Opinion: Free Market Minute

Secondary Consequences and the Stuffy Nose

Unclogging illicit drug policy

I may soon be reduced to taking unneeded drugs for my allergies and colds. Either that or I’ll have to buy a less effective product than the one I now use. These options are probably not the best of ideas, but I won’t be alone. Lawmakers have decided that pseudoephedrine, sold under the brand name Sudafed, presents a danger to the public because it can be converted to ‘speed’ —methamphetamine or a related compound.

An over-the-counter decongestant, pseudoephedrine is a very effective and popular allergy medication. State and federal authorities are moving to limit Sudafed’s availability—still in non-prescription form—by dispensing it from behind the pharmacy counter. In some states consumers will have to register with the pharmacy in order to purchase Sudafed in single-ingredient form. Mixed formulations, that contain pain relievers and other ingredients along with Sudafed, will remain on store shelves. The combination versions cost more than plain Sudafed, but some consumers will undoubtedly buy the unneeded extra medications, just to avoid the time and bother of waiting at a prescription counter for a simple decongestant.

What has happened with this over-the-counter drug is truly a tale of the unintended consequences of trying to control market choices. In this case, it’s the ‘war on drugs’ that is creating the secondary consequences. When Henry Hazlitt wrote Economics in One Lesson in 1946, he identified a universal principle concerning markets and policy. Hazlitt’s one lesson is that regulations have both short-run and long-run effects in markets. The corollary is the understanding that policy will not affect all groups in society equally, so we need to consider its effects on everyone, not just a target group or industry. What Hazlitt observed is that regulatory policies often have perverse effects over time, and that policy benefits to one group often come at a cost to other groups in society.

Hazlitt’s basic insights apply to illegal drug markets, too. Markets don’t distinguish between ‘good’ choices and ‘bad’ choices. They simply reflect individuals’ desires to exchange. As long as there are willing buyers of methamphetamine, willing producers and sellers will come forward. The market for legal, over the counter Sudafed is now experiencing the long-run effects of earlier policies restricting access to opium, cocaine, marijuana and the like. Since the war on drugs has made these more scarce and expensive, black market suppliers have turned to substitutes that use cheap, easily available legal ingredients—like Sudafed. A ‘meth-proof’ substitute, phenylprine, will soon replace pseudoephedrine in Sudafed. If it is a less effective decongestant, as reported, decongestant consumers may lose on the quality as well as on the quantity front.

Can we destroy the market for the methamphetamine by restricting access to its ingredients? Not in a meaningful way. Once Sudafed (pseudoephedrine) is successfully restricted, creators of recreational drugs will move on to some other source, or create a new drug. In an endlessly inventive market, that’s what has happened each time one drug has been banned. A further unintended consequence occurs when banned substances are replaced by more powerful, dangerous, and lucrative compounds. The demand for a mind-altering experience can be satisfied with a virtually endless array of possibilities, and it will be. The supply of any one drug may be irrelevant.

If the war on drugs isn’t winning the battle against self-destructive behavior, and unintended consequences harm legitimate consumers and inspire more dangerous drugs, what’s a policy maker to do?

Advocates of letting the market regulate itself admit that harmful drug use will continue regardless of restrictions. But removing restrictions will eliminate many negative secondary consequences. Not perfect, this solution has appeal to diverse social and political elements in our nation.

Markets execute choices, regardless of the wisdom of those choices. In light of that fact, minimizing unwanted consequences, and eliminating incentives for unwise choices through less regulation and more education, may be a more effective, albeit imperfect policy alternative to the current war on drug supply.