Executive Summary 3 2-In 1993, Americans spent $49 billion on these
drugs: $31 billion on cocaine, $7 billion on heroin, $9 billion on marijuana,
and $2 billion on other illegal drugs and legal drugs used illicitly. 4-Between
1988 and 1993, the amount spent on marijuana has remained constant. 9-Money
is not the only form of payment for illicit drugs. Dealers often keep drugs
for personal use, users help dealers in exchange for drugs, and users perform
sex for drugs (especially crack cocaine). When such "income in kind"
is valued at current retail prices, an additional $3 billion to $5 billion
must be added to the total for cocaine and an additional $2 billion to
$3 billion to the total for heroin. In this report, all expenditures are
in 1994 dollar equivalents. These expenditure estimates do not include
income in kind.

4 1-It should be noted that the range for cocaine expenditures derived
from the supply model is larger than the consumption-based expenditure
estimates. There are two reasons for this. First, the supply model does
not take into account most losses and consumption within the producer countries
or State and local seizures in this country. Second, the United States
may transship more drugs to Europe than our model assumes. Had we been
able to account for these factors, the $33 billion to $90 billion supply-based
estimate would have been lower. Still, the estimates based on drug consumption
are remarkably close to those based on drug supply. *Consider this statement
as a disclaimer.* 2-Although the estimates provided in this paper are somewhat
imprecise, they are sufficiently reliable to conclude that, according to
consumption-based estimates, the trade in illicit substances ranged from
$49 billion to $66 billion between 1988 and 1993. However, the costs to
society from drug consumption far exceed this amount. Drug use fosters
crime; facilitates the spread of catastrophic health problems, such as
hepatitis, endocarditis, and AIDS; and disrupts personal, familial, and
legitimate economic relationships. The public bears much of the burden
of these indirect costs because it finances the criminal justice response
to drug-related crime, a public drug-treatment system, and anti-drug prevention
programs. *Cannabis does none of these things. The government manufactures
the problem.* 3-The importance of these estimates is not that they provide
an accurate accounting of the retail sales from illicit drugs and from
legal drugs used illegally. The estimates have an appreciable margin of
error, and it seems unnecessary to have a study that says that the illicit
drug trade is immense. Public officials already know that. *Consider this
as another disclaimer.* 5-Perhaps it has, but other indicators suggest
otherwise. According to the National Household Survey on Drug Abuse (NHSDA),
the number of people who use cocaine on a weekly basis fell from 884,000
in 1988 to 642,000 in 1993. Best estimates based on the Drug Use Forecasting
(DUF) data suggest that there were about 2.1 million hardcore cocaine users
in 1988 (another 200,000 were incarcerated) and about 1.9 million in 1993
(*another 400,000 were incarcerated). In contrast to DAWN, these estimates
suggest that the number of hardcore cocaine users has remained fairly constant
over the last six years.

5 1-Indeed, cocaine prices have fallen from roughly $290 per pure gram
in 1988 to $240 per pure gram in 1993. This decrease might be attributed
to the small decrease in the number of hardcore users and to a large decrease
in the number of occasional users. (According to the National Household
Survey on Drug Abuse, the number of occasional users fell from about 7.3
million in 1988 to about 4.0 million in 1993.) Total U. S. Expenditures
on Illicit Drugs, 1988-1993 (Dollars are stated in billions)

Other Drugs....................$3.2..........$2.8.........$2.3..........$2.4........$2.2..........$1.8

Expenditures on Dangerous Legal Drugs

Tobacco $43.0 Alcohol $71.9

Should be noted that totals on Tobacco & Alcohol expenditures are
most difficult to obtain.

6 2-Bureau of International Narcotics Matters, International Narcotics
Control Strategy Report (Washington, D.C.: Department of State Publication,
April 1994 and previous years); Royal Canadian Mounted Police (RCMP), National
Drug Intelligence Estimate, 1994 (and previous years) and International
Narcotics Control Board, Narcotic Drugs Statistic for 1991 (and previous
years).

7 2-To estimate the retail sales value of illicit drugs consumed in
the United States, we examined both the demand for and the supply of drugs.
The demand or consumption approach estimates the number of drug users,
how much they spend on drugs, and the amount of drugs they consume. The
supply approach estimates the volume of drugs available for consumption.
To determine the amount of drugs available in this country and the retail
value of these drugs, we estimated the amount of base crop raised in producer
countries, and reduced it by the amounts lost, seized, or consumed in other
countries and by the amount seized in or shipped through the United States
to other countries. We then multiplied the result by retail prices. *Formula*
3-For a number of reasons, neither of these approaches yields precise estimates
of the yearly retail value of the illegal drug tread. First, the secretive
nature of drug crop production and manufacturing prevents accurate assessments
of drug production. Second, with some exceptions, drug dealers and their
customers transact business away from public view. Finally, drug users
often misrepresent their drug use when interviewed. Thus, estimates of
retail expenditures must be based on incomplete, inaccurate, and often
inconsistent data, as well as assumptions that occasionally lack strong
justification. *Disclaimer*

9 5-7) Evidence that a large segment of the drug-using population is
excluded from the NHSDA comes from a number of sources. According to the
1991 NHSDA, drug use is twice as high among respondents who lived in households
considered unstable than it is among those who lived in more stable environments,
indicating that the NHSDA's bias toward reporting on stable households
is like to miss many heavy drug users. Available evidence indicates that
NHSDA's numbers understate heavy drug use. A. Harrell, K. Kapsak, I. Cisin,
and P. Wirtz, "The Validity of Self-Reported Drug Use Data: The Accuracy
of Responses on Confidential Self-Administered Answer Sheets", paper
prepared for the National Institute on Drug Abuse, Contract Number 271-85-8305,
December 1986. *These people would lie!* 7-Additional evidence also comes
from interviews with nearly 35,000 intravenous drug users who were contacted
by National Institute on Drug Abuse-sponsored researchers as part of an
AIDS outreach project. Abt Associates' tabulations show that an estimated
40 percent of these drug users lived in unstable households and about 10
percent could be considered homeless. 8-Finally, a comparison of the demographic
characteristics of the heavy cocaine users in the NHSDA with those of heave
cocaine users based on other sources (the Drug Use Forecasting program,
the Drug Abuse Warning Network, and the National AIDS Demonstration Research
project) shows a marked difference in populations. Incomes are greater,
unemployment is lower, and there are fewer respondents using more than
one drug in the NHSDA population. D.Hunt and W. Rhodes, "Characteristics
of Heavy Cocaine Users Including Polydrug Use, Criminal Behavior, and Health
Ricks," paper prepared for Office of National Drug Control Policy
(ONDCP), December 14, 1992. *Acknowledges that some of these are just regular
folk.*

10 4-9) Hardcore users consume illicit drugs at least on a weekly basis
and exhibit behavioral problems stemming from their drug use. Hardcore
users cannot be identified precisely from available data. using DUF data,
a hardcore users is one who used illicit drugs on ten or more days per
month. Behavioral problems are implied by the fact that such users have
all been arrested at least once. *Bad laws!* 5-10) Because urinalysis will
detect cocaine and heroin use within two to three days of its consumption,
it is unlikely that urinalysis will fail to identify an individual who
uses cocaine on at least a weekly basis. 6-11)...A Bureau of Justice Statistics
study reports "In State correctional facilities, 3.6 percent of the
tests for cocaine, 1.3 percent for heroin, 2.0 percent for methamphetamine,
and 6.3 percent for marijuana found evidence of drug use. In Federal prisons,
0.4 percent of the tests for cocaine, 0.4 percent for heroin, and 0.1 percent
for methamphetamine, and 1.1 percent for marijuana were positive."

11 2-12)DUF data are used to produce estimates of the number of adult
heavy users who are at risk of arrest during a given year. However, some
hardcore drug users manage to avoid criminal justice involvement, perhaps
because their drug purchases are discreet and their consumption is private.

13 1-Hardcore cocaine users spent more than $220 a week on cocaine and
hardcore heroin users spent just over $250 a week on heroin in 1993.

16 3-At the opposite extreme, hardcore users who report their use in
the NHSDA appear to consume less than half as much cocaine as hardcore
users represented in the DUF data. Their expenditures might be considered
a low estimate of typical cocaine spending by hardcore users. Giving more
weight to be NHSDA expenditure figures would reduce the amount reported
in Table 3 by half. However, it is difficult to reconcile estimates that
are half as large with the amount of heroin and cocaine that enters the
country.

17 25)-Reuter and Kleiman estimated that the market for cocaine was
about $8 billion in 1982. Because of the accelerating use of cocaine from
that time until the mid 1980s and after accounting for inflation, it is
not surprising that their estimate is less than the figure reported here.
Their $8 billion estimate for heroin expenditures is more difficult to
reconcile with what is reported here for two reasons. First, the number
of heroin users has not fallen much over the last decade. Second, the price
of heroin has dropped dramatically. We would expect their estimates to
be greater than those reported here, but that is not the case. P. Reuter
and M. Kleiman, "Risks and Prices: An Economic Analysis of Drug Enforcement,"
in Crime and Justice: An Annual Review of Research, volume 7, ed. M. Tonry
and N. Morris (Chicago: University of Chicago Press, 1986), 194. Carlson,
who conducted a study of the underground economy for the Internal revenue
Service, reported that an estimated $11 billion was spent on cocaine in
1982. K. Carlson et al., "Unreported Taxable Income for Selected Illegal
Activities: Volume I: Consensual Crimes," paper prepared for the Internal
Revenue Service under contract number TIR-81.57, September 1984. In an
update of his study, Carlson estimated that cocaine expenditures increased
from $5.8 to $6.6 billion between 1988 and 1991. K. Carlson, "Unreported
Illegal Source Income 1983-1995," paper prepared for the Internal
Revenue Service under order number 89-11565, May 15, 1990. Since he relied
heavily on the NHSDA, and because his estimates are not adjusted for inflation,
it is not surprising that his estimate is much lower than the one reported
here. Carlson's estimate of heroin expenditures, based on the National
Narcotics Intelligence Consumers Committee estimates for 1982, was in keeping
with Reuter and Kleiman's $8 billion figure. His updated study, based on
NHSDA data, put that figure roughly $7 billion a year between 1988 and
1991. Thus, his estimates are consistent with those reported here.

20 1-More Americans use marijuana than either cocaine or heroin. During
1993, for example, about 9 million Americans used marijuana or hashish
at least once in the month before the survey. This number has decreased
23 percent since 1988, when it was almost 12 million. 2-We calculated an
individual's total number of joints used each month by multiplying the
number of days of marijuana use in the past month by the number of joints
used per occasion. For those without valid answers for these questions,
we imputed the total monthly use. The average number of marijuana joints
used in the past month has remained about the same (16.9 to 17.8 joints)
3-The average amount of marijuana used in the past month was calculated
from several questions in the survey. This number has changed little over
time - about 0.014 ounces per joint. 4-However, the average number and
weight of joints used by those who smoke marijuana cannot tell the entire
story about trends in marijuana use, because marijuana's THC content has
changed over time. Delta-9 tetrahydrocannabinol (THC) is marijuana's primary
psychoactive chemical. According to a study conducted at the University
of Mississippi the average THC content of sinsemilla was at a peak in 1990
and 1991. That average fell from 10.5 percent in 1991 to 8.6 percent in
1992, and to 6.0 percent in 1993. The THC content of commercial-grade marijuana
remained fairly constant at less that 4.0 percent from 1985 to 1992, but
jumped to about 5.4 percent in 1993. Because we do not know the mix of
sinsemilla and commercial-grade marijuana used by the typical user, we
cannot know, for certain, whether users are smoking more or less marijuana
as measured by THC content. 21-1-price is the final factor in calculating
the total value of marijuana consumption. Marijuana prices increased throughout
most of this period, but fell in 1993. These prices are for a one-third
ounce purchase. 2-The factors required to calculate total marijuana consumption
are shown in Table 6. In 1993, average users consumed 17.8 joints a month.
The average amount of marijuana used per joint equaled 0.0136 ounces. At
a retail price of $342 an ounce, these users spent an average of $83 each
month ($998 a year) on marijuana. This number, multiplied by the 9.0 million
monthly users, yields a consumption estimate of $9.0 billion. These estimates
of total spending are in line with estimates by others. 22 1-Nevertheless,
these estimates are probably low. Users are likely to under report socially
disapproved behaviors even when those behaviors are legal. They would seem
to have even more incentive to under report illegal behaviors. Some readers
might find it reasonable to inflate these estimates for marijuana consumption
by about one-third.

38 1-Marijuana It is difficult to develop an estimate of the size of
the U.S. retail market for marijuana from estimates of available supply.
First, the amount of marijuana that Americans cultivate for personal use
is impossible to estimate. Second, even though a large amount of the domestic
marijuana market is grown in the United States, countries in South and
Central America, the Caribbean, Asia, North Africa, and the Middle East
also supply cannabis to the domestic market. Unfortunately, the data needed
to develop better estimates are not available, and without the independent
ability to assess the reliability of the marijuana cultivation estimates,
we cannot develop a plausible supply-based estimate of the retail value
of the marijuana market in the United States.

A-14 5-The number of days that a respondent consumed each of four categories
of drugs were the independent variables. We collapsed drugs into four general
categories: COCAINE (powdered and crack), HEROIN (Black tar and other),
MARIJ (marijuana and hashish - combined in the DUF interview), and OTHER.
Cocaine, heroin, and marijuana were the only drugs consumed by a large
percentage of the arrestee population. OTHER comprised a large number of
infrequently consumed substances. Except for MARIJ, each variable comprised
at least two drugs.

*Pages A-31 to A-37 APPENDIX 4 Imputations for missing data on marijuana
use. Consists of formulas they invented to determine how much cannabis
is consumed in the United States, and what persons paid for it.