Interesting libertarian argument against the US War on Drugs. Similar effects in Brazil, of course.
Here's an interesting question though. Why has no country in the world simply declared narcotics like heroin and cocaine to be legal, and encouraged a legitimate market to form there? Surely it would be highly lucrative (you would tax all deals, naturally). And although initially it would attract an awful lot of members of criminal gangs, over time, more legitimate companies would get involved. Drug distribution would need to spend less on hiring hard-men to do the dirty work of gang-warfare, and more on advertising and PR for competition within the legitimate market.
Beyond this, an enlightened government could medicalize the problems of addiction. Encourage specialist training for research and treatment, run expensive rehabilitation clinics for US and European tourists etc.
So why doesn't anyone do it? Is this too hot to handle? Are there ferocious international / UN treaties that would get you invaded immedietely by the US? Or does illegality (and huge profits) suit the criminals, who discretely support it?