Comparison of the illegal price of cocaine to the legal pharmaceutical price reveals that the illegal price substantially exceeds the legal price. In 1981 the illegal price exceeded the legal price by a multiplicative factor of almost 50, in 1998 by a factor of nearly 2.5. Pharmaceutical prices are not likely to be valid as measures of the prices of recreational drugs in a hypothetical regime of regulated use, but the large pre-1990 markups are nonetheless suggestive. Moore (1990), citing similar figures, concludes “these data make it clear that prohibition and supply-reduction efforts can increase the price of psychoactive drugs well above levels that would obtain in a legal market.”⁸ Nadelmann (1991), Morgan (1991), and Kleiman (1992) draw similar conclusions. Miron (1999), focusing on data from the late 1990s, finds the evidence less persuasive.⁹

Price markups along the production and distribution process have also been used as suggestive evidence of the effects of enforcement. Reuter and Kleiman (1986: Table 1) displays interval price estimates at various stages of the process for a pure kilogram of heroin, cocaine, and marijuana. Many of the intervals are wide, reflecting the limitations of existing data. Nevertheless, two general conclusions may be drawn. First, the markups from the farm to retail distribution are substantial. The retail price may be 100 times the farmgate price for cocaine and marijuana and perhaps 1,000 times for heroin. Second, a substantial portion of the final price is added in the final stages of distribution. For heroin and cocaine, prices increase between 7 and 13 times in the transition from import to retail; for marijuana, prices increase 2 to 6 times.¹⁰