Free drug programmes make market more attractive
massey-university
Tue Apr 21 2009 12:00:00 GMT+1200 (New Zealand Standard Time)
Free drug programmes make market more attractive
Tuesday, 21 April 2009, 10:28 am
Press Release: Massey University
Tuesday, April 21, 2009
Free drug programmes make market more attractive to new users, study shows
Free methadone programmes can encourage new users to take heroin, research by two university economists suggests.
Dr Steffen Lippert and Dr Christoph Schumacher from the College of Business have studied the impact of free treatment schemes on the heroin trade.
They devised an economic model that indicates taking "high-risk" heroin users out of the market by putting them on to methadone programmes reduces heroin dealers' distribution costs, which in turn drives down price.
A high-risk user is one who is severely addicted, typically needs to finance their drug habit from crime and cannot always pay. By taking them out of the market, dealers have lower expected distribution costs and can drop their prices to attract new customers.
Dr Lippert says this makes the market more attractive to people who have not taken drugs before. “New users are reacting strongly to price changes and begin their consumption because of price. Lower the price and more non-users will try a drug and consequently become addicted,” he says.
In their paper, Hopping on the Methadone Bus, Dr Lippert and Dr Schumacher have devised a model in which dealers use payment and punishment options to screen between high and low-risk users. If the user doesn’t pay, it assumes the dealer requires the user to deal or smuggle drugs to repay their debt.
Neither high or low-risk users are usually able to pay for their drugs on the spot unless they engage in criminal activity, but high-risk users always resort to crime to finance their drug habit whereas low-risk users only do so if they had to pay for drugs straight away rather than deferring payment.
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Low-risk users also try to regulate their drug consumption according to what they can afford or try to increase their legitimate income.
Dr Lippert says: “When the high-risk users are out of the equation, the market becomes more stable because the dealer knows he is getting his payment. Supplying to low-risk users mean the police are less likely to be on his back and that affects the risk involved and the price goes down.”
The model assumes dealers and users honour their deals.
“This is the first time this effect has been shown by influence on market price,” says Dr Schumacher. “Instead of concentrating on the demand side, we focus on the cost of supplying the market for illegal drugs.
“In our model, entry of new addicts into the drugs market does not rely on the addicts’ calculated – or miscalculated – decision to become addicted but is driven by a reduction in the dealers’ distribution costs.”
Dr Lippert and Dr Schumacher strongly support free drug treatment programmes as a solution but say their model highlights the fact methadone programmes should be used as complement to law enforcement measures rather than a substitute, as sometimes occurs.
Previous research in Australia that looked at the economic analysis of public policies for controlling heroin use showed when methadone programmes were introduced, legal penalties were brought in directed specifically at new users.
The researchers say that law enforcement measures should also be directed at drug dealers to stop supply-side driven entry of new users into the market.
“When free drug treatment programmes are offered, often law enforcement is reduced but there is actually a need to increase policing to target the dealers and stop new users coming in,” says Dr Lippert.
Their findings will be published in the Journal of Health Economics later this year.
ENDS
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