VERDICT ON THE DRUG WAR IS IN

The good news is that heroin use is down, which has led to a decline in
property crime, writes Ross Gittins.

You wouldn't believe it, but at long last we're making progress in the war
against drugs. Evidence is mounting that we've succeeded in limiting the
supply of heroin available, which has led to a decline in its consumption
and the harm it causes.

What's more, the decline in heroin use has led to a decline in property
crime. And these good outcomes flow from the workings of simple market forces.

This encouraging chain of events is demonstrated in a study by Dr Don
Weatherburn and colleagues at the NSW Bureau of Crime Statistics and
Research, which was presented to a conference of criminologists late last year.

Although the decline in heroin use is nationwide, Weatherburn's study
relates to NSW. A study for the ACT has reached similar findings,
suggesting they ought also apply to Victoria even though its decline in
property crime has been more recent.

Around Christmas 2000, Australia began experiencing a major shortage of
heroin. Sometime later the average street price of a gram of heroin in
Sydney's notorious suburb of Cabramatta had risen by three- quarters, from
$218 before the shortage to $381 after it.

Heroin users interviewed by Weatherburn at the time also reported a sharp
drop in purity and a significant increase in the time it took to "score".

The supply of heroin around Australia seems to have recovered somewhat
since then, but at no stage have street prices fallen back to where they
were before the end of 2000.

Why is there now less heroin available? It can't be proved conclusively,
and there may be other factors at work, but the most plausible explanation
is the increased effectiveness of federal and state law enforcement.

Some people have credited it to the effect of drought in the Golden
Triangle, but the suddenness with which supply dried up makes that unlikely.

The shortage occurred soon after a huge jump in the quantity of heroin
seized by customs. It also began after the arrest of a large number of
heroin importers and distributors by the Joint Asian Crime Group.

For obvious reasons, we don't have official figures for how much heroin is
being consumed. Researchers have satisfied themselves, however, that
changes in the rate of heroin use are fairly well reflected in changes in
the rate of ambulance call-outs to incidents of heroin overdose.

In the time since the shortage began, the average rate of non-fatal heroin
overdoses a month in NSW has been 50 per cent lower than it was in the
years before. That's pretty clear evidence of a beneficial effect on public
health.

It's no secret that dependent drug users often resort to crime to finance
their purchases of illicit drugs. Heroin dependence has been a major factor
behind the growth in robbery over the past 35 years.

After a spike in the number of robberies, they fell slowly in the following
months and years. Weatherburn and colleagues use a lot of fancy statistical
tests to demonstrate that the fall in heroin use (as indicated by the fall
in overdoses) led to the fall in robberies.

Just looking at the published crime statistics, between 1999 and 2002 (the
latest year available) the rate of robberies per 100,000 people in NSW fell
by more than 10 per cent, as did the rate of burglaries. The rate of car
thefts fell by more than 15 per cent.

Over the same period for Victoria, robberies and burglaries were down by 10
per cent and car thefts by more than 12 per cent.

These falls may seem modest, but something to watch for when the crime
figures for 2003 are published is whether the fall has continued.

It's important to understand that the object in outlawing harmful drugs and
using law enforcement to intercept and seize them is not so much to make
them simply unobtainable - that's an impossible goal - as to drive up their
price by restricting supply.

As you raise the price of drugs, you make them harder to afford so that
fewer are bought and less harm is done.

Ah yes, you may say, but surely if such drugs are addictive, raising their
price won't have much of a deterrent effect. Indeed, it may just mean
addicts have to commit more crime to support their habit.

Nice point - and an objection that's often been raised by people who've
lost faith in prohibition and think some form of controlled legalisation
might end up doing less harm.

But, as an economist would tell you, this is an empirical question. Is the
demand for drugs "elastic" (sensitive to changes in price) or "inelastic"
(insensitive to changes in price)?

The message to take away from our recent experience with heroin is that,
contrary to what you might expect, the demand for drugs turns out to be
reasonably price-elastic.

And this suggests that the conventional approach to the drug problem may
have something going for it: that is, the way to limit the harm done by
drugs is to price them out of the market.

But this encouraging tale also carries an economists' caution. Had the
shortage of heroin not been accompanied by a shortage of its close
substitute, cocaine, it could have made matters worse rather than better.

Ross Gittins is a staff columnist.