I'll tell you what I'd do if it were up to me: I would establish a strictly controlled distribution network through which I would make most drugs, excluding the most dangerous ones like crack, legally available. Initially I would keep the prices low enough to destroy the drug trade. Once that objective was attained I would keep raising the prices, very much like the excise duty on cigarettes, but I would make an exception for registered addicts in order to discourage crime. I would use a portion of the income for prevention and treatment. And I would foster social opprobrium of drug use.
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