[05] Supply and Demand of Drugs by Anonymous

Catch-22

Bluelighter
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The black-market for drugs (microeconomic framework) is like any other market, and is governed by Supply and Demand. Unfortunately, the Demand for drugs is relatively inelastic (in the short-term) and an increase in prices will not necessarily lead to a significant decrease in the quantity of drugs demanded (bluntly put -- addicts will buy no matter what the price).

Some factors that affect the demand for drugs include time frame (i.e., New Year’s Eve), income levels and the availability of other substitute products (i.e., other dealers). The Supply for drugs is relatively elastic and an increase in price will usually cause a large increase in the quantity of drugs supplied. Some factors affecting supply include government restrictions, seasonal/weather conditions and the price/availability of pre-cursor products.

When it comes to the "War on Drugs", the government has two main policy options. Harm Reduction (through education and information) or heavy-handed restrictive policies such as sniffer dogs, customs control and tough sentencing. The most vital difference between the policies is that Harm Reduction is aimed at the 'Demand' side of the market and Restrictive policies target the 'Supply' side. Obviously most governments adopt a 'policy mix', but restriction is the main budgetary component aimed at reducing drug use. The budgeting that is directed towards Drug Education is almost always lacking and spent on fear driven propaganda or ignorant misinformation.

The restrictive policy is aimed at reducing the supply of drugs provided by dealers, importers and manufacturers. The police force is the policy 'instrument' in this case and they operate by arresting as many people as possible. They try to reduce supply in order to decrease the equilibrium quantity of drugs bought/sold. These policies require maximum spending and result in minimal rewards.

When the demand for drugs is inelastic, a decrease in supply will cause an increase in the market price for a drug, but only slightly reduce the quantity of drugs bought and sold. This type of policy can never make a real dent on supply and buyers will demand drugs, even at high prices.

Figure 1. Decrease in supply => increase in price and small decrease in drugs traded

But we all know what higher prices mean. More crime. You stupid policy setters have bitten yourselves on the ass. Your policies aimed at restricting 'crime', have now resulted in worse types of crime -- the type that impacts negatively on a third party. So by attempting to reduce crime by strict trafficking laws, increasing busts and more resources on the "War Against Drugs", the government effectively increases more serious crimes such as armed robbery and the like. Not to mention the shoddy drugs that are manufactured in highly regulated markets.

This is when the case for Harm Reduction must be presented. The policy instrument of proper information and education regarding drugs (when adopted by a government) is aimed at decreasing the demand for drugs, through education and moderation. This works to decrease the amount of drugs demanded and therefore traded in the market (the government's aim).

Unfortunately the government doesn’t like the idea of demand-side policies in the drug market, so sites like Bluelight.nu must pick up the slack. Hopefully one day we will be heard and our clearly 'more economic' policy will be implemented (if they really must interfere with the market forces).

Figure 2. When demand is relatively inelastic; decrease in demand => decrease in price and significant decrease in the equilibrium quantity of drugs traded

As you can see, successful education is clearly the better policy. Restrictive policies actually increase total crime rates, by increasing prices. The impact on the quantity of drugs bought/sold is insignificant and no lives are saved. The prison system only gets more strained. Education achieves the government’s aims successfully, when undertaken through non-propaganda resources such as the one I am typing on right now. By being a Bluelighter and endorsing harm reduction and moderation, you actually aid in drugs becoming cheaper.

The cheer-squad for drug prohibition believes that in the long-term the demand for drugs is elastic, as users have time to adjust and choose not to consume, or buy other substances. Young people are also deterred by the higher prices. The trade-off is higher short-term crime rates in exchange for the faint hope that eventually drugs will be too expensive for people to buy, or that busting three suppliers at a tax cost of $6 million will make an impact on the supply in the market. Drug education is the answer.
 
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Catch-22

Bluelighter
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Reminder: I am posting this essay on behalf of someone else. These comments are not an official policy statement. Whether you want to agree or disagree, please put your thoughts in this thread. Do not send me PM's or emails unless you are contributing a new essay of your own. Thanks!
 

Heineken4u

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Great little post here... those pictures do represent what the author is talking about, however anyone can come up with a model/diagram to prove their argument. If that diagram contained actual numbers, it may help to further prove the point regarding the relationship between supply, demand, quantity and price.
 

FUTURAmike

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brilliant argument
 

snakjaw

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It was OK. It essentially presented one point: that demand for drugs is relatively inelastic.

Expand upon it, I'd say.
 

maykeme

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melbourne
hey catch-22

nicely said. im studyin micro & macro and this helps as its an interesting topic and i can actually read it. i'm gona pass it around. thanks

i guess if lecturers used topics we could relate to and dont mind hearin about, we would actually learn somethin. :)
 

Shimmer.Fade

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The pictures make perfect sense if you have had advanced business calc ;). Also, i agree partly with the post, as in how he said it makes sense, yet i would have to say it is a bit too hypothetical
 

poisoned candy

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Its an interesting argument, particularly the point that reducing the supply of drugs by law enforcement doesn't do much to decrease use (due to inelastic demand).

However, the argument that harm reduction information reduces demand is bunk. Harm reduction doesn't tell people not to use; it tells how people can use drugs more safely. If anything, this would lead to an increase in demand, as people realize that there are measures one can take to use drugs relatively safely. Not to mention the increased demand from addicts who otherwise would have OD'd (if not for harm reduction info).
 

D'oh

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I just took a couple quarters of econ (all you'd really need to understand the graphs and terminology is about a week of microeconomics). Basically the article summarizes a couple of my daydreams while bored in econ class. It could use a little more detail, such as specifically looking at the addict market, as for those people, the idea holds the most true in that demand is very inelastic and an increase in price correllates very strongly with an increase in crime.
 

ashaman

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heh. this is just an economic class... a lot of other factors can add into it. Ever heard of the 'paradox' of crime? you're effectively talking about that in the article.

nice analysis though :)
 

heat6622

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Relatedly

Quote from History Channel show I saw last night.

"The government simply can't police a product with a 17000% profit margin. If I could make this pen for a dollar, then turn around and sell it for $17000, you could never stop me or somebody like me from making and selling this pen."

Neat.
 

mushman1

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i just learned that graph shit in enonomics class
 

BOGBUBBLE

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Feb 11, 2002
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Good Argument... but

I really liked your article, and you should have it published in some more left-wing sites. I consider myself quite moderate. I agree with hardcore conservative economic policies, but tend to disagree with alot of US foreign policy as of late. One issue that remains that is completely denied by most all media sources is religion.

Some people argue that "it's my body, and i should be free to do with it as i please". This would be fine but i i believe that healthcare should be the responsibility of the individual. If i person is sick, or needs surgery, they should recieve immeadiate treatment, even if they can't pay... if they don't pay then that is their right, and their credit rating will go down.


If Drug Users ( i define users as those who use the drug, but pay with money they earned legally) are caught in possesion they should be put through the same grueling system we have now... the difference being instead of punishment, we need rehabilitation.

The only way to pay for this ridiculously expensive method, i believe would be to pass a law, that would not allow ANY company to suspend/fire employees for failing drug tests. If an employee fails, they must then go to a government funded detox, education program (maybe a 6 hr class). if the offender is caught with drugs in their system again, then the employee must compete a 1-2 week course. This course will be very expensive and must be a cooprative effort between local education systems, city, state, county, as well as the corporation the employee works for must subsidise that cost.

For instance in Texas the regional authorities should appoint officers to run an organization delagating all this.

Some cons include the extra burden that will be placed on health insurance companies (which opens a whole can of worms). And the seriously drasitcally high cost involved with gonig the "rehabilitation" route

For trafficers, If they are citizens they should have to join the military, otherwise continue the policy of deporting them. If we won the drug war everyone in the south western hemisphere would most likely starve.


This is a complicated issue
 
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satricion

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^^
I don't think you sound like a moderate at all...your views are definitely those of a right wing social conservative. (forcing people into the military?!)

You have basically stated that people should be punished for using drugs...it's this baseless ideological opposition to the idea of drug use that is most harmful and that has led to adoption of the restrictive drug policies that make drug use so much more dangerous now. Forcing people into rehab not only doesn't work, it is also as you mentioned very expensive and the money would better be spent educating people about safe drug use. I don't think that this would actually reduce recreational drug use but that isn't the point...the point is to keep people safe.

Also, someone's drug use is not the business of their employer unless it starts to affect their behaviour at work.

As to the original essay...was this based on research into how the drug market actually works or just on the inferences of the writer? I don't know if I would agree that demand for drugs is so inelastic...most users are recreational users, and not addicts.

Looking at the market forces governing the drug market is interesting. It could be argued that the only place real free market capitalism exists is in the drug market and looking at the elasticity of supply and demand in drugs I think is a good perspective.
 

SilverFeniks

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Good rundown, I don't agree 100% but the basic premises are all right on, of course.
I think there is a distinction to be made between recreational users and addicts; I personally have declined purchases due to outrageous prices in my location, while some addicts will pay any price (and do anything needed to obtain the funds) to score.

But we all know what higher prices mean. More crime. You stupid policy setters have bitten yourselves on the ass.
Brilliant :D
 

jammeth

Bluelighter
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Jan 5, 2004
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Nice article, i especially agree with the last statement. Drug education is the answer.

A more informed consumer in any industry already has more power. Unfortunately government run drug education does not seem to be realistic or relevant to what life has to offer.

I also would like to add that this approach will never happen as the illicit drug industry is not just profitable for suppliers. Enforcers rely on drug trade for their employment and the higher up the food chain the more other industries do as well, (ie. medical companies, arms dealers, paper manufactuers, surveillance and security, prisons etc..) Many micro and macro economies rely on the current situation, sadly i feel the war on drugs (much like most wars) is too profitable to end.
 

kittyinthedark

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THANK YOU! Nice article, nice graphs :) - they illustrate your point well. The economics of the drug trade are so simple you'd think the government would have figured it out by now.... Unfortunately, the government would rather endlessly arrest people who won't change their habits or stop selling/using once they're out of jail anyhow. Another point that could be taken into account: why doesn't the gov't just freakin' legalize marijuana? (among other drugs...) If alcohol and cigarettes had to be put through FDA testing today, they'd never make it through, but the companies that produce them still make millions of dollars, if not more, every year. Countless studies have shown that marijuana use is FAR less damaging than cigarette use (on the average of course - "one joint is four cigarettes," but how many people smoke 20 cigs a day and how many people smoke 5 joints to themselves a day... and this doesn't even account for the filtered water pipe smoke that many people use). If the government legalized marijuana and used even 2% of the income produced from it to fund drug education and rehab services for addicts, none of this would be an issue. If the government realized that there are way more responsible users than they could ever imagine, things could change, but unfortunately they have all been brainwashed with the "drugs will kill you no matter what and they are only bad" message. I think they are the ones who need the most education.
 
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