Nber Working Paper Series the Economic Theory of Illegal Goods: the Case of Drugs
نویسندگان
چکیده
This paper concentrates on both the positive and normative effects of punishments that enforce laws to make production and consumption of particular goods illegal, with illegal drugs as the main example. Optimal public expenditures on apprehension and conviction of illegal suppliers obviously depend on the extent of the difference between the social and private value of consumption of illegal goods, but they also depend crucially on the elasticity of demand for these goods. In particular, when demand is inelastic, it does not pay to enforce any prohibition unless the social value is negative and not merely less than the private value. We also compare outputs and prices when a good is legal and taxed with outputs and prices when the good is illegal. We show that a monetary tax on a legal good could cause a greater reduction in output and increase in price than would optimal enforcement, even recognizing that producers may want to go underground to try to avoid a monetary tax. This means that fighting a war on drugs by legalizing drug use and taxing consumption may be more effective than continuing to prohibit the legal use of drugs. Gary S. Becker Department of Economics University of Chicago 1126 East 59 Street Chicago, IL 60637 [email protected] Kevin M. Murphy Graduate School of Business University of Chicago Chicago, IL 60637 and NBER [email protected] Michael Grossman NBER 365 Fifth Avenue New York, NY 10016 and CUNY Graduate Center [email protected]
منابع مشابه
Nber Working Paper Series Neoclassical Theory versus Prospect Theory: Evidence from the Marketplace
Neoclassical theory postulates that preferences between two goods are independent of the consumer’s current entitlements. Several experimental studies have recently provided strong evidence that this basic independence assumption, which is used in most theoretical and applied economic models to assess the operation of markets, is rarely appropriate. These results, which clearly contradict close...
متن کاملNber Working Paper Series Comparative Advantage, Complexity and Volatility
We are grateful to Arnaud Costinot, Miklos Koren and workshop participants at the University of Michigan and the 2009 AEA Meetings for helpful suggestions. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-revie...
متن کاملNber Working Paper Series Managerial Skill Acquisition and the Theory of Economic Development
متن کامل
Nber Working Paper Series toward an Efficiency Rationale for the Public Provision of Private Goods
متن کامل
Nber Working Paper Series the Shape of Temptation: Implications for the Economic Lives of the Poor
This paper argues that the relation between temptations and the level of consumption plays a key role in explaining the observed behaviors of the poor. Temptation goods are defined to be the set of goods that generate positive utility for the self that consumes them, but not for any previous self that anticipates that they will be consumed in the future. We show that the assumption of declining...
متن کامل