We've all seen the big drug busts on the news. Hundreds of kilograms of marijuana plants are seized, a few thugs get a perpwalk to the curb and the streets of your neighbourhood are safe once again. Or at least we think.
With every media outlet from here to Honolulu bogged down with the boondoggle that is Iraq, the biggest foul up in US history is consistently forgotten: The War on Drugs. Don't get me wrong, I harbour as much disdain for society's vagrants as the next guy, but it just makes my stomach turn to see millions of dollars every year put to make the drug problem worse.
Allow me to elaborate. Let us imagine that there are currently 100,000 units of an ultra-addictive, super-intoxicating illicit substance circulating the streets of your hometown and that the going rate per dose is $10; this amounts to $1,000,000 of narcotics. It is quite probable that a percentage of those who will purchase this substance will commit crimes (such as theft or prostitution) to pay for their habit. For the sake of practicality, let us assume that 40% of value of this drug will be purchased through illicit means; that means that about $400,000 worth of crime will be committed to finance this addiction. Now, let us imagine that your friendly police force decides to put together a strategy to remove 500,000 units of this magical drug off of the streets; this only leaves 50,000 units left. Good news right? Well, since this drug is so euphoric and the same people are still out to procure it, a situation of scarcity is created as the drug bust puts the market in disequilibrium.
This is true as the supply has decreased but the demand has not changed since the drug carries such addictive properties. Consequently, the price of the drug must increase to fix this disorder that DEA have created. For the sake of this thought experiment we will assume that the demand for this drug is perfectly inelastic and the price increases to $40 per unit. The street value of this drug has thus increased from $1,000,000 to $2,000,000; and the proportion of crime-financed expenditure increases to $800,000. Consequently, if addicts really want to get their fix they're going to have steal twice as much money to finance their addiction, and in theory, should lead to double the crime in your neighbourhood.
