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Hawaii Professors Advocate Regulation and Taxation of Drugs Instead of Prohibition


February 1996

In a paper released by the University of Hawaii at Manoa, two economists find that a system of regulation and taxation would be more cost effective and socially reasonable than the current U.S. system of drug prohibition (Joakim Johansson and James Roumasset, "Prohibition vs. Taxation Drug Control Policy in the USA," Working Paper Series, Drug Research Unit, Social Science Research Institute, University of Hawaii at Manoa, November 30, 1995).

Joakim Johansson and James Roumasset, economics professors at the University of Hawaii, use an economic framework to compare the current U.S. drug policy of prohibition with a policy of taxification, which they define as a drug control policy that combines legalization of the sale and use of currently illegal drugs with a taxation program.

The authors contend that prohibition and drug enforcement impose high costs on participants in the drug trade. They argue that a system of taxification could be useful not only to impose costs on users and dealers, but also to prevent social harms. For example, a system of taxation could increase the ability of participants in the drug trade to access police, reduce violence, improve quality controls on drugs to prevent overdoses and poisonings, protect the freedom of those who use drugs without harming others, and provide tax revenue to the government.

Johansson and Roumasset estimate the effects of two different taxation policies on cocaine. The first model involves the imposition of a unit sales tax on cocaine. While this model might be the most effective, the authors warn that the social costs of such a policy are difficult to estimate and the policy may not be politically viable. Their second model, which they say is more politically realistic, strives to keep cocaine use at constant levels by using the tax revenue to treat heavy users.

[For more information about this report or to receive a copy, contact the Department of Economics, University of Hawaii at Manoa, 2424 Maile Way, Room 542, Honolulu, HI 96822, 808-956-7561.]