The problem of distorted incentives, especially when it comes to funding and drug criminalization, goes back to the Treasure Department in the early 1900s. Because the Harrison Act required federal taxes on narcotics, the Treasure Department had a Federal Bureau of Narcotics to enforce it. The enforcement was strict and harsh, and it is believed that the bureaucrats played a role in getting the Marijuana Tax Act passed in 1937. The Bureau was facing a strict competition for funding, as both Congress and the public wanted enforcement of narcotics laws to be handled by the FBI.

A History of Distorted Incentives

The Bureau of Narcotics was responsible for gross misrepresentation of the effects of consuming marijuana back in the 1930s, as they were trying to get the Marijuana Tax Act (1937) passed. Marijuana was alleged to cause insanity and criminal behavior, including rate and other violent crimes. 

Historic Misinformation Spread by Law enforcement

When bureaucrats realized that police were using the Comprehensive Crime Act to circumvent local forfeiture laws, they proposed the Anti-Drug Abuse Act f 1988. Section 6077 repealed the ability to use federal laws over local laws in forfeitures.

Attempts to Overthrow the Comprehensive Crime Act

We can see the effects of the warped incentives by looking at the fact that states which allowed police to keep as much of the seized property as they wanted (as opposed to using federal laws that required giving federal agencies at least 20%) had significantly more drug arrests. These laws raise the ratio of drug arrests to total arrests by between 35 to 50%. Furthermore, as the drug war began to wind down, juvenile arrest rates fell

Changes in Arrest Rates from Distorted Incentives

If we assume that public officials, like the police, will act like a regular person and attempt to maximize their utility, then allowing local law enforcement ot profit from strict enforcement of drug policies means that the Comprehensive Crime Act incentivized the police to increase their efforts against drugs.

University of Oklahoma

A section within this law allowed local law enforcement to take a large share (80%) of property or money confiscated in a drug investigation, despite local or state laws that stated otherwise. This allowed law enforcement in places like North Carolina, which required that the proceeds from confiscations fund education, the local law enforcement could circumvent this and keep the profits for themselves.

The Comprehensive Crime Act of 1984

Benson, Bruce & RASMUSSEN, DAVID. (1996). Predatory Public Finance and the Origins of the War on Drugs. The Independent Review. I. 

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