A stupid quote

[zunger]

From the Washington Post today:
Authorities and people familiar with the drug trade say violence in Mexico and increased enforcement -- symbolized by the Flores case -- are having a dramatic effect on Chicago street sales, at least for now. The wholesale price for a kilo of cocaine -- about 2.2 pounds -- has spiked over the past 18 months, from $18

Comments

[covenantscave]

Wouldn't you need to know the volume of sales to know if the overall profits are up?

I think the implication is that the price went up due to decreased supply - the standard supply/demand curve interpretation.

The per-unit profit is higher, which probably would attract more dealers & such, but I don't know that translates to overall profit increases for the drug lords.

Not that it matters... most people don't know boo anyways:

http://redtape.msnbc.com/2009/12/when-i-published-gotcha-capitalism-two-years-ago-i-was-in-for-a-big-surprise-as-i-talked-about-systemic-hidden-fee-fraud-al.html

[pope_guilty]

I imagine that the people selling aren't the ones who had their stuff confiscated. Sure, it sucks for the people who got busted, but if it was someone else's suppliers, now you not only have more demand, you have fewer competitors.

[zunger]

I would analyze as follows. There are two different things which enforcement is doing -- reducing supply (by confiscating and burning it), and increasing operating costs for producers. (By adding non-financial risks such as arrest and/or shooting of the people on the ground) The former is likely to be a very small effect; I doubt that total drug seizures are going to be a double-digit percent of all the drugs on the street. At first order, at least, we can ignore it

[xthread]

I doubt that total drug seizures are going to be a double-digit percent of all the drugs on the street.

And if they were having that impact, that is so significant a result that it would be one of the talking points. It's not, ergo, they're not.

[covenantscave]

I don't think they (or anyone else) has any clue WRT the quantity of drugs on the street.

Messing around with supply via law enforcement is by all accounts largely a waste of time and resources, but it's politically easy. All serious, credible reviews I've ever seen have all pointed to fundamentals (education, employment, and frankly, therapy) as the real solution. But that's work, takes time, and isn't glamorous

So, you attack the supply curve and point out that you are moving the needle there by talking about how much more expensive it is.

As an aside, Freakanomics has a really good analysis of gang finances due to an unusual capture of the books of a gang. Interesting reading.