Has little effect on drug use by addicts and a large

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2 has little effect on drug use by addicts and a large effect on nonaddicts.Now consider the effects of the increase in price on expenditures on drugs. Addictspurchasex1 drugs at the low pricep1, which results in total expenditures ofp1 "x1, as indicated by areasB&Cin Figure13.1. After the campaign against drugs, addicts purchasex2 drugs at the higher pricep2, which results in totalexpenditures ofp2 "x2 as indicated by the areasA&Bin Figure 13.1. The campaign thus causes a large increase inexpenditures on drugs by addicts, specifically an increase ofA(C. Total expenditures go up because addicts continuebuying almost the same quantity of drugs and paying a much higher price. Consequently, addicts will need a lot moremoney to buy drugs, and much of that money may come from property crimes. Thus, public policies that raise the cost ofdrugs to addicts may cause more crime rather than less. (The campaign against drugs, which raises prices, also causestotal expenditures by nonaddicts to godownbyA'(C'.)This analysis exposes a dilemma: Public policies that raise the price of drugs havethe good effect of reducing their use by nonaddicts. Less use by nonaddicts presumablyimplies fewer crimes committed by them, and also fewer nonaddicts becoming addicts.However, public policies that raise the price of drugs have the bad effect of substantiallyincreasing expenditures on drugs by addicts. More expenditure on drugs by addictsimplies more crimes committed by them in order to get more money for drugs.The obvious response to these facts is to try to get the best of both worlds by raisingthe price to nonaddicts and not raising the price to addicts. In other words, the obviousresponse is a drug policy that discriminates in drug prices between addicts andnonaddicts. Successful price discrimination causes the addicts in Figure 13.1 to facethe low pricep1 and the nonaddicts to face the high pricep2. As implemented in theUnited Kingdom and elsewhere, addicts can submit to medical examination and registertheir addictions. After registration, they can buy cheap drugs legally by prescription,much as people obtain medicinal drugs by prescription from a doctor.Consequently, addicts obtain a safe supply of drugs sufficient to maintain their habits.However, nonaddicts (or unregistered addicts) cannot obtain drugs legally from pharmacies;instead they must purchase drugs illegally at much higher prices.We have discussed a system of prescription sales for addictive drugs that createsprice discrimination between addicts and nonaddicts. Note that price discrimination inthis system goes in the opposite direction from price discrimination practiced by profit maximizing companies. Theprescriptions system aims to lower the price of addictivedrugs to consumers with inelastic demand (addicts), whereas profit-maximizing companiesaim to raise the price of their products to consumers with inelastic demand.

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