@ossobuco,
I would suggest that they should be regulated by each state in much the way alcohol is regulated. We certainly don't need federal regulation.
I'm sure that for a time there would still be an illegal drug trade, particularly if legalization is left to each state, but it won't be anything close, in scale, to what it is now.
States will get as much tax revenue as they can from drug sales, but not so much that they will drive consumers to the black-market. The price differential would have to be really quite high for people to task a risk on breaking the law, product quality, and consorting with criminals in seedy locales.
In addition, imagine the money that will be spent on marketing the products. People are suckers for ad campaigns and the black market won't be able to compete on that front.
I suspect that some drugs will take much longer to legalize than others and some may resist legalization for decades to come.
Clearly, Pot is the first in line, but legalizing pot alone will not eliminate the negative impact of legal prohibition. There will still be a lot of money to be made on cocaine, heroin, meth, prescription pain-killers etc.
I think though that by legalizing some version of each drug, the market for the most extreme will reduce considerably. I don't think there will be many new users of Crack if less addictive drugs, including cocaine, were available for roughly the same price as illegal Crack.
I could be wrong, but I don't believe the alcohol industry depends upon the addictive quality of it's product the way the tobacco industry does.
If a pill were created tomorrow that eliminated the possibility of alcoholism, I don't think the alcohol industry would suffer all that much.
Its hard to imagine that entrepreneurs within the new industry of legal drugs wouldn't be ultra-sensitive to the addiction issue, and would avoid any opportunity to encourage their critics on that score. As a result, the Legal Drug industry might even spend a fair share of it enormous profits on developing some way to counter/avoid addiction.
Imagine how much more heroin could be legally sold if people weren't concerned about becoming addicted? Addiction naturally powers the illegal drug trade, but I just dont think it will be seen by the Legal Drug Trade as
economic fuel, and at all worth trying to exploit.
Remove physical addiction from drug use and the market explodes while much of the criticism is muted.