consequences of drug use; it can nevertheless have a significant effect on policy outcomes. Indeed, public policy mirrors the inconsistency of social views on drugs: some drugs are prohibited while others, such as alcohol or nicotine, with significant externalities and addictive properties of their own, are much more lightly regulated. Social opprobrium may determine why private interests of market participants are ignored in policy debates regarding drugs, in contrast to regulatory debates on legal markets.

Levels of social opprobrium vary widely, however, and can change significantly: several US states have decriminalized the medical use of marijuana, where before none had. Even within political parties there is substantial variation in views regarding decriminalization: decriminalization in New Mexico was signed into law by Republican governor Gary Johnson, but vigorously opposed by members of his own party. The existence of such externalities may justify some government intervention in the drug market, provided it is efficacious and does not impose high costs of its own.

Most of the public debate on the costs of drug use focuses on the social costs and benefits of drug consumption, such as criminal behavior, reckless driving, aggressive behavior, and other types of potentially irresponsible and dangerous actions by drug users. Little attention is given to the private costs and benefits of drug use, although these affect a very large fraction of the population. The US Department of Health and Human Services estimates that slightly more than 35 million Americans aged 12 or over used an illicit drug in 2004. 5.5 million reported cocaine use and 1.4 million reported crack use. The US Office of National Drug Control Policy (2001) uses survey, incarceration and treatment data to estimate roughly the number of chronic heroin and cocaine users (who are believed to account for approximately 75 percent of total consumption). In 2000, according to these calculations, there were approximately 2.7 million chronic cocaine users (down from approximately 4 million in 1988), and 900 thousand chronic heroin users (down from 1.34 million in 1988). There are about as many occasional users of cocaine (3 million) as chronic users, but not surprisingly (given its greater addictiveness), there are far fewer occasional users of heroin (253 thousand).

A strict economic evaluation of drug use policies should also take into account private costs and benefits of these drug users: the welfare gain or loss to them from consuming the good and the monetary gain to producers from being able to sell it above its average cost. Social opprobrium or simply the pre-conception that drug use has no private benefits both contribute to the lack of attention to the private side of the cost-benefit ledger. Nevertheless, in a market with 35 million consumers in the US alone, the private net benefits (or costs) of consumption are likely to be of a magnitude similar to the social costs of consumption.

In general, one can imagine three scenarios under which individuals might decide that the private benefits of drug use exceed their private costs, and in the first two of these scenarios net benefits are indeed positive. First, for many individuals, the private costs of drug use are low: they are either less vulnerable to addiction or they prefer to consume low enough quantities that the risks of addiction are low or they prefer drugs that are less addictive. This characterizes the vast majority of individuals who have ever used drugs. It also, arguably, characterizes those chronic users who are not regarded as needing treatment (for example, chronic users for whom the procurement and consumption of drugs has become the central focus of their lives). While a large fraction of chronic heroin users are viewed as in need of treatment, roughly one-half to two-thirds of chronic cocaine users do not fall into this category (Executive Office of the President, 2001). Chronic users of marijuana are least likely to be regarded as needing treatment; the private net benefits of marijuana use are most likely to be positive among these users.

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