New Report Explores Relaxation, Reversal of Prohibitions of Illegal Goods, Services

Author Says New Efforts to Decriminalize, Legalize Should Undergo Impact Assessment

Decriminalization and legalization of illegal goods and services are at the center of many pressing policy controversies around the world. In a new report, a researcher explores the relaxation and reversal of prohibitions across a wide range of domains. The report calls for having any new prohibitions or legalizations undergo an impact assessment to ensure that well-intentioned bans or reversals of bans are considered thoroughly.

The report, by a researcher at Carnegie Mellon University, is published by the Manhattan Institute.

“Examining policy shifts across multiple issue areas helps dispel myths that would be easy to believe if the analysis were limited to just drugs or any other single area,” says Jonathan P. Caulkins, professor of operations research and public policy at Carnegie Mellon University’s Heinz College, who wrote the report. “This approach also uncovers interesting parallels and contrasts, such as similarities between prohibition and legalization of cannabis and of private fireworks.”

Governments prohibit many products and services beyond drugs and alcohol and at times, these prohibitions are eased or reversed. Some prohibitions (e.g., bans on drugs, gambling, commercial sex work, and counterfeit goods) engender large illegal markets. Others (e.g., bans on abortion) create markets for illegal transactions, but the illegal market is not the most important dimension, says Caulkins.

Caulkins defines the components of illegal markets, then explores a variety of issues, including the reasoning behind prohibitions and their costs; clarifications about distinctions among legalization, decriminalization, and other options for liberalization; popular misconceptions; and the range of markets that have been either prohibited or legalized.

Caulkins concludes that the merits of legalization depend on the particulars of the market in question and offers a constructive suggestion: Whenever a legislature considers imposing a new ban, there should be a dispassionate, market-savvy analysis of the likely effects of that ban. Modeled on environmental impact assessments, these proposed illegal market impact assessments might reduce the number and size of illegal markets that are created without sufficient planning for unintended consequences that could have been foreseen, Caulkins says.

“Just as the statutory requirement for environmental impact assessments drove improvements in the ability to do environmental impact analyses, a statutory requirement for illegal market impact assessments might drive advances in the science of illegal markets,” he notes.

The report was funded in part by the National Science Foundation.

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Summarized from a report of the Manhattan Institute, Legalization, Decriminalization, and Other Alternatives to Prohibitions That Create Illegal Markets, by Caulkins, JP (Carnegie Mellon University). Copyright 2025. All rights reserved.

About Carnegie Mellon University's Heinz College of Information Systems and Public Policy
The Heinz College of Information Systems and Public Policy is home to two internationally recognized schools: the School of Information Systems and Management and the School of Public Policy and Management. Heinz College leads at the intersection of people, policy, and technology, with expertise in analytics, artificial intelligence, arts & entertainment, cybersecurity, health care, and public policy. The college offers top-ranked undergraduate, graduate, and executive education certificates in these areas. Our programs are ranked #1 in Information Systems, #1 in Information and Technology Management, #8 in Public Policy Analysis, and #1 in Cybersecurity by U.S. News & World Report. For more information, visit www.heinz.cmu.edu.