The Context of Drug Policy: An Economic Interpretation

Abstract

Economics can be used to analyze public sector decision making because individuals make these decisions within a framework of incentives and constraints that are a product of individual preferences and institutional structure. Considering the emphasis on law enforcement in U.S. drug policy in this context, this paper presents an analysis of the incentives and constraints affecting drug policy that explains a reluctance to change the policy even in the face of considerable evidence that some reforms could be cost effective. Two specific incentives for an emphasis on enforcement are presented. First, police agencies have an incentive to allocate more resources to drug enforcement due to the factors that determine police budgets. Second, asset forfeiture laws give police agencies a direct monetary reward for making drug arrests. We conclude that understanding drug policy requires an examination of the incentives and constraints that affect the behavior of those who are responsible for policy development.