Gary Becker discusses The Failure of the War on Drugs:
After totaling all spending, a study by Kevin Murphy, Steve Cicala, and myself estimates that the war on drugs is costing the US one way or another well over $100 billion per year. These estimates do not include important intangible costs, such as the destructive effects on many inner city neighborhoods, the use of the American military to fight drug lords and farmers in Colombia and other nations, or the corrupting influence of drugs on many governments.Assuming an interest in reducing drug consumption — I will pay little attention here to whether that is a good goal — is there a better way to do that than by these unsuccessful wars? Our study suggests that legalization of drugs combined with an excise tax on consumption would be a far cheaper and more effective way to reduce drug use. Instead of a war, one could have, for example, a 200% tax on the legal use of drugs by all adults — consumption by say persons under age 18 would still be illegal. That would reduce consumption in the same way as the present war, and would also increase total spending on drugs, as in the current system.
But the similarities end at that point. The tax revenue from drugs would accrue to state and federal authorities, rather than being dissipated into the real cost involving police, imprisonment, dangerous qualities, and the like. Instead of drug cartels, there would be legal companies involved in production and distribution of drugs of reliable quality, as happened after the prohibition of alcohol ended. There would be no destruction of poor neighborhoods — so no material for “the Wire” HBO series, or the movie “Traffic” — no corruption of Afghani or Columbian governments, and no large scale imprisonment of African-American and other drug suppliers. The tax revenue to various governments hopefully would substitute for other taxes, or would be used for educating young people about any dangersous effects of drugs.
As Arnold Kling points out in his EconLog, “a tariff creates revenue for the government, while a quota creates rents for sellers.”