniel writes:

“In 2010, federal prisons cost taxpayers $6.2 billion… And, as Posner mentions, drug-related crimes account about half of the federal prisoners. So really, the effect would be only half of that tiny reduction, and again, there are surely some drug laws you’d want to remain intact. So the portion would be even smaller… Assuming similar costs on the state level, that would spread a maximum cost-savings of $7.8 billion over the 50 states. Again, that number is not insignificant, but it wouldn’t have a dramatic impact on state budgets.”

As I pointed out in the comments section to his post, this would be an accurate assessment of government spending on drug prohibition if all drug law violators were voluntarily turning themselves in at the prison gates with signed statements confessing their crimes and waiving their rights to a fair trial. Unfortunately, people are sneaky when they break the law, which means considerable state, local, and federal police officers are required to find them, apprehend them, and arrest and detain them; followed by which a team of judges, prosecutors, public defenders, and jurors have to show up and do their thing before you can put them in jail. And all that is before the first appeal.

All these costs add up pretty quickly; economists Suren Basov, Mireille Jacobson, and Jeff Miron have estimated that the annual cost of drug prohibition is $30 billion per year.

Daniel points out that if there’s less stuff for the police -and I presume he would include judges, lawyers, and juries- to do, then there will be less jobs, which will increase unemployment, which is a bad thing during a recession. First off, there’s plenty of other crime out there to be prevented, and some of it’s probably even the kind of crime that, unlike voluntary drug use, actually does harm to a person or person’s property against their will. Freeing up the criminal justice system to spend more time on the prevention and prosecution of crimes that actually have economic costs to society might even contribute to the positive economic impact of drug legalization.

But even if there were no criminal justice work for these newly redundant government employees to do, in the short run the lack of any real contribution to make certainly doesn’t mean that public servants would be laid off. They can clean parks or teach drivers ed if they’ve got nothing better to do. And in the long-run if the size of the criminal justice system is scaled back to reflect the decline in “crime”, this just allows governments to shift resources to higher value uses or lower taxes; you know, the kind of stuff that increases economic growth.

Indiviglio goes on in the comments to claim that if you only legalize marijuana it won’t matter much:

“I don’t think that much is really spent to prevent marijuana use, for example, compared to cocaine or heroin. (And if it is, then that’s just silly.)…The same applies to the violence. I don’t think there are too many marijuana-related crimes. So unless you’re talking about legalizing the really hard stuff, then I don’t seem much decline in this variable either.”

I’m not sure why the hardness of the drug should be related to the violence associated with the production of it; the prohibition of alcohol, for instance, caused a good deal of violence from 1920-1933.  For drug producers, violence is a means to settles disputes and fight for turf and prevent market entry. Any drug that creates a stream of revenue that needs protecting by illegal means will generate violence. According to a recent Wall Street Journal articles, marijuana accounts for 50% to 65% of Mexican cartel revenues. I don’t see any reason why the drug that provides a “steady source of income that allows cartels to meet payroll and fund other activities” wouldn’t be an important cause of drug related violence, especially since it contributes significantly to the employment of the people who create said violence.

As to whether significant resources are spent by law enforcement on marijuana prohibition, this is unquestionable. According to the FBI, in 2008 12.2% of all arrests were for drug violations; more any other category of crime. Of the 1,702,537 drug violation arrests, 82.3% were for possession, and more than half of those were for marijuana possession. There were more than twice as many arrests for marijuana possession than there were for the sale or manufacture of all drug types combined.

Finally, Daniel worries about what all the prisoners are going to do for jobs when they get out of jail. I would remind Daniel that if he’s so worried about how unproductive released prisoners are then he should be all the more concerned about policies that every year turn more and more people into future released prisoners.