I've posted extensively about this subject before. (Look here and here.) Here are a few thoughts:
Prohibition did reduce alcohol use. This point isn't to defend alcohol prohibition, rather to suggest that legalization of drugs will result in increased drug use.
Why is alcohol policy pointed to as a model. Doe we really want the ubiquitous marketing and consumption of alcohol to be replicated with drugs?
He offers a false choice between the status quo of insane incarceration rates and legalization. There's a lot of room in between.
All drug policies will bring problems, the question is, which problems are we willing to live with and how can we minimize them?
Developing a dependence on tax revenue from the sale of drugs strikes me as a pretty bad idea.
I'd like to end use of the phrase "war on drugs" (WOD), but the failure of the current tactics in the WOD to end drug use isn't really a good argument for ending the WOD. It's an argument for revisiting the tactics and goals, but it does not mean that the goals should be abandoned. For example, of we have a war on organized crime and organized crime persists, does it mean that the goal of minimizing or eliminating organized crime should be abandoned?