Vice Squad
Saturday, October 18, 2003
Victory is Just Around the Corner

Mark Kleiman had an interesting post a few days ago about prices
for illicit drugs. Here's an extended excerpt, with an internal link omitted and a couple spelling changes:

"Now, after twenty years of intensified drug law enforcement, the wholesale price
[for heroin] is about $70,000 a kilo and the retail price in New York about 20 cents
per pure milligram, a factor-of-three reduction at wholesale and a factor-of-ten
reduction at retail, reflecting a greatly reduced markup. The general price level,
as measured by the CPI, has roughly doubled over that period, so the inflation-
adjusted price of a pure milligram of heroin is actually down about 95%.

The price drop for cocaine has been a little bit smaller: from about 80 cents per
pure milligram in 1980, the price fell very rapidly until about 1988, and has since
stabilized (in nominal-dollar) terms at about 15 cents per pure milligram, which
adjusted for inflation is a decline of about 90%.

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."

Price declines do not imply increased supply, of course. Among other factors, decreased demand
for illicit drugs could drive lower prices; so, prevalence figures would be helpful in interpreting
these stunning price declines. More on the prices of illicit drugs in the near future!

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