LIES, DAMN LIES

It has been almost a month since the White House Office of National Drug
Control Policy (ONDCP) issued a breathless press release trumpeting an
update to research on the economic impact of drug abuse. "Illegal Drugs
Drain $160 Billion a Year from American Economy," shouted the headline on
the press release. "Drug Czar Details 'Direct Threat' to US Economic
Security," it continued.

The press release, touting "The Economic Costs of Drug Abuse in the United
States, 1992-1998," which purports to precisely calculate the impact of drug
use on the economy, continued with dire warnings from newly-appointed Drug
Czar John Walters. "Illegal drugs are a heavy drag on the American economy,"
said Walters. "This new report proves that the costs of tolerating drug use
can be measured directly in dollars lost, work hours missed, and pink slips
handed out. Drugs are a direct threat to the economic security of the United
States," he continued. "This study provides some grim accounting, putting a
specific dollar figure on the economic waste that illegal drugs represent."

No major media outlets bit at the drug czar's press release, but readers can
rest assured that they will be hearing that figure in the future. Like other
imaginary numbers, such as the mysterious "50,000 annual deaths from drug
abuse," the $160 billion economic cost figure is sure to become another
arrow in the quiver of drug war propagandists.

The study's authors break the costs down into three broad categories --
productivity losses, health costs, and "other," primarily crime-related,
costs -- and then breaks down losses within each category. Productivity
losses, for example, include losses from premature death, drug abuse-related
illnesses, institutionalization and hospitalization, crime victims' loss of
productivity, and losses due to incarceration and criminal careers.
Productivity losses constitute 69percent or $110 billion of the study's
calculated $160 billion total costs. "Other" costs, as noted above, are
primarily law enforcement-related, and include criminal justice system
funding and private costs, such as private legal defense and property damage
to crime victims. These costs amounted to 22percent of the total estimated
costs of drug abuse. Looking at such figures, drug abuse does indeed appear
to be a detriment to the US economy.

There's only one problem: The study is bunk. It is rife with methodological
problems and questionable assumptions, but one huge flaw, admitted by the
authors, screams out at the serious reader: The study conflates the economic
costs of "drug abuse" (which in fed-speak means any use of proscribed drugs)
with the costs of enforcing prohibition. In other words, if you are arrested
for smoking pot, the wages of the police officer who arrested you, the
district attorney who prosecuted you, the judge who sentenced you, the
guards who jailed you, the functionary who drug-tested you, and the parole
officer who supervised you all become part of the cost of drug abuse. And
the fact that you could not work while you were in jail? Those lost wages
are also considered a cost of drug abuse, not prohibition.

The study's authors admit this up front: "In the context of this report, the
phrase 'drug abuse' is used to refer to the consequences of using illicit
drugs, as well as societal costs pertaining to the enforcement of drug
laws."

But don't count on President Bush, Drug Czar Walters or their fellow drug
warriors to make that distinction. Instead, be prepared to hear the number
repeated like a mantra whenever drug policy is on the agenda.

"This is a piece of propaganda that demands to be answered," said David
Duncan, chairman of the National Association for Public Health Policy's
Council on Illicit Drugs. "I think the study is useful only if you assume at
the outset that the current prohibitionist policy is the only reasonable
policy to pursue," he told DRCNet. "On the other hand, if you understand
that many of the costs are related to drug prohibition and not directly to
drug use, then the study is less useful. This study fails to disaggregate
drug abuse costs and drug prohibition costs, but the fact is that
prohibition itself creates the law enforcement costs and increases the
health care and productivity costs," said Duncan.

"That's a problem only for someone interested in what costs would look like
without all that enforcement," said Dr. Peter Reuter, founder of the RAND
Drug Policy Research Center and currently professor of public affair and
criminology at the University of Maryland. "But the question the study poses
is what, under current policy, is the cost of drugs, including drug
control," Reuter told DRCNet.

Boston University economics professor Jeffrey Miron was not as sanguine as
Reuter. "This study is completely useless," said the researcher on drug
market economics. "It is totally tautological to say that the money we are
spending on drug enforcement is a cost of drug use. That's crazy," he told
DRCNet. Miron also had a harsh word for the study's authors, who were
careful in the fine print to note some of the study's problems. "The authors
still have to know that their work will be used for propaganda purposes, so
they deserve to catch some flack, too," said Miron.

Aside from the fundamental flaw of including prohibition costs as part of
drug abuse costs, the study is replete with serious methodological problems,
say all three experts.

"The authors seem to assume that if illicit drugs ceased to exist, these
costs would not exist," said Miron. "But people would in fact do something.
They would look for substitutes. They might turn to alcohol or gambling. The
authors do not do the counterfactuals that would account for all these
things."

Assigning precise figures to productivity losses attributed to drug abuse
also raised flags. "They are trying to estimate a number which is neither
useful nor possible to estimate," said Reuter, who recently co-authored
"Drug War Heresies: Learning from Other Places, Times and Vices" and who had
published a critique of an earlier version of the study. "When you ask how
much is productivity reduced by drug use, my answer is pick your estimate.
There is a wide range of figures. The broad problem is that these estimates
are very sensitive to what drug use measure is used, statistical techniques,
and what years are involved."

In his earlier critique, Reuter identified a number of methodological
problems in the study. There are "inherent uncertainties" in the numbers
because "for almost none of the components of cost is there a strong
empirical base," he wrote. There are "inconsistent findings" from studies
with contradictory results, he noted. And some estimates, such as those for
drug-related homicides when a large percentage of murders are unsolved, are
no more than a "good guess."

Miron accused the study's authors of a "one-sided assessment" of the
evidence. "Take the relationship between drug use, lower wages, and lost
productivity," he said. "There are a huge number of studies that find a
positive association between drug use and wage levels, not a negative one,
but the study dismisses those estimates showing positive effects and only
uses the ones showing negative effects."

Duncan agreed. "They are using one study that showed lower wages in persons
who smoked marijuana," he said. "In fact, better studies since then have
found either very weak relationships or no relationship between drug use and
wages or any other measure of productivity. Whether there is any significant
association between drug use and productivity is questionable."

But Reuters, for all his even-handedness, delivered the most devastating
critique of the study. "Is the question important?" he asked. "One test is
to see how these estimates have been cited in the past." Reuters found that
"almost universally the study is cited simply as evidence that alcohol
and/or drug abuse had large economic costs. In each instance, it was a prop
for a policy argument, which would hardly have been affected if the number
had been only half as large or twice as large."

So, the study is essentially a propaganda tool. It will be used as one. Drug
reformers who wish to confront the study's findings might also find the
following mental exercise useful. Let us attempt to disaggregate the
numbers, separating the costs of drug abuse from the costs of drug
prohibition. This will necessarily be a quick and dirty exercise using some
approximations and assumptions about the roles of individual drug users and
prohibition itself in generating economic costs.

The study estimates drug abuse health care costs at $14.9 billion for 2000.
Assuming that all prevention costs and half of treatment costs are drug
abuse-related (assuming that roughly half of all treatment slots are filled
by court mandates) and that individual drug users should shoulder half the
burden of drug-related diseases such as HIV/AIDS and Hepatitis C (some
disease costs are generated by prohibition, i.e. lack of availability of
clean needles), we see that of that $14.9 billion, about $7 billion is
fairly attributable to direct consequences of drug use.

The study estimates productivity losses at $110 billion for 2000. Again,
assuming that drug users should take half the responsibility for premature
death, drug-related illness, and hospitalization and half the blame for
costs associated with "crime careers," and assuming that 90percent of
drug-related crime is prohibition-related, we find that productivity losses
fairly attributed to drug use shrink dramatically. Incarceration is the
single largest productivity loss factor, pegged at $35 billion, but that is
clearly a prohibition-related cost. Of the $110 billion productivity loss
then, approximately $40 billion comes from drug use and $70 billion from
drug prohibition.

The study estimates "other" costs, primarily law enforcement, at $35 billion
in 2000. Generously assuming that 10percent of these crime costs are related
to the psychobiology of drug use, with the rest related to the functioning
of black markets, we see that prohibition-related costs account for $31.5
billion of the $35 billion in "other" costs.

Applying this analysis, we see that costs directly associated with drug
abuse account for about $50 billion in economic costs, not an insignificant
figure. But it pales in comparison with the $110 billion in costs imposed by
prohibition.

These figures are, of course, only rough estimates, but they illustrate the
magnitude of the price society pays to maintain drug prohibition.

Finally, under its own definitions, the cost of producing "The Economic
Impact of Drug Abuse in the United States, 1992-1998" is yet another drug
abuse-related cost.