The equilibrium effects of aggressive drug enforcement

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Mark Kleiman makes an interesting point about the effect of aggressive drug enforcement (read it, really):
In the long run, drug enforcement may, in fact, tend to decrease prices by creating a class of retail drug dealers with felony records who therefore can't find lawful employment. That group then bids down dealing wages. (Crack dealers, who were making $30/hr. in Washington D.C. in the late 1980s, were making less than the minimum wage in Chicago in the late 1990s.) Since retail dealers' wages are an important element of the cost structure of the illicit drug industry, falling retail wages translate into falling retail prices.

This isn't the only thing that could cause prices to fall, but it's certainly an intriguing one.

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My extensive research (ie watching COPS for the last decade or so) provides supporting evidence for this. It used to be that street-corner crack dealers were all blinged up. Now, they're generally toothless whores who need to turn tricks in customers' beater chevy trucks to supplement their crack-selling income.
Plus, I hear all the white-collar crack jobs are being outsourced to cheaper skilled labor in China.

Actually, Craig, you are correct. I'm a cop in a major city. Many of the street level dealers are now users who are paid in crack. For every two or three rocks they sell, they get one free to smoke. They have to turn the money over to their supplier. We call them "hooks," since they hook up with a buyer and act as a go-between with the real supplier.

I hope the blogosphere keeps the debate going on legalization of all drugs, as I think the drug war has been a huge waste of resources.

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