Dynamics of intervention in the war on drugs: the buildup to the Harrison act of 1914.

Author:Redford, Audrey

The Harrison Narcotics Tax Act of 1914 is widely viewed in the scholarly literature as the beginning of the U.S. government's war on drugs (Miron and Zwiebel 1995; Benson and Rasmussen 1997; Libby 2006; Francis and Mauser 2011; McNamara 2011). An essay by Peter Boettke, Christopher Coyne, and Abigail Hall (2013) is an exception that dates the war's start to the Pure Food and Drug Act of 1906. However, the problems that the Harrison Act was intended to address can be directly traced to the unintended consequences of antidrug policies adopted by state governments and the federal government in the nineteenth century. This paper documents these nineteenth-century antidrug policies and uses an economic theory of the dynamics of intervention to explain how these policies led to the adoption of the Harrison Act. These nineteenth- and early-twentieth-century policies represent the beginning of the U.S. government's war on drugs.

With the notable exception of a book by Mark Thornton (1991), the literature on the drug war largely fails to recognize and explain the dynamic nature of the interventions in the war on drugs. The literature on the legislation and outcomes of the period leading up to the Harrison Act, written primarily within the history and medical professions, falls short in explaining how the Harrison Act came about because it does not have a suitable economic framework to interpret the events. (1)

We utilize the theory of intervention developed by Ludwig von Mises ([1940] 1998) and then built upon by F. A. Hayek (1945, [1944] 2007), Sanford Ikeda (1997), and others to explain the evolution of drug laws leading up to the Harrison Act, and, in doing so, we are able to address and utilize insights from David Musto (1973), Edward Brecher (1972), and David Courtwright ([1982] 2001) in a cohesive, not contradictory, manner. This theory allows us to explain how policy X implemented at time t affected the decision to implement policy Y at time t + 1.

Each government intervention into the market impacts the information and incentives of a wide variety' of market participants who often have goals other than and sometimes contrary to those of the policy makers. But, as Mises states, "interventionism is not an economic system ... it is not a method which enables people to achieve their aims" ([1940] 1998, 78). Because information is dispersed across the economy often in the form of tacit knowledge (Hayek 1945), policy makers cannot fully anticipate, unless they are omniscient, how the changed information and incentives of market participants will ripple through the market and create secondary consequences that policy makers consider undesirable. When these consequences reveal themselves, policy makers have a choice of repealing their prior intervention or creating an additional intervention to deal with the undesirable consequences. When they choose the latter, "it will only be a matter of time before new, negative consequences of the new intervention manifest themselves--at which point they will be facing a replay of the previous choice" (Kurrild-Klitgaard 2005, 5). Intervention also distorts the discovery process for entrepreneurs (Kirzner 1985). The opportunity set available to entrepreneurs also changes with interventions, and they respond accordingly (Martin 2011, 352). Intervention stifles discovery that would have found ways to serve consumer desires if entrepreneurs had had more freedom to experiment. It also creates superfluous discovery, which takes place when entrepreneurs come upon new business ideas that exist only because of an intervention that made it uneconomical to serve consumers' desires in other ways. To summarize explanations offered by Mises ([1940] 1998) and Hayek ([1944] 2007), once the road of intervention is chosen, movement along it will only continue because unintended consequences will continue to manifest with each attempt to correct the previous problems. The only way to get off this road is to begin rolling back or undoing previous interventions and allow the market to sort itself out. Unintended consequences alone do not qualify as dynamics of intervention. It is when the creation of these unintended consequences leads to subsequent intervention to correct the problems of the previous intervention that we see the dynamic cycle emerge.

Crisis, or the perception thereof, plays a crucial role in the dynamics of intervention. "Besides permanently increasing the true size of government relative to the size that secular forces alone would have produced, crisis may also affect the operation of the secular forces themselves. .. . Conceivably, without a crisis to break down some of the obstacles to the ongoing growth of government, the secular forces would eventually lose their power to sustain the true growth of government" (Higgs 1987, 61). This is precisely the cycle we find in the war on drugs.

As Mark Thornton describes this cycle, "The demand for interventionist policies such as prohibition arises from the perception that the market process has caused an inefficient outcome or that the market will not correct inefficiencies" (1991, 80). For example, when the government prohibits a drug, people have the incentive to stop using that drug (the intended consequence), but they also have the incentive to switch to a different drug that satisfies similar ends (the unintended consequence), which creates an entrepreneurial opportunity for individuals to supply more of the alternative drug. What this new drug is or the form it takes is impossible to predict ex ante, so it requires new legislation ex post to deal with it. During the period from the 1880s to the 1910s, the federal government and state governments enacted a series of interventions to try to address and eradicate a growing opium problem in the United States. Each of these interventions in turn created unintended consequences that were addressed with future interventions.

We analyze the series of federal interventions into narcotics markets during the late nineteenth and early twentieth centuries to show why the Harrison Act was passed and how previous interventions created the very problems the Harrison Act sought (and failed) to correct. At several steps along the way, Congress members called into question and tried to limit their own federal jurisdiction, but all of these attempts to tie their hands were rendered irrelevant with the passage of the Harrison Act-"the close interdependence of all economic phenomena makes it difficult to stop planning just where we wish and ... once the free working of the market is impeded beyond a certain degree, the planner will be forced to extend his controls until they become all-comprehensive" (Hayek [1944] 2007, 137).

We focus specifically on how interventions into smoking-opium markets failed to produce the intended result (the elimination of the smoking-opium vice in the United States), increased smuggling, and incentivized American citizens' involvement in opium importation. At the same time, patent-medicine use and opiates for nonmedicinal use were on the rise. As an attempt to stifle the nonmedical market for opiates and patent medicines, many states passed laws prohibiting the sale of the medicines without a prescription. As a result, interstate sales of opiates increased to circumvent these laws. Finally, the United States spearheaded an international campaign to shed light on and eliminate the crisis of the "opium evil" around the world but was forced to confront its own domestic opium problem in a sufficiently comprehensive way to gain the respect of fellow International Opium Commission nations. These three lines of intervention coalesced with the passage of the Harrison Narcotics Tax Act of 1914, which aimed to fix, once and for all, the unintended consequences of the aforementioned interventions.

We begin by analyzing the evolution of the smoking-opium market in the United States and government intervention in that market up through 1909 because smoking opium was regulated much differently from other drugs up until that time. Then we analyze the evolution of all other drug markets through 1909. The next section describes interventions immediately prior to the Harrison Act that led to the adoption of the act. We then explain the Harrison Act's content and ramifications and close by examining how this act led to a wide-ranging escalation in intervention that remained consistent with the pattern established by prior interventions and by drawing broader lessons.

Smoking Opium

Smoking opium is an alteration of crude opium that can be smoked through a pipe and is far less potent than other crude-opium derivatives and morphine. More interventions occurred in smoking-opium markets because it was consumed mainly by Chinese immigrants to the United States, not because of its potency. Anti-Chinese sentiments spread throughout the country during the 1870s, ultimately resulting in U.S.-Chinese negotiations and the Angeli Treaty in 1880. The treaty discussion included consideration of rules surrounding the importation of smoking opium in China and the United States.

Chinese officials were trying to repress the opium economy in China following the Opium Wars and wanted to minimize foreign exports. Susan Capie (1982) states that a provision in the treaty to ban Chinese nationals living in the United States from importing smoking opium would appear favorable to the U.S. public because it was suppressing a vice activity that most American citizens, in particular those living in California, where the Chinese national population was the densest, saw as a detriment to society. Further, "at the time this treaty was negotiated, the State Department hoped that no American citizen would engage in the importation of smoking opium" (International Opium Commission 1909, 7). The Angeli Treaty and its implementation into law in 1887 were the first federal attempt to intervene in the opium market...

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