The War on Drugs is Counterproductive, Once Again

A two-sector general equilibrium model that included drugs as basic goods was relativelysuccessful at explaining the waste of resources that the war on drugs incurs (Ortiz, 2003). Due to theassumption of constant productivity, the model predicted the rise of the drug price with supplyrepression. Yet Plan Colombia, an unparalleled effort to eradicate drug production in Colombia,had no significant effect on drug prices. In order to correct the model two sources of productivityimprovement in the drugs sector are examined. The modified model helps to understand why drugprices have remained stable, why global supply and demand have not diminished, and why cocaplantations were spread throughout the nation under Plan Colombia.