The Price Elasticity of Heroin

A new study has some interesting things to say about the demand curve of heroin users. Drawing data from volunteers who use the drug daily, researchers Juliette Roddy, Caren Steinmiller, and Mark Greenwald tested three parameters: an income shock; removing the financial support of family and friends; and multiplying the the risk of getting caught. They found that income reduction had some effect: as income decreases, those who purchase a lot of heroin scaled back more than those who bought a little. When government subsidies were removed, participants also attested that they would buy less. They also found that participants with cocaine in their urine were more efficient drug buyers – this subgroup lowered transaction costs by shaving both distance (making sure they lived close to a drug dealer) and time in their purchases. They found that the more frequent the user,  the most cost-effective they are about their heroin purchases, with those who also use cocaine being the most effective shoppers.

Kevin H

Are cocaine and heroin substitute goods?


No. They are simply treating a symptom instead of the root problem.

Substitutes are essentially drugs that remove one downside of drugs, that they are illegal if not prescribed. (pro's and con's aside) you could just legalize use and get the same effect cheaper.

Substitutes have the downside of letting an addict say.. "I'm not a Heroin addict".


This reply misses the point as only someone who has never used or been exposed to illegal drugs outside of a clinical artifice could.

Cocaine is not a substitute for heroin, not because it's not a drug that removes the illegality downside of heroin, but because it has effectively the opposite neurological effect on the user. The nature of cocaine use (short-term benefit, requires frequent repetition) probably accounts for the efficiency of its users.

That said, heroin users often use cocaine for the short term dopamine boost, but a true substitute would look more like oxycontin or morphine - another narcotic "downer" - rather than cocaine or methamphetamine ("uppers").

Reality Check

Some thoughts....

First, we all are subject to the limitations of our income. If you can't afford to buy all that we want, we must buy less. After all, the dealer is not going to give us the same amount for less money. So whether we want to or not, we must settle for less if our income is reduced (or find a way to increase our income with a second job--like theft).

Second, a recent study on heroin (actually posted on Freakonomics, I believe) pointed out that when heroin addicts were freely given heroin, it changed their outlook. Why? Because for the addict, every waking moment is either spent being high...or figuring out how to get the next fix. When addicts no longer had to spend their efforts on finding money to get high, getting to the right side of town, dodging the law, etc., they actually started thinking "sanely" again...about the future, about their situation, etc.

So it stands to reason that the people buying heroin, since they spend so much time THINKING about it, having to conserve their money, having to take all the little details into consideration, etc., are very likely going to plan and act in ways that are the most beneficial to them, providing the greatest efficiency, etc.

It is my belief that if we would de-criminalize all but the most nefarious drugs (e.g., drugs that make you aggressive or so forth), addicts would then be able to devote their time and efforts to being productive on the job, obtaining an education, etc. I can tell you from my time on pain killers (due to severe surgical complications) that though I never grew addicted, I was constantly concerned when my pills got low. I knew I was in for some hellish pain if I couldn't get ahold of the doctor, or my prescription wasn't called in in a timely manner. The addict, while perhaps not dealing with the physical pain I was, is equally concerned about getting more pills due to the "pain" (whatever sort it may be) that they deal with.

I was in my right mind when I was on these pain killers. I didn't drive because, though I'm sure I could have, I dared not risk it due to having a child. But I could have EASILY done my job at a major bank, played music, read a book, taught class, or what have you, even with three hydrocodone 10's inside me (before I learned how to take them properly, I was taking up to eight a day for pain--I stopped only because of the acetaminophen limits).

I never had a toke on a marijuana cigarette. For that matter, I've never had a drink. But after going through what I did, I have never understood why "feeling good" is a crime. Yet we spend BILLIONS trying to keep people from feeling good, turning them into criminals, sending them to the bad side of town, and funding the drug cartels and all their evil. What a shame.


Jon VP

Great comment. I had not considered this point before and I think it's a good one. However, while I believe you are right about the benefits of decriminalization to those currently addicted, wouldn't decriminalization lead to greater drug use among those not already addicted? Surely there are many people who would try heroin and become addicted if not for the fear of getting caught.


Actually countries that are more tolerant of of heroin use like Netherlands have much lower precenage of abuse then the USA. I thought Decrimalization would Increase addiction but that is not the case. Personaly I feel that MJ and Heroin should be legal but I am not sure about cocaine and Certain stimulants like Methamphitamine.


wow great study! I could never figure out why the law of diminishing return did not apply for drugs because I always presumed that the more addicted an user become the "more badly" he needs a hit and willing to pay anything for it but this study proves me wrong! Drugs are just like any commodity just like the enormous addictive effects!

Another point scored for the legazalition by the way.


[correction] "Drugs are just like any commodity despite the enormous addictive effects."

P.S You guys really need a Edit option in the comments


Don't you mean income elasticity?


I can't understand a neighbor that can afford crack, but not a lighter to light it with...

Charles S B Shaw

No they would be compliments if the used them together. Oxy contin and Heroin maybe substitute goods. Or possibly Opana or Methadone.. the one factor that generates sales is the fear of withdrawal. Cocaine would not off set that downside of heroin, while OC's and Methadone would.

I think it is interesting that they are more efficient when doing both Coke and Smack, then when they are only on smack..

ronish parajuli

IS demand for heroin is elastic or inelastic curve ?

Regina Bekina

To refer to the addict's daily rendezvous with a dealer as an endeavor to "get high" is indicative of a great misunderstanding of heroin addiction.