From Mark Kleiman, I learn that the real, inflation-adjusted price of a milligram of pure heroin in New York has dropped by 95 percent since 1980, and the price of cocaine by 90 percent, for average rates of improvement of about 14 and 11 percent per annum, respectively. This is quite impressive, especially since "all of this happened in the face of an enforcement effort that increased the number of drug dealers behind bars from about 30,000 in 1980 to about 450,000 today". One wants to know how this massive improvement in the satisfaction of consumer demand came about. Increased competition dissipating monopolistic or oligopolistic rents? (If so, the massive jailing of dealers amounts to price support for those who don't get busted; besides, one has the impression that there are, shall we say, credible barriers to entry at the wholesale level.) Cost-savings in raw materials being passed along to the consumer? Or is this pure productivity growth --- improved communications leading to more flexible, streamlined, network organizations and better logistics (just-in-time dealing?), together with a highly motivated workforce? How much of the increased total factor productivity of drug dealing will show up in the national accounts? Clearly, there is a fascinating, if somewhat risky, topic for an economics dissertation here.
Posted at November 06, 2003 14:04 | permanent link