Under that logic nobody would be taking it now, it's not as if it's effects are currently a secret. You also get an issue of peer pressure in the young. Currently school kids often start smoking because it's seen as a cool thing to do. A similar issue would likely develop with other drugs. Placing an age cap on the products would only lead to the same black market that already exists for cigarettes.
Under your logic everyone would smoke tobacco since it is legal... wait, no. Being illegal isnt stopping people taking it, and being legal wouldnt make everyone take it, its only turning people into criminals. Look at prohibition, it didn't stop people drinking, it merely created a huge black market and turned quite a lot of formerly law abiding citizens into criminals, and when it ended the Mob lost a massive source of income, and I dont know about you, but I dont know of any Vodka dealers standing on street corners nowadays.
1) The number of people in jail issue. I don't think the people in jail are there because they've taken drugs. I would suspect that it is more related to selling those drugs. These people have demonstrated that they are willing to break the law to gain money. I suspect that if drugs where legal they would simply be breaking the law in another way in order to do the same. Equally, I would think you would still require police to capture them and courts to prosecute them just as you do now. How, would that save any money?
As far as I'm aware its all of the above, dealing drugs, making drugs, possession is a huge one.
Sure people deal drugs to make money, and there may very well be a bit of a black market even if it were legalized. But a big source of easy revenue for gangs would be cut off, maybe dropping other crimes as well.



These show the increase of people in jail since the "war on drugs", the percent purely in on drug charges, and the huge number of people in prison. And this is over a period where Violent crime in the US is
down.
3) Secondary effects. Who becomes responsible for the problems it causes. Such as the rise in DUI cases that would occur. Who is responsible for paying the health problems that result from the drug use. Presumably those in the states would soon find clauses in the heath insurance that would preclude treatment for any resultant issues. Equally, the NHS in the UK would have an interesting battle on it's hands to find the extra funding to treat people.
Well I strongly disagree legalizing it would cause more people to use. And I have never seen any stats to suggest otherwise. More people in NZ use Marijuana than they do in Holland where it is legal.
So as for cost:
We save money but not having otherwise innocent people in prison, this alone would be millions if not billions. Looking at the graphs I provided you would not only let out tens of thousands, but those people could very well go back into the work force providing even more revenue (avoiding the issue of unemployment at the moment)
We make money it taxing. Alcohol, the once illegal drug was legalized and taxed. There are no black markets for it of any worthwhile size, and it is a MASSIVE source of tax income.
Sure it would need some more policing to avoid DUI ect, but more police on the streets wouldn't exactly be a bad thing and would be easily covered alone by the reduction in the size of the prison system.
4) Taxation. One claim made is that taxation on these drugs would result in a huge in flow of cash for governments and presumably fund the issues raised above, at least in the realm of state funded health care. The issue with that is one of criminality. Presumably it would be illegal to sell the drugs without collecting and paying the tax. This would lead to the very same situation we have now, where there would be an illegal trade in tax free drugs. This exact thing has already happened here in the UK where tax on cigarettes is quite high. This has lead to an in flux of smuggled cheap imports from eastern Europe.
Again I give the example of prohibition and the then legalizing and taxing of alcohol.
I grant with drugs it may be a bit different, but if a user had a choice of getting a gram of Coke for $40 on the street or $50 in a pharmacy I'm sure the peace of mind of knowing he is A) getting clean drugs of proven quality and B) not breaking the law, would prove decent motivation. The illegal drug market would mostly collapse.
I also want to point out I am not picking on America, all countries have a problem but all the available stats are for the US. IN addition to their war on drugs provide a very obvious turning point in their criminal culture.