quinta-feira, 3 de outubro de 2013

On Drugs

I dont know this Sérgio Sousa, but he is my friends' friend, so I will try to be polite. He says criminalization led to better quality drugs due to more organized supply (see his post here). And lower prices!
Jesus, man! IT HAS TO BE THE CONTRARY.

EVERY THING ELSE CONSTANT, Criminalization increases prices because it ADVERSELY affects supply (since non-criminals won't supply) and increases prices further still because you have to compensate the entrepreneur for the high risk incurred. Sérgio talks about high profits  in illegal markets. MAN YOU HAVE TO CONTROL FOR RISK.

And Sérgio does not mention the most important thing: NEGATIVE EXTERNALITIES. Criminalization generates violence, which spills over. Why beer producers wear suits and cocaine producers carry weapons? Because of stupid criminalization! In the 20s, in USA, beer producers carried guns too.

How to account for the lower prices then? A much more plausible explanation is that law enforcement turned laxer, increasing supply.

14 comentários:

  1. Hey X,

    Three things:

    (1) Criminalization does increase price (where did I say otherwise?). But it also increases risk premium and economic profits (a pound - not a kilo, a pound - of cocaine for instance was over $200k ten years ago!), which attracts more players into this market, however counterintuitive this may sound.

    (2) I do mention negative externalities. It is the whole justification for considering decriminalization.

    (3) Enforcement got stricter, not laxer. Dude, read the paper and the post before commenting next time please.

    Peace out!

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    Respostas
    1. Give him a break, Sergio. His portuguese is horrible.

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  2. Nothing paticular against u, i just dont like fea faculty, they are arrogant

    Oh, oh, than you think decriminalizing will DECREASE supply? The reverse of what you say must be true, boy, otherwise what you say must be wrong. And, surprise surprise, the REVERSE IS OBVIOUSLY FALSE !!!! Oh,boy, u must be really out of your senses if u think liberalizing would decrease supply

    And how can u be sure profits controlling for risk increased man?? How can you?

    What happens in these mkts is that more enforcement has a selection effect: the endogenous criminal becomes a tougher one.

    YOU DIDNT MENTION THE EXTERNALITY I AM CONCERNED WITH: DRUG BOSSES TRAIN PEOPLE TO OPERATE GUNS, ESCAPE POLICY, KILL, ETC. AND WHAT DO U THINK THESE PEOPLE DO WHEN THE BOSS FIRES HIM? AH? AND WHAT DO U THINK THESE PEOPLE DO WHEN THEY ARE NOT WORKING? THEY COMMIT OTHER CRIMES, BOY.

    JESUS, DO I HAVE TO TEACH EVERYTHING TO EVERYONE? WHY DONT PEOPLE STUDY MORE BEFORE MESSING WITH X?

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    Respostas
    1. You clearly have some static model in your mind. Throw it out and think dinamically. Now:

      1. Decriminalizing will increase supply; dunno why you insist on this.

      2. Indeed I am not sure whether profits increased. It is the apparent increase in supply and product purity that suggests so.

      3. It was not a post about all the drug-related externalities. So I am afraid you won't find a comprehensive list of them on my post. So I am glad you are taking your time to list them here. Because, as I said, the more they are (and you mentioned a very important one), the more justifiable is to bring this market into legality and regulate it just like any other market selling potentially addictive products.

      To teach everyone? What are you on about sweetheart? Why don't you just chill eh? :-P

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  3. X,

    What if the marginal drug dealer is less risk averse?

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    Respostas
    1. Then this would probably help accounting for why strict enforcement did not crush supply.

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  4. PAY ATTENTION: THE COMPARATIVE STATIC SEGIO IS DOING IS A TOUGHER ENFORCEMENT, HIPER SUPER TRADE JME FAG!

    THIS HAS TO DRIVE AWAY THE SOFT DRUG DEALERS AND ATTRACK THE TOUGHEST

    ANOTHER TYPE OF ALLURING ATTRACTION INTO THE BUSINESS MAY GENERATE MARGINAL FAGS LIKE YOURSELF, BUT NOT THE COMPARATIVE STATIC BEING DISCUSSED HERE

    X

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  5. Man, i am tired...
    sergio says supply increased with criminalization. this is wrong. supply cant increase after an increase in costs. this should be obvious. if it increased, it was either because of some other factor, or as many people think, because DE FACTO (even if not DE JURE) law enforcement became laxer.
    sergio must be two persons: one sergio argues criminalization INCREASES supply (which is odd); the other one accepts that DEcriminalization would INCREASE supply (which is correct).
    it is an interesting case of double personality

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    Respostas
    1. Let me clear things up cuz you arguing about nothing (maybe bcuz you are confusing shifts in the supply curve and shifts in the "equilibrium" quantities supplied in the market).

      1. The point I do make on the post is that criminalization contributed to increasing drug "quality", as measured by its purity. I say nothing about criminalization shifting supply up or down. It has been an ilegal market since ever.

      2. But yes: everyting else cosntant, stricter drug policies are very much likely to shift supply curve up. If demand is not complete inelastic, that should decrease quantity and put prices up. You are obviously right on the money here.

      3. Having said that, the paper I comment suggests that supply curve shifted down over the last 10/15 years. So some other factor must have happened to more than offset authorities' attempt to crack down on the drug market. I am not sure what would that be. Probably some innovation in production/smugling technology.

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  6. http://www.youtube.com/watch?v=vcPVa3Fd52w

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  7. Lower prices and high quality! Good target for a policy maker.
    D2

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