It takes around two milligrams of fentanyl to induce an overdose in a human being. In recent years, deaths from fentanyl and opioids have drastically increased (see chart below), leading some politicians to call for the death penalty for dealers. This raises the question: why have opioid-related deaths increased? In a forthcoming paper, we argue that prohibition has led to this increase through the mechanisms of the Iron Law of Prohibition and the Alchian-Allen effect.

The war on drugs has attempted to address the dangers of opioids since its inception in the 1970s. Both prescription and illicit opioids are heavily regulated under the Controlled Substances Act. Despite heavy restrictions and strict enforcement, the use and sale of illicit opioids persist, and deaths from opioids have increased at an alarming rate.

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One reason for the failure of drug prohibition is that it tends to increase the potency of illegal drugs. This effect is known as the “Iron Law of Prohibition,” coined by Richard Cowan. The Iron Law of Prohibition, also known as the potency effect, works through several mechanisms.

Drug suppliers may produce stronger drugs because it is easier to avoid detection by transporting less bulky but more potent drugs. As economist Mark Thornton argues in The Economics of Prohibition, trafficking penalties are based on the weight of shipments, effectively adding a “tax” on weight. Drug suppliers will raise the value of the shipment to bear the tax by increasing the potency of the drugs.

The Alchian-Allen effect, or the Third Law of Demand, posits that adding a fixed charge to the prices of two substitute goods will increase the consumption of higher-quality good by decreasing its relative price. Drug prohibition imposes a fixed cost of avoiding detection on drug suppliers, so suppliers may switch to producing more high-potency drugs, which may be considered the higher-quality good.

Given that illegal drugs are more potent, restrictions on legal opioid prescriptions may increase the demand for illegal and stronger opioids. In the US, opioids are only legally available through prescriptions, and doctors face a legal limit on how much they can prescribe. If an individual’s demand for pain-relieving drugs exceeds what doctors can legally supply, patients may look to black markets where high-potency drugs are common to meet their demand.

The Iron Law of Prohibition suggests that stricter enforcement and regulation of opioids would increase their deadliness, and the facts bear this out. Despite opioid prescriptions declining by roughly 40 percent between 2011-2019, opioid overdose deaths rose by nearly 45 percent during the same period. The decline in prescriptions is largely due to increased federal and state regulation of prescription opioids that started in 2011. The data suggest that increased restrictions on opioids reduced the supply of legal opioids, shifting consumption to more deadly black-market options.

In addition to new regulations on opioid prescriptions in the 2010s, the degree of enforcement of prohibition has grown. The amount of synthetic opiate heroin seized increased by over 300 percent from 2008 to 2017, and the Congressional Research Service suggests that enhanced enforcement is likely a factor in the increase. Annual heroin arrests grew well over 100 percent from 2007 to 2017.

Despite heavier enforcement, or perhaps due to it, heroin and synthetic opioid deaths have increased alarmingly since the early 2010s. Overdoses from fentanyl, a synthetic opiate much more potent than heroin, have grown even faster than overdoses from heroin and other synthetic opiates. As the Iron Law of Prohibition predicts, increased enforcement and regulation of opioids have made them more potent and deadly.

Given that the war on drugs (especially opioids) is costing thousands of human lives, we suggest a few possible paths for policy reform. Lowering the schedule level of illicit and prescription opioids could lead to fewer deaths. A lower schedule would increase the supply of legal opioids, meaning greater consumer access to lower-potency (and therefore safer) opioids. Additionally, this would lower the chance that individuals would have to turn to the black market to obtain opioids, where many opioids are laced with higher-potency opioids like fentanyl.

Another step is to allow doctors to prescribe their patients the quantity and strength of opioids they see fit. Because opioids have legitimate medical uses (mainly pain relief), restricting doctors’ prescription abilities only leads those with chronic pain to search in the black market for pain relief drugs, where, yet again, more potent opioids and possibly laced drugs exist.

The most drastic step would be full-scale legalization. Legalization would virtually destroy the underground market for opioids. Additionally, there would be fewer high-potency opioids overall, as suppliers would not be induced to artificially supply high-potency opioids.

The results of opioid prohibition and regulation demonstrate the consistency of the law of unintended consequences. Despite its stated noble intentions, the war on drugs has resulted in thousands of deaths and untold suffering for the loved ones of the deceased. Although it sounds counterintuitive, liberalizing the opioid market would save countless American lives. If human flourishing is a priority for Americans and policymakers, as it should be, economic reasoning must be taken seriously.

Samuel D. Peterson

Samuel D. Peterson is a student at Grove City College majoring in economics. Samuel is a 2023 Summer Research Intern with the Competitive Enterprise Institute, a Don Lavoie Fellow with the Mercatus Center, and a Mises Institute Apprentice. Samuel plans to attend graduate school. His research interests lie at the intersection of Austrian Economics, Public Choice, economic history, private governance, and the economics of culture.