Freakonomics draws attention to a study of the Portuguese decision in 2001 to decriminalize drugs (full paper here), which finds that it has reduced drug use, HIV infection rate from addicts sharing dirty needles, increased the number of people seeking drug treatment, and helped re-assimilate problem drug users into society.
Under this legal dispensation, drug possession for personal use and drug usage itself are still legally prohibited, but violations of those prohibitions are deemed to be exclusively administrative violations and are removed completely from the criminal realm. People caught with small quantities of drugs were no longer sent to prison, but were sent to rehab centers.
Update 1
Freakonomics debates decriminalization of marijuana here.
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