The Potency of Illegal Drugs

Another factor contributing to increased health consequences of marijuana use is the increase in potency over the past several years.

—The White House Drug Abuse Policy Office, 1984 National Strategy for Prevention of Drug Abuse and Drug Trafficking

Drug prohibition establishes a wholly superfluous discovery process with respect to the potency of illegal drugs. Blackmarket entrepreneurs are spurred on by artificial, prohibition-created profit opportunities in a similar fashion to entrepreneurs in a legal market responding to profit opportunities. At one level, the entrepreneur supplies a profit-maximizing quantity of the product, in both legal and illegal markets. On another level, the profit motive prompts entrepreneurs to alter production techniques, product quality, and the product itself.

Market forces lead to certain industry standards, such as twelve ounces in a can of soda and four rolls of toilet paper per package. Each product line in the market, whether breakfast cereals or light bulbs, moves toward an efficient level of product diversification (heterogeneity), the lowest cost of production, and optimal quality levels for the product. In the black market similar tendencies exist. In prohibited markets, however, consumers face fewer choices at any time, but severe product variability over time.

The potency of narcotics, cocaine, alcohol, and marijuana increased significantly after the enactment of prohibition. In the United States during the past century, opium was virtually replaced by morphine and, later, morphine by heroin. The original Coca-Cola contained small concentrations of cocaine. Today cocaine is sold in the form of a high-potency powder or as concentrated nuggets called crack. During Prohibition consumption of beer plummeted, and consumption of distilled spirits and moonshine increased. The potency of marijuana increased several hundred percent after a "prohibitive" tax was enacted in 1937. Synthetic narcotics and combinations of drugs, such as "speedball" (heroin and cocaine) or "moon-shot" (crack cocaine and PCP), have been introduced.

Since 1968 when Simon Rottenberg published his germinal article, "The Clandestine Distribution of Heroin: Its Discovery and Suppression," economists have investigated many aspects of illegal drug markets, including alcohol prohibition, the problem of addiction, and public policy toward addiction and black markets.1 Rottenberg examined several hypotheses for changing potency but concluded that his analysis did not answer the question of changing potency. "It is like explaining why Falcon automobiles will be manufactured, as well as Continentals, but would not explain why the fraction of Falcons rises and the fraction of Continentals falls" (Rottenberg 1968, 83).

The question of potency remains unanswered and largely uninvestigated despite its implications for public policy, the effectiveness of law enforcement and addiction, and the health of illegal drug users. The questions of potency and product quality also have important implications for basic theoretical and empirical investigations of prohibition and other public policy. Crawford et al. (1988) and Reuter, Crawford, and Cave (1988) found (indirectly) that entrepreneurs switched to smuggling higher-potency drugs when faced with increased enforcement.

Higher potency reduces the overall effectiveness of law enforcement because it means that smaller quantities represent greater effective amounts of the product. Higher-potency drugs are thought to be more dangerous and produce a greater risk to the health of the user, but actually great variance in the potency of a product poses a greater

'Rottenberg's article contains no references to economists or economic journals. Much of the recent research on illegal drug markets contains corrections, improvements, and extensions of Rottenberg 1968. The modern literature has generally ignored the economic analysis and experience of National Alcohol Prohibition.

risk to the user. Higher-potency drugs are also thought to be more addictive. In the black market the potency of a product is not fixed, consumers have less information about potency and added ingredients, and the producers are not legally liable in the same sense as pharmaceutical companies. In a recent study on the relegalization of drugs, James Ostrowski (1989, 47) claims that 80 percent of the 3,000 deaths per year associated with heroin and cocaine are the result of the illegal nature of the market, not drug use per se. (See also National Institute on Drug Abuse 1981-84.)

What caused the tremendous increases in drug potency after prohibition? Exogenous technological changes and shifting consumer tastes might provide explanations. For example, in figure 4 the market for drugs has been divided into high-potency and low-potency submarkets. If a technological change occurs that decreases the costs of high-potency drugs, shifting the supply curve to the right, this shift would cause a decrease in price and an increase in the quantity demanded. The changes in the market for high potency would lead to a decrease in the demand for low potency. These events would explain also the type of result observed under prohibition.

Technological changes are typical after prohibitions are instituted, but the type of technological change that occurs is not new technology but a different implementation of existing technology (see A. D. Little 1967).

The experience of prohibition, particularly of National Alcohol Prohibition, seems to rule out changes in consumer tastes as a cause for the increased potency of drugs. Once Prohibition was repealed, the pre-Prohibition expenditure patterns for both high- and low-potency alcohol reemerged. It appears that the dramatic change in potency of prohibited drugs is directly related to prohibition itself. The decrease in average potency over time of legal drugs, such as caffeine, nicotine, and alcohol, reinforces this proposition (Ippolitio, Murphy, and Sant 1979).

The explanation of higher potency offered here depends crucially on the effect prohibition has on relative prices of the same drug of different potency, the relative prices of different drugs, and the incentive for innovation in new drug products. The penalty structure, the level of enforcement, and the incentives of law-enforcement officials will be examined as causes for higher-potency and more dangerous drugs.

Low Potency Drug Market High Potency Drug Market

Low Potency Drug Market High Potency Drug Market

Figure 4. Effect of Improved Technology for High-Potency Drug Production.

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