Opium or Cannabis? Historical Records Suggest People Prefer Whichever Is Cheaper

Economists have long been interested in underground drug economies, but studying them in any rigorous sense has always been difficult due to the lack of large data sets. There are a number of reasons for this dearth of data, the most obvious being that when you're dealing illicit goods, you're less likely to want to talk about your business (at least, if you're smart).

While sealed lips might be good for business and staying out of the big house, understanding the economics of drug use is a crucial component to designing effective legislation for the regulation of controlled substances and helping those who need treatment, which is all but impossible without reliable consumer data.

In an effort to combat the ill-advised drug policies that have shaped America since Nixon declared a war on drugs in 1971, Siddharth Chandra, an economist and the director of the Asian Studies Center at Michigan State University, cracked open the history books to study the economics of drug use in the days when substances that are now considered Schedule I narcotics were not only legal, but openly peddled by federal governments.

Chandra examined the use of cannabis and opium in the turn of the century British Raj in the first study of its kind to use historical data that is considered reliable, according to Chandra.

"One hundred years ago, these products were legal," said Chandra in a statement. "In British India the government was actually selling these things to the public, and they kept meticulous records."

Using 100-year-old Excise Administration Reports, detailed financial ledgers kept by the British authority in the Punjab province, Chandra found a surprising correlation between the prices of cannabis and opium and patterns of drug use in the provinces.

Specifically, he discovered that when the price of opium would go up, users would switch to cannabis. Perhaps more surprisingly, the opposite was also true: when the price of cannabis would go up, users would switch to opium, despite the wildly different effects of each substance on the human body. In economic terms, this phenomenon is called substitution.

"The time, place, and context are different, but the phenomenon is there," said Chandra. "You might think consumers would treat them differently, but just because the two drugs used are very different doesn't mean people won't switch."

Then again, perhaps Indians and the British viceroys were just getting some really potent buds in 1900. As Chandra noted in his study, despite the trend in substituting cannabis and opium, consumers still wouldn't substitute opium for bhang (cannabis in its weakest form). The substitution effect was only noted between opium and charas, or hashish.

This substitution may also be the result of the fact that in the British Raj, both opium and cannabis were a part of the traditional Indian medical pharmacopoeia, although according to Chandra, these substances were being used mostly for non-medical purposes.

"There are many policy implications for these results," Chandra said. He cited the ongoing heroin epidemic in the United States as a particularly potent example of a crisis that can be fueled by easy access to relatively cheap substances.

"Many people know someone who has been affected by heroin," he said. "But prohibiting harmful drugs selectively can be ineffective. Consumers may switch… [and] targeting a particular drug with policies and enforcements may backfire."