Chapter 18 - Observations on practices

Significant economic and social costs [1][1] 

In 1996, the Canadian Centre on Substance Abuse published the first study on costs related to alcohol, tobacco and drug abuse in Canada.[2][2] Estimating costs raises difficult technical questions:  what should be included, and how should each element be measured? The very analysis of public drug policies is predicated on the assumption that a number of the associated social costs can be reduced, if not eliminated altogether. These costs are of two major types: those associated with public policy, primarily the cost of prevention and suppression, as well as those of administering the policy; and the costs that would be avoided if the problems stemming from substance abuse were eliminated–the so-called “counter-factual” scenario. In these, the effects of drugs are treated as social costs, that is, as a diminution of the collective well-being. This amounts to saying that all the costs of drug abuse are social costs, or what economists call “externalities” or “spill-overs” – secondary rather than primary consequences.

Moral considerations aside for the moment, there is no doubt that use of drugs can have certain benefits–albeit short-term and to some extent non-rational ones–for the users, and even for those around them. Hyperactive individuals calmed by cannabis, those whose productivity is enhanced by the use of cannabis or whose mental or physical suffering is attenuated, or those who smoke a joint in the evening to relax or help them sleep and are in better shape to work the next day as a result, are just a few examples. And they are not unusual cases.

From another point of view, the underground drug economy, not trafficking on a major scale, but small-scale neighbourhood supply, whether in poorer or wealthier areas, generates certain economic benefits and even some capacity to integrate socially. Entire families are supported by small-scale dealing. Houses, cars, travel and luxury clothing are financed by drug sales. The amount of the wealth they generate can be illustrated by the example of British Columbia. In this province alone the cannabis-based economy is estimated to be worth $6 billion annually. It can be assumed that a major part of this revenue, let us say half, goes to people who are otherwise well integrated socially and are not part of the criminal culture.

The analysis of social costs based only on externalities does not take into account the drug economy.

Ultimately it rests on another hypothesis, equally difficult to defend, which is that the money saved if the social costs of drug use were reduced could be invested elsewhere; in economic theory these costs are known as “opportunity costs”. However, money saved on enforcement of cannabis laws would probably be redistributed within the police organization; other social costs might also arise from the substitution of other substances.

Having set out these caveats, Single’s study produced the following table[3][3].

 

Total cost of alcohol, tobacco and illegal drugs in Canada, 1992

	Alcohol	Tobacco	Drugs	Total
1. Direct health care costs: total	$1,300.6	$2,675.5	$88.0	$4,064.1
1.1 morbidity-general care hospitals	666.0	1,752.9	34.0	2,452.9
-psychiatric hospitals	29.0	--	4.3	33.3
1.2 co-morbidity	72.0	--	4.7	76.7
1.3 ambulance services	21.8	57.2	1.1	80.1
1.4 home care	180.9	--	20.9	201.8
1.5 outpatient treatment	82.1	--	7.9	90.0
1.6 ambulatory care: doctors’ fees	127.4	339.6	8.0	475.0
1.7 prescription medications	95.5	457.3	5.8	558.5
1.8 other health care costs	26.0	68.4	1.3	95.8
2. Direct losses in the workplace	14.2	0.4	5.5	20.1
2.1 EAP and health promotion programs	14.2	0.4	3.5	18.1
2.2 drug testing in the workplace	N/A	--	2.0	2.0
3. Direct administrative costs for transfer payments	52.3	--	1.5	53.8
3.1 social assistance benefits and other    programs	3.6	--	N/A	3.6
3.2 workers’ compensation	48.7	--	1.5	50.2
3.3 other administrative costs	N/A	N/A	N/A	N/A
4. Direct costs for prevention and research	141.4	48.0	41.9	231.1
4.1 research	21.6	34.6	5.0	61.1
4.2 prevention programs	118.9	13.4	36.7	168.9
4.3 training costs for doctors and nurses	0.9	N/A	0.2	1.1
4.4 costs for behavioural modification	N/A	N/A	N/A	N/A
5. Direct costs of law enforcement	1,359.1	--	400.3	1,759.4
5.1 police	665.4	N/A	208.3	873.7
5.2 courts	304.4	N/A	59.2	363.6
5.3 correctional services including probation	389.3	N/A	123.8	513.1
5.4 customs and excise	N/A	N/A	9.0	9.0
6. Other direct costs	518.0	17.1	10.7	545.8
6.1 damages due to fire	35.2	17.1	N/A	52.3
6.2 damages due to traffic accidents	482.8	--	10.7	493.5
7. Indirect costs: loss of productivity	4,136.5	6,818.8	823.1	11,778.4
7.1 loss of productivity due to illness	1,397.7	84.5	275.7	1,757.9
7.2 loss of productivity due to death	2,738.8	6,734.3	547.4	10,020.5
7.3 loss of productivity due to crime	--	--	N/A	N/A
Total	7,522.1	9,559.8	1,371.0	18,452.9
Total % of GDP	1.09%	1.39%	0.20%	2.67%
Total per capita	$265	$336	$48	$649
Total % of all costs related to substances	40.8%	51.8%	7.4%	100.0%

 

 

An examination of these data indicates:

 

·               In 1992, the costs associated with all illegal drugs were $1.4 billion, compared with $7.5 billion in the case of alcohol and $9.6 billion in the case of tobacco.

·               Expressed as a percentage of the gross domestic product, the total costs for all substances was 2.67%. Of this, 0.2% was for illegal drugs, 1.09% for alcohol and 1.39% for tobacco.

··               The principal costs of illegal drugs are externalities, that is, loss of productivity ($823 million), health care ($88 million), losses in the workplace ($5.5 million), for a total of about 67% of all costs related to illegal drugs.

·               The cost of public policies, or opportunity costs, represent about 33% of what.

··               The cost of enforcing the law represents about 29.2% of all costs, or about 88% of all policy costs. The balance goes to prevention, research and administration.

 

Previous studies conducted in British Columbia (1991), Ontario (1988) and Quebec (1988), using different methodologies, established costs of $388 millions, $1.2 billion and $2 billion respectively, for a total cost of $3.5 billion for these three provinces alone.[4][4] These figures demonstrate the extent to which such estimates can vary, according to the methodology selected and the availability of data.

Nevertheless, with the CCSA study taken as the standard, two comments must be made. First, loss of productivity–the major cost–is measured in mortality ($547 million) and morbidity ($275 million). Except in the case of traffic fatalities, cannabis is not a cause of death and involves none of this type of social cost. Morbidity corresponds to losses attributed to problems caused by drug use as measured by the difference between the average annual income of users and of the population in general. Here, two further observations about cannabis should be noted. A large proportion of cannabis users are young people who are not yet part of the workforce; and cannabis use involves none of the addiction and attendant problems that follow from heroin or cocaine use. It is, therefore, the costs that can be attributed to cannabis in this regard are likely minimal. If one accepts the methodology of the authors, cannabis in itself entails few externalities, which are the main measures of the social cost of illegal drugs.

However, it should also be noted that the study did not calculate the costs of substance-related crime. Alcohol is well known for its frequent association with crimes of violence (at least 30% of all cases), as well as with impaired driving , which results in major social and economic losses. Crime related to illegal drugs is of several types: organized crime, of course; crimes against property committed in order to pay for drugs, true mainly in the case of heroin and cocaine; and crimes of violence committed under the influence of drugs. With the exception of organized crime and driving under the influence, cannabis involves few of the factors that generate criminal behaviour.

Secondly, according to Single’s study, the main cost of illegal drugs, after loss of productivity, is the cost of law enforcement, which the study estimates at approximately $400 million. In Chapters 14 and 15, we noted that police and court costs are certainly much higher than this figure, and probably total between $1 billion and $1.5 billion. As Single et al state, these are costs that “are incurred as a conscious decision by policy makers, as opposed to those costs imposed on the treatment system and on industry as a result of substance-related morbidity and mortality.”[5][5] The proportion of these costs attributable to cannabis is, obviously, impossible to determine for certain. But, insofar as 77% of all drug-related offences involve cannabis, and of these 50%  involve simple possession, and given that about 60% of incidents result in a charge, of which some 10% to 15% of cases the accused receives a prison sentence, it is clear that a considerable proportion of the drug-related activity addressed by the penal justice system is concerned with cannabis. While admitting this to be a very rough estimate, we suggest that about 30% of the activity of the justice system is tied up with cannabis. On the basis of our estimates and the lowest cost of law enforcement, or $1 billion, it costs about $300 million annually to enforce the cannabis laws.

In effect, the main social costs of cannabis are a result of public policy choices, primarily its continued criminalization, while the consequences of its use represent a small fraction of the social costs attributable to the use of illegal drugs.

Next to this, the costs of prevention and research pale into insignificance. Single estimates them at approximately $42 million in 1992, at the height of Canada’s Drug Strategy – a strategy that ceased to be funded after 1997. Far from increasing since then, it is probable that expenditures for prevention and research have decreased as a proportion of the total social cost of drugs.

At several points in this report, we have spoken about the Canadian Centre on Substance Abuse, pointing out both its lack of visibility and legitimacy and its lack of resources the two being related. The economic and social costs of illegal drugs alone on the order of $1.5 billion (which in light of our estimate of the costs of suppression alone is certainly the floor), the annual budget of the CCSA represents a mere 0.1% of them! Considering that the CCSA's mandate is to facilitate everything we have just been discussing, and to serve as a clearing-house for information, practical experience and best practices, there is good reason to wonder whether successive governments have not failed to put their money where their mouth is in their approach to the drug issue. The social costs of alcohol, a substance that also falls within the CCSA’s purview, have not even been included in this calculation, though they are at least seven times greater than those of illegal drugs! This is why it is imperative to raise the proportion of funding to the CCSA from 0.1% to 1%–a drop in the bucket for the federal government that would produce inestimable benefits.