marijuana, cocaine, and heroin – in the shorter time interval between 1990 and 2002. Evidence from other countries is consistent with the US experience. Following the legalization of marijuana in the Netherlands, usage appears to have increased, but observers attribute the increase not to legalization, per se, but to significant retailing and marketing efforts that were permitted under the particular rules that accompanied legalization (MacCoun and Reuter, 2001). The lower private costs of marijuana use also contributed to the demand increase. However, increased marijuana consumption was not associated either with any significant increase in marijuana-related health problems or with an increase in hard-drug usage or drug-related crime (p. 303). MacCoun and Reuter (2001, p. 306) also report that Italy relaxed penalties on all drugs and saw an increase in heroin deaths. However, similar patterns of mortality were observed in both Spain (where policy was consistently permissive) and Germany (where drug use was consistently penalized).

Historical evidence from other episodes of prohibition, such as the American alcohol prohibition during the inter-war period, also point to only small movements in consumption. Miron and co-authors (Dills and Miron, 2004, and Dills, Jacobson, and Miron, 2005), for example, find that alcohol prohibition reduced consumption by no more than 10-20% in the medium run, and may have had no impact whatsoever over the long-run.

Tables 1 and 2 present new cross-country evidence that reinforces the conclusion that prohibition has weak effects on consumption. Prices, qualities, and quantities of drugs supplied and consumed vary considerably across countries (much more than across and within regions, cities, and households). While national level data on drug prices and qualities are crude and highly approximate, their analysis can still inform critical questions. We focus on the markets for cocaine and heroin, the two drugs that are most traded internationally and that are most relevant to developing countries. In an exploratory effort, we look at these data and ask whether the determinants of variation in drug prices, quality, and demand found in the analysis of crosscountry data are consistent with the conclusions of within-country studies. Enforcement is bound to have an effect on retail drug prices. However, the direction and amount of the price change depends on the particular enforcement strategy and on the elasticity of demand. Effective enforcement strategies that emphasize penalties for users, suppressing demand, _reduce_ prices. Enforcement that emphasizes penalties for suppliers, on the other hand, _increases_ prices. The increase is particularly large in the presence of inelastic demand. In fact, actual enforcement strategies are much more strongly focused on the supply side (attacking supply networks, interdicting supplies, arresting dealers).<sup>6</sup> Consequently, if enforcement expenditures are effective, we should observe significantly higher retail prices of cocaine and heroin.<sup>7</sup> We consider three types of variables to explain prices, measured at the national level: the country’s drug supply availability, economic and social development, and law enforcement resources. Supply availability is proxied by a binary variable indicating whether the country is a major cocaine or heroin producer and by the intensity of drug seizures in the country.<sup>8</sup> As is 6 A large fraction of prisoners in the US are incarcerated for violation of laws against the possession of drugs, but Sevigny and Caulkins (2004) argue that most of these are dealers who reached plea agreements with prosecutors.

7 The appendix provides details on definitions and sources of all variables used in the empirical analysis.

8 The latter can also indicate the strength of enforcement but since this is controlled for by the other determinants, drug seizures’ remaining explanatory power is likely to be related to drug availability.

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