Question

Submit a lengthy response supporting either demand side or supply side policy to combat illegal drug use.

Answer 1

In this model, the “supply-side” refers to the enforcement, distribution, source-country interdiction, and production controls of drugs, while the “demand-side” refers to the treatment, education, and prevention programs put in place to reduce the number of drug users. In other

words, “supply-side” policies represent the criminal justice-based, law enforcement-focused

approaches used to minimize the amount of drugs available, while “demand-side” policies

represent a public health approach grounded in treatment that aims to diminish the demand of

drugs by decreasing the number of people who use them. The ideological differences between

supply-side and demand-side strategies have formed the main crux of the debate regarding which

policies will successfully reduce illegal drug use in the United States if implemented.

Normal economic theory would predict that effective enforcement of illegal drugs (a solely supply-side policy) should directly reduce demand because diminishing the supply would

simultaneously raise the price and minimize the availability of illicit drugs. Consequently,

consumption would decrease due to drugs becoming more expensive and harder to procure.

However, in this case consumption cannot be directly linked to demand because unlike other

products that can be explained using a supply and demand model, illegal drugs are psychologically and physically addictive. Therefore, even if a supply-side strategy was

successful in making illegal drugs more expensive and increasingly difficult to acquire by

reducing the supply in the market, there will still be a finite number of addict consumers who

will be willing to go to further lengths to get their fix.

Subsequently, a decrease in consumption resulting from higher prices rather than lower

demand merely shifts the point on the demand curve at which supply equals consumption.

Therefore, a reduction in the supply is actually more likely to increase the profits for drug

dealers, making the demand for drugs “inelastic.” In other words, the addictive nature of drugs

means that the demand will not shift significantly even when the supply becomes smaller and

more expensive. Therefore, drug dealers can then sell the supply they do have at higher prices,

giving them the opportunity to turn a bigger profit. This phenomenon likely worsens the issue of

drug use and addiction rather than mitigate it because higher revenues fiscally incentive more

people to become involved in the drug trade. On the other hand, it can be assumed that an actual

reduction in demand, potentially achieved through demand-side base policies that focus on

rehabilitation, treatment, and prevention for drug addicts, could decrease consumption without

generating negative side effects. However, because mainly supply-side strategies, such as

increased law enforcement, mass incarceration, and interdiction, have been implemented over the

past few decades, the demand for drugs has remained constant despite the enormous financial

commitment to fighting the War on Drugs.

Federal drug prohibition policies began in 1914 with the Harrison Act; however, it was

not until the 1990s that researchers began to separate them into either supply-side or demand

side responses in order to analyze their overall effectiveness in counteracting drug epidemics.

One of the most prominent scholars associated with the supply and demand drug policy model is

Peter Reuter, whose seminal writings in the early 1990s and 2000s have served as the

foundational cornerstone of research pertaining to the economic-based perspective of drug

epidemics and their subsequent policy responses. As an economist, he combines the economic

theory of supply and demand with research on alternative approaches to drug control and federal

and state responses to epidemics. At the time of his research, the dominant political strategy of

the federal government was focused on supply-side solutions, and Reuter was one of the first

scholars to question their efficacy, contending that the policies were “punitive (in both rhetoric

and reality), divisive (certainly by race, and probably by age), intrusive (in small ways for many

and in large ways for some), expensive (30 to 35 billion annually),” and most importantly,

unsuccessful. Reuter’s critique of supply-side based policies has been adopted by the majority

of drug policy scholars, as it recognizes that due to the addictive nature of drugs, the illegal drug

market does not fit within the normal supply and demand framework.

Later, other scholars who then used this approach expanded on this initial research to

strongly criticize the federal government’s drug control budget, which year by year became more

heavily weighted towards supply-side programs. For example, federal expenditures on drug

control grew five-fold between 1980-1992, with 65% of the budget allocated towards

enforcement programs, while only 25-35% was allocated towards preventing drug use and

treating drug abuse or dependency. Nevertheless, between 1980-1985, Colombian traffickers, the main source of heroin and cocaine in the United States at the time, doubled their profits from
roughly $1.5 to $3 billion. These statistics suggest that while the spending on supply-side
strategies drastically increased, the results were mediocre at best in curbing the flow of illicit
drugs into the United States.
Subsequently, the reluctance of the federal government to allocate adequate resources to
treatment and prevention-based programs has been widely cited as one of the main reasons for
the failure of the drug war. However, the incentives, programs, and overall supportive attitude
for supply-side policies instituted by the federal government subsequently tricked down to the
state and local levels. Thus, it is also important to note the role of state and local governments
that engaged in these types of supply-side based solutions. Combined, state and local
governments spend almost as much on drug control annually as does the federal government, and
their budget allocations are even more heavily skewed towards enforcement. A study conducted
by the U.S. Census Bureau found that state and local governments spent a total of $12.7 billion
on drug control, as compared to the $11 billion spent by the federal government in 1993. These
numbers indicate that state and local governments are at least equally responsible for the
negative consequences associated with implementing mainly enforcement-based strategies.
Therefore, the role of states must be considered when contemplating policy solutions for drug-
related crises.
Overall, there is now a broad consensus among scholars and policymakers that supply-
side policy solutions are ineffective on their own. This shift in approach is reflected in the fact
that most of the literature and policy recommendations that have been published in the 21st century have favored demand-side policies. There has also been a change in public support for
policies based around treatment, rehabilitation, and prevention. Americans witnessed the failure
of the War on Drugs firsthand, and public opinion is important to take into consideration because
politicians seeking re-election will in part tailor their policy strategies to their constituents’
demands. Moreover, so far over a trillion dollars of U.S. taxpayers money has been spent on
these unsuccessful policies. The cost ineffectiveness of supply-side programs coupled with the
fact that they have failed to completely eradicate the source of the drug market has been crucial
in this transformation in support for supply-side and demand-side solutions.
Because this theory divides drug policies into either “supply-side or “demand-side”, it is
common to conceptualize these two types of policies as two separate entities that do not have an
effect on each other. However, supply disruptions can play a major role in the subsequent
demand for a certain drug. For example, the reformulation of OxyContin, one of the most
commonly abused prescription opioids, into an “abuse-deterrent” form, led directly to a rise in
heroin and fentanyl overdoses and overdose deaths. The overprescribing of prescription opioids
is widely believed to be the main driver of the current opioid epidemic, and OxyContin was
reformulated in 2010 in a way that made it more difficult to crush the pills, the way most addicts
tend to abuse them. Although this strategy helped curb prescription abuse, it caused large
national shock to the supply of prescription opioids as they were then “unabusable.” Consequently, many addicts turned to heroin as a substitute. This phenomenon not only
highlights the challenge of addressing a deep-rooted addiction epidemic in the presence of
numerous substitutes, but more importantly demonstrates the intertwined connection between
supply-side and demand-side policies. Although this supply-side policy was successful in
reducing the overall amount of prescription opioids available to users, it increased the demand
for other, more dangerous types of opioids. Supply-side and demand-side policies contain
drastically different approaches on how to successfully mitigate drug epidemics. However, in
order to understand why certain types of policies fail, it is necessary to realize how one type of
policy can affect the other. Exclusively supply-side solutions have failed, but it is equally
unlikely that demand-side approaches alone will be successful in countering drug epidemics.