Wednesday, April 13, 2011

L.A. Crack Dealer on The Economics of Drugs

"Lots of economists write about the economics of illegal drugs. Here's a paper from a Harvard guy. Here's another co-authored by a couple Chicago guys. One thing missing from those papers: Actual drug dealers.

So for this podcast on NPR Planet Money, we run some economic theory by Freeway Rick Ross (pictured), who was one of the biggest crack dealers in LA in the '80s and '90s. He went to prison in '96, and was released on parole in '09."

14 Comments:

At 4/13/2011 5:15 PM, Blogger Peter said...

"Cocaine Cowboys" is a good documentary that shows this same phenomenon.

 
At 4/13/2011 7:17 PM, Blogger Benjamin said...

Well, it may be a bit sordid, but selling drugs and prostitution, along with jitneys and sidewalk pushcarts, are business with very low barriers to entry, in terms of capital.

All of these activities are illegal--it is as if we want people to not be entrepreneurs.

All of these activities should be legalized by an amendment to the Constitution. We should be about free enterprise, not only for well-capitalized people.

In America, everyone believes in free enterprise until they don't.

 
At 4/13/2011 8:51 PM, Blogger Jim said...

There was one economist in this podcast who I know will be ignored. He was the one that estimated that there would be 5 million more cocaine addicts if cocaine were legal. People forget this other side of the "demand" curve (rememmber econ 101 - lower price, increased demand??). Who's going to take care of these addicts when they get sick and die? Since when is the idea of a free society mean legalized purveying of poison? Should I be allowed to sell cyanide laced candy to your children?

 
At 4/13/2011 9:16 PM, Blogger Peter said...

@Jim...If you legalized it you would have more opportunity to find cures for addicts since currently the drugs can't be studied since they are illegal. Portugal decriminalized drug laws and they saw the same and even a decrease in the drug use. Also STD and deaths related to drug use decreased. I would say if you legalized it you would have even more benefits.

 
At 4/13/2011 10:18 PM, Blogger Amateur Economist said...

Hey Mark,

I really enjoyed listening to this. I felt like the world in which Freeway Rick Ross lived was somewhat anarcho-capitalist. For example he hired protection services (as discussed in Machinery of Freedom) so that he could walk around South Central without being kidnapped or killed. He relied on private lawyers and other market methods for punishing people that cheated him. When Rick Ross says he felt free and powerful, I feel part of this is because he was living in a very market oriented world, not relying on the police for protection, but rather a spontaneously created black market.

 
At 4/14/2011 2:41 AM, Blogger Ron H. said...

Jim

"People forget this other side of the "demand" curve (rememmber econ 101 - lower price, increased demand??)."

You have this backwards. Demand drives the equation. In the case of cocaine, prices are driven sky high by an artificial supply constraint, while demand remains high. Do you seriously believe there are 5 million people who would just love to use cocaine on a regular basis, but don't because the price is too high?

In my opinion, almost everyone who wants to use cocaine, or any other illegal substance, for that matter, is already doing so. Legalization would cause prices to plummet, and destroy criminal enterprises that only exist now because of the current high demand for drugs.

"Who's going to take care of these addicts when they get sick and die?"

Well, no one if they have died. Why are you worried about sick addicts? They shouldn't be your responsibility unless they are family, or friends and you accept that responsibility.

"Since when is the idea of a free society mean legalized purveying of poison? Should I be allowed to sell cyanide laced candy to your children?"

That"s not really the right question. I doubt there's much demand for cyanide laced candy. Do you believe that people don't currently sell poisonous candy to children because it's illegal? I suspect it's not considered a good business opportunity due to low profit margins, low demand, few repeat customers, and the very real risk of being killed in some unpleasant way by enraged parents.

 
At 4/14/2011 5:55 AM, Blogger geoih said...

Quote from Jim: "Since when is the idea of a free society mean legalized purveying of poison?"

"Poison" is in the eye of the beholder. All pharaceuticals are poisons. So are pesticides. Some foods are poisons, depending on the quantity and species. Even water is a poison, if you have too much of it.

 
At 4/14/2011 8:02 AM, Blogger Jim said...

Let's get the facts straight. Portugal did decriminalize drug use by replacing forced prison with forced treatment. Trafficking is still illegal as is use. Forced treatment in lieu of just prison is a good idea and that has reduced deaths from overdoses. But in this case, one form of prison is replaced with another kind - forced treatment. The Netherlands has effectively legalized drug use and this experience has been such a failure that the Dutch are reconsidering their drug laws. As for decreasing demand by decreasing price and increasing distribution channels, nothing could be more wrong. I don't know of any businessman or economist who will actually say that increasing supply and reducing prices will reduce demand. If drug usage increases, sickness and death will also increase which will increase total costs to all. Besides, legalizing drugs will open up suppliers to lawsuits when they are sued by the families of victims. If one of your loved ones succumbed to one of these "poisons" you will be quick to sue the free market purveyors of these harmful substances.

 
At 4/14/2011 12:35 PM, Blogger Benjamin said...

Why doesn't the Tea Party militate for national legalization of jitneys, sidewalk push-carts, prostitution, and drug dealing?

Why does the caterwauling and posturing about "freedom" always stop at enterprises that many Americans could actually do?

Is the right-wing mau-mauing only for the rich?

Yes.

 
At 4/14/2011 1:28 PM, Blogger Paul said...

"Is the right-wing mau-mauing only for the rich?

Yes."

Go back to your boyfriend and his apparatchiks, Benji. You're more at home with those cretins.

 
At 4/14/2011 3:23 PM, Blogger Che is dead said...

"Why doesn't the Tea Party militate for national legalization of ... prostitution, and drug dealing?"

It must be a great imposition to have the things that you and your family find themselves most adept at - prostitution and drug dealing - declared illegal. I'm curious, why haven't you ever written a post complaining about the fact that the Democrats have never "militated" for the legalization of your family businesses either?

 
At 4/14/2011 7:15 PM, Blogger Paul said...

Heh, Che.

To be fair, Benji's mother got out of the business years ago.

 
At 4/14/2011 7:43 PM, OpenID Sprewell said...

Jim, are you a drug dealer? Because you certainly argue like one. ;) You exhibit the faux paternalism of worrying about what happens to all the drug addicts, then argue that legal drug suppliers will have too many lawsuits?! What does this mean, it's better if it's illegal, so that drug dealers don't have to deal with... the lawsuits? :D Yes, drug use may go up if we legalize it, but you never address the larger benefit of crime going down. Do you propose also criminalizing alcohol and tobacco, for all the "sickness and death" they cause today? We just want to treat adults like adults and reap all the benefits that come with that, though there will undoubtedly be some costs too, just smaller than the benefits.

Benjie, it is weird that you keep blaming the Republicans for stuff that the Democrats are far worse on.

 
At 4/15/2011 9:06 PM, Blogger Ron H. said...

Jim

"I don't know of any businessman or economist who will actually say that increasing supply and reducing prices will reduce demand.

No one is suggesting lower demand, only that demand is likely almost as high as it's going to get. To believe otherwise, you must believe that there are a large number of potential drug users whose only reason for not using now, is that the price is too high.

While legalization would certainly allow prices to drop, supply would only increase by the amount of demand.

"Besides, legalizing drugs will open up suppliers to lawsuits when they are sued by the families of victims. "

This is the silliest reason I've ever heard for not legalizing drugs. Do you really think drug dealers would be worse off being sued than being killed and imprisoned as they are now?

 

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