Tabarrok and Cowen on the Economics of the Drug War

This is from their Modern Principles: Microeconomics text. Ellipses for omitted text, most of which is a description of a supply and demand chart.

Why the War on Drugs Is Hard To Win 

It's hard to defeat an enemy that grows stronger the more you strike against him or her. The war on drugs is like that. We illustrate with a simple model.
The U.S. government spends over $33 billion a year arresting over 1.5 million people and deterring the supply of illegal drugs with police, prisons, and border patrols. This in turn increases the cost of smuggling and dealing drugs.
(Description of a chart accompanying the discussion follows)
The most important assumption...is that the demand curve is inelastic. It's hard to get good data on how the quantity of drugs demanded varies with price, but most studies suggest that the demand for illegal drugs is quite inelastic, approximately 0.5. Inelastic demand is also plausible from what we know intuitively about how much people are willing to pay for drugs even when the price rises. Economists have much better data for the elasticity of demand for cigarettes, which one can think of as the elasticity of demand for the drug nicotine and it too is about 0.5.
What happens to seller revenues when the demand curve is inelastic and the price rises?... When the demand curve is inelastic, an increase in price increases the seller revenues....Prohibition increases the cost of selling drugs, which raise the price, but at a higher price, revenues from drug selling are greater even if the quantity sold is somewhat smaller.
The more effective prohibition is at raising costs, the greater are drug industry revenues. So, more effective prohibition means that drug sellers have more money to buy guns, pay bribes, fund the dealers, and even research and develop new technologies in drug delivery (like crack cocaine). It's hard to beat an enemy that gets stronger the mroe times you strike against him or her.

Then follows a paragraph discussing the use of a tax to deter drug use, as opposed to outright drug prohibition. They reference a paper by Gary Becker (and Kevin Murphy and Paul Grossman) titled The Economic Theory of Illegal Goods: The Case of Drugs. I did a write-up of this excellent paper a couple of years ago. The conclusion: even if we decide it's a good idea to deter drugs (which is a dubious goal), it's better to do so with a tax than an outright ban.

This discussion in the Modern Principles text nails the economic case against drug prohibition. So I don't understand how Cowen can be such a teetotaler. Maybe Tabarrok wrote that part of the textbook, and Cowen doesn't really know the standard economic analysis of drug prohibition? Or maybe Cowen does understand the standard economic treatment in the Becker paper, but perhaps he thinks that something's missing from this analysis? (But has never, to my knowledge, explained what is missing.) Since I wrote that blog post, Cowen posted this piece with excepts from a New York Times piece. Tyler adds his own commentary, saying "I increasingly believe that decriminalization will prove a more stable solution than outright legalization." Nothing in Cowen's post or the original NYT piece supports this belief, so I guess he's just sharing his stray thoughts with us. "Decriminalization" means no penalties for users but prohibition on the supply side. But the economics of illegal goods implies that the black market grows stronger (in the "greater revenues" sense) the more you crack down on it. So I don't get it. Decriminalization keeps the high revenues for black markets intact (with all the associated black-market violence and corruption) while not discouraging the demand side (except through higher prices driven by interdiction, which price-inelastic users willingly pay). To be fair, Cowen never outright defends drug prohibition, but he's always lukewarm on the benefits of legalization and (in my reading of him) exaggerates the harms of drug use.

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In a recent assorted links post, Tyler links to Scott Alexander's post on marijuana prohibition, in which Scott references some (in my opinion, poorly done) recent studies claiming that traffic accidents rise after states legalize marijuana. (I remember reading Scott's post and thinking, "Tyler is going to post a link to this, because this drug war meta-contrarianism stuff is like catnip for him." I even e-mailed a couple of people at Cato saying that this nonsense is going to make the rounds in the news cycle again, so we might want to get ahead of it.)  My reservations about these kinds of studies are outlined here. Not to fault Scott or Tyler for referencing respectable-looking, superficially convincing research on this question. What else are they supposed to do? But there is contrary research showing the opposite conclusion. I worry that it's becoming easy to claim "studies show legalization increases traffic accidents" when in fact that's still an open question (and in my reading of the evidence to date, probably not true). Scott is careful to hedge his conclusions in conditional terms and say why the studies he cites might not be right, but the thrust of his post is about how his previous cost-benefit assessment of marijuana legalization was wrong and that this new evidence might flip the conclusion. Be careful, guys! You both have enormous influence on elite opinion.