Dual Markets

Before the implementation of an international policy regime with the aim of restricting the trade in opiates beginning in 1912, the free availability of opiates in domestic and international trade was the norm. Opiates were not unregulated, however. Another set of policies ruled the day, formed by other preconceptions of the dangers of drugs and by a high degree of consciousness of the limits of state power. Examining both these preconceptions and limits from a comparative perspective, this chapter describes how a discourse featuring opium as a poison accompanied regulations that took great care not to exacerbate the effects of a dual market in opium but rather to regulate “on the cheap.” Assessed both by its own set of goals in a historical context much different from ours and anachronistically in light of latter-day prohibition regulations, this chapter suggests that maybe the prior approach of regulating opium as a poison should not be deemed a failure.

The world heroin market today commands an estimated annual market value of US$55 billion and affects around 12 million people. After a short description of the current state of the world heroin market and its basic properties—maturity, segmentation, and elasticity—this chapter briefly outlines the history of heroin consumption and its regulation over the last 150 years. Historically, most interventions in the heroin market sought to curb its availability and consumption by using either vinegar (incarcerating drug sellers and users) or honey (diverting addicts to treatment). However, there is no conclusive evidence that either way is effective in reducing the number of heroin users and addicts; to a large extent, drugs become popular or fall out of fashion due to the natural history of epidemics and other social and cultural factors. Thus, the traditional drug policy goal of addressing the root cause—reducing the number of heroin users—is largely misplaced. Currently, many scholars conceive of “harm reduction” as an overarching goal of drug policy. As health-oriented harm reduction does not aim to curtail drug use per se but reduce some of its harmful consequences, criminological harm reduction applied to drug-related crime does not aim to prevent violation of drug laws per se but rather to prevent certain harmful consequences of drug use and sales. We then use the influential Goldstein model of drug-related crime to show how harm reduction principles can be applied to heroin-related drug crime.

The United States is facing its worst drug overdose epidemic in US history, driven by a quadrupling in death rates from medically accessible prescription opioid pain relievers since 1999—not cocaine, heroin, or the other illicit products that have driven these numbers in the past. While the scale of the problem in the United States is substantially larger than that of other countries, it is not alone in its struggle with prescription opioids, as numerous Western countries, including Canada, Australia, Spain, and the United Kingdom, are now showing evidence of a struggle with rising abuse and misuse rates. In this chapter, we discuss how opioids are an atypical addictive good, not because of their pharmacological properties but because of the unique markets in which they can be traded (legally for some, illegally for others). We describe the main theories explaining the explosion in opioid misuse in the United States as well as the primary public and private policies that have been attempted to reduce the supply, demand, and harms associated with these drugs.

The first global encounter with cocaine began with its rapid emergence as a medical wonder drug in the mid-1880s. Despite being widely promoted for its therapeutic potential in legitimate medical practice, it is important to understand that cocaine always existed within a regulatory environment, albeit one that was initially quite open to sale and use. This chapter tracks the evolution of cocaine regulation over the next five decades, from pharmacy laws and subnational regulation to the origins of national-level controls and finally the creation of an international control system. This chapter also attempts to reconstruct patterns of cocaine use over those early decades and concludes with a consideration of the consequences of control.

This chapter explores the logic of the international drug conventions and their “comprehensive, integrated, and balanced” drug policy approach that rejects all “nonmedical and scientific” drug uses and implicitly seeks a drug-free world. It questions the logic of that policy approach, its consistency with the reasons given for the conventions, and whether the prevalent interpretation of the conventions is logically derived from them, and it explores the implicit assumptions behind the logic of the conventions. It contrasts the policy approach of the conventions with the “balanced recipe” proposed in this book, which seeks to maximize individual liberties if they do not harm others and to incorporate into policy making and implementation processes the existence of market externalities and the inconsistency of human decisions. It shows that drug phenomena are not independent of other problems arising from social vulnerabilities and structures and shows why successful, balanced drug policies must recognize the complexity of drug phenomena and the need to include all relevant nonstate stakeholders in policy formulation and implementation processes. This chapter argues that to have truly successful drug policies, countries need to tackle their social and structural vulnerabilities. A short sketch of some of the characteristics of the evolution of the cocaine markets, coca eradication, and local microtraffic in Colombia, Bolivia, Peru, and other Latin American countries illustrates the need for a policy approach that responds to the vulnerabilities of each country and the need for an international control system in which drug policies are formulated in coordination with all policies that confront possible social harms.

Methamphetamine is a potent synthetic central nervous system stimulant used by diverse populations around the globe. Both the consumption and production of methamphetamine influence its circulation through licit and illicit markets. At the level of consumption, it is used both for pleasure and for more instrumental ends such as increasing work productivity and weight loss. At the level of production, it is made using chemicals designed for and available through the licit economy, such as the pseudoephedrine in many common cold remedies. Both aspects pose challenges and opportunities for regulators. This chapter examines the precursor laws introduced in the United States to limit access to the chemicals used in domestic production of methamphetamine. The specific focus is on efforts to more tightly control access to products containing pseudoephedrine at points of sale. Research suggests that tightening pseudoephedrine regulations would likely curb local production of methamphetamine—particularly small-scale production—thereby mitigating many of the risks such operations pose. However, research also suggests that such precursor laws alone will not have long-term impacts on either the availability of methamphetamine or use rates.

Marijuana regulation in the United States is contradictory, decentralized, and rapidly changing. Although the production, distribution, and sale of marijuana remain illegal under federal law, an increasing number of states are authorizing the drug for medical and recreational purposes. This chapter describes the way marijuana regulation in the United States has evolved over the last 20 years and the constraints imposed on state regulatory frameworks by both the continuing federal prohibition of the drug and the complications of the federal system.

This paper analyzes drug policy and related outcomes in Portugal and Spain after decriminalization. Portugal and Spain are usually singled out as countries with permissive drug policies because they have decriminalized drug use. In these countries, individual drug consumption is not considered a crime, and drug users are generally not subject to criminal sanctions. People are increasingly demanding different policies on marijuana, particularly through cannabis social clubs in Spain. In recent years, decriminalization and an absence of criminal punishments for drug users, along with a trend toward less severe punishments for drug trafficking, have not been associated with significant increases in drug use. Portugal and Spain continued their normal patterns of drug use after decriminalization, supporting a growing consensus that decriminalization is not associated with escalating drug use and drug-related problems.

This chapter describes and analyzes the various phases of the liberal, tolerant Dutch approach toward cannabis during the last 50 years. In the 1960s, prosecutors in large Dutch cities started using their discretionary powers to stop prosecuting cannabis users. In the 1970s, the legal discretion to prosecute a crime only when opportune was extended to the sales of cannabis by house dealers in so-called youth centers. In the 1980s, this systematic application of the principle of opportunity also applied to coffeeshops, and as of 1995, exclusively to coffeeshops. Despite different rules and regulations for cannabis and coffeeshops, cannabis has remained illegal. The focus of Dutch cannabis policy has been on decriminalizing cannabis on the demand and retail side. Simple possession has been formally decriminalized from a crime to a low-priority minor offense. Retail sales in coffeeshops have been de facto decriminalized. If coffeeshops respect the nationally set rules, their (technically criminal) retail sales are officially tolerated. Cannabis production and wholesale distribution, on the other hand, have remained illegal. For the last 15 years, public-private partnerships have invested heavily in detecting marijuana-growing operations. The result is a cannabis and coffeeshop policy that can be characterized as dialectical, moving between de facto decriminalized retail sales and totally illegal, enforced production and wholesale trade. The political unwillingness to consider ways to further reduce cannabis-related crime has become criminogenic, especially in the context of cannabis tourism, which has stimulated illegal cannabis production.

While much has been learned about the impact of various government interventions in the markets for traditionally illicit drugs, the recreational drug markets that operate in a legal gray area are often overlooked in contemporary research. This chapter examines how government interventions on illicit drugs have created a separate market of New Psychoactive Substances (NPSs), more commonly known as “legal highs.” To restrict the sale and use of these products, governments have used several legislative approaches, including banning individual NPSs on a case-by-case basis and banning entire groups/analogs of NPSs, all with varying degrees of success. Governments have also created new measures such as temporary banning orders as well as attempted to regulate low-risk products to better handle the problems resulting from NPS use. This chapter examines some of the strengths and weaknesses of these different approaches as well as examines some of their unintended consequences. The chapter concludes by providing an overview of some of the reasons against what some researchers have deemed to be an overregulation of this market. Finally, a case study of the once popular NPS mephedrone is used to illustrate the impact that regulatory changes on this product had on the mephedrone market.

In democracies, drug policy is shaped by expectations of problems as well as by public preferences and political realities. As public preferences shift, so too will the systems of control. But systems of control have their own costs. There are the costs of maintaining the regulatory system, the costs of the black markets that emerge in response to the regulation, the costs of criminalizing behavior of otherwise law-abiding citizens, and the costs of forgone liberties. Some markets, such as heroin, are entirely prohibited. In contrast, in states that have legalized recreational marijuana in the United States, the focus is on product safety and reducing problem use and youth access, with targeted regulation and taxation. Some harmful substances are permitted under the ordinary regulations that apply to any sort of commerce (such as sugar) or with special regulation and taxes (such as alcohol). The relative social costs and benefits of systems of control are hard to assess, and these calculations are rarely performed. The challenge is in designing a system that does less harm than the harmful behavior it targets.

This chapter charts the American experiment with national alcohol Prohibition from 1920 to 1933. It looks at how such an ambitious and absolutist law was adopted in the first place. It then charts the many unintended consequences of the crusade. While Prohibition has largely been understood as a massive public policy failure, I argue that such a perspective has caused us to lose sight of its many lasting consequences. The alcohol prohibition years pressed the American state into distinctive and permanent molds and built the edifice of the twentieth century federal penal state. The chapter ends with a discussion of the lessons one can draw from this public policy effort and its significant and lasting legacies—not least among them the federal government’s crossbreeding penal approach to other illicit narcotics.

Historical considerations of alcohol control focus disproportionately on the American experience with alcohol prohibition, which famously begot rampant bootlegging, corruption, and disrespect for the law. Much more instructive are the experiences of Sweden, historically a trailblazer in the realm of alcohol policy. Despite deeply entrenched temperance sentiment, not only did Sweden dodge the bullet of draconian prohibition and its negative consequences, it diverged from the conventional free-market trade in alcoholic beverages to foster a series of innovations—municipal dispensaries, individual rationing, and government monopolization—that has balanced the liberty of the individual to consume alcohol with a restriction on the negative externalities that the liquor trade imposes on society.

Beer was prohibited in Iceland from 1915 until the ban was finally lifted by parliament (Alþingi) in 1989; but wine has been legally imported since 1922, as have all other alcoholic beverages since 1935. Using records of parliamentary debates, newspaper accounts, interviews, and census data, this chapter will examine the main arguments used for and against the law in Alþingi. Various side effects and unintended consequences of prohibition will also be revealed in this chapter. Opposition to beer in Iceland was found to be strongest among Alþingi members from rural areas and traditional socialist parties. The most influential argument against beer alone was that adolescents are particularly susceptible to the temptation to drink beer. Similarly, prohibition of marijuana has had the same objective: To save youth from what is perceived as a major threat to their well-being. Opponents of the beer ban in Alþingi pointed out the peculiar nature of the law allowing hard liquor but prohibiting the weakest substance of all, beer. More liberal alcohol policies have indisputably increased the total amount of alcohol consumed in Iceland in recent years.

Tobacco products are highly taxed and regulated in the United States to deter consumption and raise revenues. These restrictions, especially differences in taxation by jurisdiction, invite an illicit trade in tobacco products (ITTP), particularly in cigarettes (illicit retail trade in cigarettes or IRTC). This IRTC amounts to billions of dollars annually in lost tax revenues, reduces the efficacy of smoking reduction efforts, and imposes the other attendant costs of a black market. Stricter controls may invite further evasion, presenting challenges to enforcement.

Despite the heterogeneity of the illicit trade in cigarettes within countries, available studies mainly take national markets as their unit of analysis. The innovative contribution of this work is the focus on the phenomenon at the subnational level. Price and non-price factors are examined as determinants of the consumption of illicit cigarettes in 247 subnational areas of 28 European countries, exploiting a mixed linear model. This approach combines national and subnational data, thus accounting for the correlation among regions and explaining the important differences in the consumption of illicit cigarettes within a country. The size of the informal economy, the affordability of licit cigarettes, the rate of illicit cigarettes in the bordering regions, and the level of economic inequality emerge as the main etiological factors in the illicit cigarette trade in Europe.

The enactment of the Family Smoking Prevention and Tobacco Control Act in 2009 gave the US Food and Drug Administration (FDA) authority to regulate tobacco products—specifically, cigarettes, smokeless tobacco, and roll-your-own tobacco products. That authority was extended to all products that contain tobacco-derived substances, including nicotine, in 2016, when the FDA’s “Deeming Rule” went into effect, capturing products such as e-cigarettes, cigars, and shisha within the FDA’s authority. This chapter focuses on the FDA regulation of e-cigarettes under the Deeming Rule, including the current pre-market authorization requirements that could result in an effective ban on e-cigarettes in the United States.

Casino gambling has been introduced in the United States to revive local economies by providing a desired activity without raising taxes on individuals. An important question is how to minimize the potential deleterious effects of legalized gambling while maximizing its economic benefits. From a criminological and economic perspective, central questions include the following: (1) to what extent legalized casino gambling has impacted rates of pathological gambling, (2) what its impact is on crime rates, (3) to what extent organized crime has infiltrated legal gambling, and (4) what the best methods are to protect legal gambling from illegal activity. This analysis examines what is known about these impacts, and it reviews methods to maximize the positive impacts of casino gambling while minimizing its negative social and economic impacts.

This research evaluates the connection between gambling and crime, simultaneously taking account of addiction-related mental health, alcohol, and drug use problems, using individual survey panel data collected on 4121 subjects over a period of 5 years. Pathological gambling is statistically significantly associated with elevated rates of crime and can be compared in its impact to substance abuse and mental health variables.

Sports betting is a popular economic activity in the United States. Sports betting can generate some negative externalities like disordered gambling and increased incentives to fix the outcomes of sporting events, and it also generates utility for those who wager responsibly. The United States has taken an unconventional approach to the regulation of sports betting, one that outlaws most types while making sports betting fully legal in one specific location. This regulatory approach does not address the underlying problems associated with gambling and it encourages illegal sports betting markets. It serves as a poor example of how sports betting should be regulated.

Currently, several proposed changes in sports betting laws are being debated around the world. Despite the global expansion of sports betting opportunities, relatively little research has been done to compare different regulatory environments. Many countries have banned this gambling activity, while many others allow unlimited sports betting. This chapter offers some concise impressions of sports betting regulation worldwide and a more detailed view of some individual cases worth mentioning. Outside of the United States, sports betting appears to be popular, widely legal, and quite heterogeneous in terms of market structure and legislation. In any case, there are diverse disputes going on as to how sports betting should be changed and adapted in the next future. It appears evident that the prospective value of the sports betting market may increase, but the potential effects of expanding sports betting opportunities may have to be balanced against the negative consequences of this gambling activity.

The Swedish Sex Purchase Act has sparked considerable interest and debate internationally since it was introduced in 1999. This chapter describes and contextualizes the political process preceding the introduction of the Swedish Sex Purchase Act. We then describe its implementation and existing knowledge and assessments of its consequences. One key point is that analyses of legislation in the field of prostitution must consider the relationship between the expressed intentions of the law, the formulation of the law, and how the law is implemented. Legal measures are taken based on specific agendas, but their symbolic value and implications are transformed by the way in which the criminal law interacts with other policy domains. With the Swedish Sex Purchase Act, there has been an interaction between the feminist abolitionist agenda, which was the original basis for the policy, and other agendas. Laws are not made once and for all but are continually revised and readily appropriated by new aims, agendas, and actors.

This chapter examines two nations where prostitution is legal and regulated by the state. The central features of each legal system are described, followed by an analysis of struggles over prostitution policy in the postlegalization period. Recent conflicts in Germany and the Netherlands illustrate the kinds of debates and policy proposals that may arise in other nations after prostitution is decriminalized. The legislation resulting from these recent struggles is evaluated.