Replies

We all can recite the old bromide about the definition of insanity.

Here is a reply I posted on May 12, 2014, and ever since then we have been doing more of the same expecting different results:

If you want to know why the war on drugs is lost start thinking about it the way Adam Smith and Warren Buffett would think about it. Adam Smith would talk about the law of supply and demand and he tells us that when the demand goes up so does the price; when supply goes down, the price goes up. When the demand is inelastic, that is, when it is the product of an addiction, the price curve is even more radical in its upward thrust when supply is reduced. Therefore, the more the government succeeds in interdicting the supply of addictive drugs, the more it increases the price and thereby increases the incentive to increase supply. The more the government succeeds, the more it must fail.

That is why drug smugglers and dealers are so wonderfully inventive in evading the law and will ever continue to be so unless you want to live in North Korea.

Without putting words in Warren Buffett's mouth, his criteria for investing in an enterprise are well-known. He wants a company with a unique product and a huge market potential. What better than an addictive drug? He wants company with high barriers to entry against competition. What better barrier than the law and what better barriers than drug enforcement agencies raiding your competition? And if competition becomes too serious, this business model says you simply eliminate it by murdering them.

Buffett would be very intrigued by the idea that costs are extremely low, markup extremely high, and the price is ever supported by the government! By making drugs illegal, the government in effect has enacted price supports. By selling into an inelastic demand of addicts, the market as well as price are virtually guaranteed.

Because the price is high, addicts are incentivized to push the drugs onto others in order to addict them, to create a mini market which funds their own addiction. What a wonderful business model! On the macro level it is a multilevel marketing scheme on steroids, or should I say, powered by addiction, and supported by the government.

Meanwhile, this wonderful marketing scheme generates so much money that corruption is inevitable. Worse, our enemies in the Muslim world and elsewhere have exploited this market to our disadvantage and national security peril. Meanwhile, our only politically correct response is a full throated roar: "do more of the same."

(The result we will get this time: we just boosted the price and therefore the incentive to deal drugs by $1 billion)

Your assumptions involve a free market. If the penalty for drug use and sales was death, what would happen?

In fact if the penalty for speeding was death, how many speeding tickets would be issued?

Because of the nature of man, there is no easy solution. But history does teach us some things. We might look to prohibition and say it was a failure if looked at in isolation . But if we understood the times, the whole system of the time, it changed society. There was tremendous per capita consumption, and moral degradation at the times began a generational movement that raised the moral stature of our culture. Yes it went to far but look at the big picture.

We are more than just economics.