Iron Law of Prohibition

The iron law of prohibition is a term coined by Richard Cowan which states that "the more intense the law enforcement, the more potent the prohibited substance becomes." This law is an application of the Alchian–Allen effect. It is based on the premise that when drugs or alcohol are prohibited, they will be produced only in black markets in their most concentrated and powerful forms. If all alcohol beverages are prohibited, a bootlegger will be more profitable if he smuggles highly potent distilled liquors than if he smuggles the same volume of small beer. In addition, the black-market goods are more likely to be adulterated with unknown or dangerous substances. The government cannot regulate and inspect the production process, and harmed consumers have no recourse in law. Therefore the "iron law" says that the more you try to enforce prohibition (bigger budgets, larger penalties, etc.) the more potent and dangerous prohibited drugs become.

The law is based on the research of Mark Thornton an economist associated with the Ludwig von Mises Institute. He first showed that the potency of marijuana increased in response to higher enforcement budgets. He latter expanded this research in his dissertation to include other illegal drugs and alcohol during Prohibition (1920-1933). The basic approach is based on the Alchian and Allen Theorem. They argue that if you add any fixed cost (e.g. transportation fee) to the price of two varieties of the same product (e.g. high quality red apple and a low quality red apple) the more expensive variety will get exported more often. When applied to rum-running, drug smuggling, and blockade running the more potent products become the sole focus of the suppliers.