What the government knows (legalization with education and rehab being better than current methods) and what it does is normal. The government consists of hundreds of thousands of employees (military, civilian and contractor) plus a small handful of politicians who decide the rules.

Being politicians, it doesn't matter so much what they know as what their constituents want (or believe they want). Which leads to the government being a screwed up, multi-headed entity with many competing and opposing objectives and directives.