The strongest reaction of the criminal justice system has been toward heroin, with a total prohibition on heroin importation, manufacture, distribution, possession, and use. Before attempting to evaluate the extent and costs of heroin use today, this paper reviews the evolution of laws and social attitudes toward heroin in Australia. Using an economic framework for analyzing the black market in heroin, the paper examines proposals for enforcing the prohibition by tightening the supply side, and by reducing the demand for heroin. It argues that attempts to restrict the supply have had the effect of increasing the costs borne not only by the users but by society at large, through increases in acquisitive crime and police corruption. On utilitarian grounds it concludes that the costs to society of the prohibition far outweigh the costs of a policy of freer availability, and suggests that a policy of government supply of price-controlled heroin and methadone would be far preferable to today's failed policy of prohibition. 2 tables, 74 references. (Author abstract)