Tag Archives: War on Drugs

The nature of black markets: why making commodities illegal is ineffective.

I think it is important to characterize the commodity in very a generalized manner—at least for now—therefore we will refer to our commodity in question as a widget. Now, it is of no consequence what a widget is because, when analyzing the effects of a black market, the only relevant factor is that widgets were made illegal by lawmakers. It is important to begin with a basic definition of a black market:

“A black market or underground economy is the market in which goods or services are traded illegally. The key distinction of a black market trade is that the transaction itself is illegal. The goods or services may or may not themselves be illegal to own, or to trade through other, legal channels.”

It is important to note that the definition also identifies that the goods (in our example widgets) need not be illegal to own. This refers to situations where taxation or regulations are used to limit, control, or inhibit the trade of a good or service (i.e. high cigarette taxes). However valid this discussion is, it will not be the focus of this conversation as we are assuming our commodity has been made illegal for the sake of simplicity.

Black markets develop because making a product illegal does not cause people to stop using it; instead, it merely marginalizes consumption, the production, and the distribution to those who are willing to accept and operate under greater degrees of risk. I know this may sound a little confusing which is why I created a graphic that illustrates the levels of acceptable risk for different groups of society:

Risk flow chart

In this graphic we can observe that the lower two segments (5 & 6) are those people who enjoy or are comfortable with greater risk levels; next (segments 3&4) we can observe the greatest amount of people as the average level of risk takers which would be generally averse to great risk, but partaking in some low/moderate risk; finally, in our upper two segments (1 & 2) we can see a portion of the population who range from mostly risk averse to almost exclusively averse to risk. This understanding of risk tolerance is important in the realization that making commodities illegal only serves to focus use and production on the risk loving segments which are most likely to partake in other risky behaviors (e.g. crime, violence, etc.) regardless of their use of a certain commodity. This reality is why the argument of illegality for the purpose of public safety is largely invalid.

Let us return to our concept of widgets again. If widgets are made illegal then we have some serious problems: 1) people are still demanding this product (although demand is now almost exclusively coming from groups 5&6 and a small part of group 4) so new producers will enter the market to meet this demand and receive the greater profits now offered by an illegal trade operating at monopoly pricing. 2) By compressing consumption to the risk loving segments we create a self-fulfilling prophesy – that the people using the widget will also be breaking other laws [don’t believe me?…look at why prohibition did not work for alcohol].

We can see a new and growing market segment dominated by those who are more predisposed to risky (read: criminal) behavior. Also, we have reduced competition in the production of widgets which would generally (particularly in a highly criminalized black market) lead to the production of “crappier” products at higher prices. Therefore, the risk factors of our widgets become even greater due to the lower quality. Additionally, in this market with limited competition, lower quality requirements, and huge profit margins we will observe more criminal (mob-like) activities in the production and distribution of our widget. In essence, criminal producers compete with force instead of with price or quality (or both) to gain customers; this has many negative effects on the communities in which these suppliers operate.

We are also presented with a consumption level distortion. The new consumer group—which is also isolated to higher risk tolerances—engages in the same activities they would have likely done anyway; however, now our widgets are given the credit (blame) for these activities. This creates somewhat of a paradox in that the results of prohibition become the best argument for prohibition because the correlation between widget use and other risky/criminal behavior increases due to us arbitrarily slicing segments 1, 2, 3, and most of 4 off of the consumer base. We have not eliminated any undesirable by-products of consuming widgets; we have merely magnified the (rudimentary) perception of the widgets’ effect on producing these negative by-products.

Why is this important? First, there are little to no positive effects of making products illegal beyond people making themselves feel better that they may have coerced others into not engaging in an activity this other person condemns [think Michael Bloomberg and soft drink sizes]. Second, by isolating supply to risk loving individuals we fuel illegitimate activities and isolate supply into the hands of people willing to exercise the most risk. Not only have we criminalized users, we have laid the foundation to launch a whole new and highly profitable enterprise that relies on criminal activity and violence as the primary means to restricting market entry. This incorporation excludes traditional competitive means (product differentiation and price) in favor of force, violence, intimidation, and a new criminal recruitment system resulting in social problems in these communities as well as losses in property values, tax revenues, and legitimate employment opportunities.

Gun rights advocates make this argument quite accurately and succinctly when they state that: “making guns illegal would only keep them out of the hands of the law abiding population who do not commit crimes anyhow.” This is a very astute observation. Unfortunately, this same group often fails to realize that the same is true for our widget example, or drugs, or prostitution, and was found empirically to be true with alcohol. Making any of those things illegal did not eliminate the use of them; it merely marginalized use and created a criminal enterprise where one did not previously exist. Does prohibition result in decreased use?…only a little because, if the product is inherently risky, a vast majority of the population will avoid it anyway. Does prohibition make society safer? No, in fact the evidence would indicate the opposite.

So, why does our society struggle with this idea? Because liberty is scary to so many people! Of course, liberty—like so many other things—is really only a good idea for ourselves, not for others. The false premise that one group of people has the responsibility or authority to try and save others is preposterous and, I would argue, excludes the people who hold that idea from having any real profound understanding of the concept of Natural Rights or the ideas that our founders held so dear in creating this greatest of countries. The land of the free has become the land of the busybodies, intent on utilizing their votes to gain access to the force that government wields to make individuals “mind” them. I do not wish to have a nanny state economically nor do I wish to have one for individual choices. Incidentally, one thing everyone should keep in mind, you do not get one of those without the other.

Medical marijuana in Florida: confronting the scare tactics

           I am a Florida resident. There has recently been a successful effort to get a proposed state constitutional amendment, amendment 2 legalizing medical marijuana, on the ballot which will be voted on during the 2014 general election.  This has sparked significant controversy in the state as to what the precise results of this initiative will be and speculation as to what the ultimate intent of gaining passage of medical marijuana is.  I will make the effort to confront popular opposition and hyperbole in reference to this topic which I find to be largely scare tactics.

                Jeb Bush, former Florida governor and potential 2014 presidential candidate, stated earlier in the year that legalization of medical marijuana will hurt the state’s “family friendly” reputation.  This is an interesting observation that smacks of both ignorance of prescription drugs and detachment from medical conditions that can be helped with the use of this treatment.  First, perhaps Bush and others are unclear as to the wide array of opioids and other controlled substances which are readily available for medicinal use?  Maybe Mr. Bush and his contemporaries–which share his trepidation of medical use of a drug like marijuana–has not heard of morphine, oxycodone, methadone, codeine, hydromorphone, fentanyl, and Xanax; all drugs which can be safely stated as being much strong than marijuana.  I guess I have not heard of all the families boycotting Disney and Universal Studios when Orlando has a burgeoning drug problem with hydrocodone (a prescription drug) being one of the most popular illegal recreational choices.

                Speaking further on the attempt in Florida to “create a family-friendly destination for tourism and a desirable place to raise a family or retire” Bush continued by stating that “allowing large-scale, marijuana operations to take root across Florida, under the guise of using it for medicinal purposes, runs counter to all these efforts (Adams, Reuters, 2014).”  I suppose Jeb Bush has also not heard that there is no such thing as a marijuana shortage in the state.  In fact, our government, in all its wonderful glory cannot even keep drugs out of prisons; but, let us make certain that a cancer or epilepsy patient doesn’t get their hands on it…it will be the end for sure!!!

                A local state representative, Rep. Broxson, stated recently that legalization of medical marijuana is just the first step towards legalizing it recreationally; an assertion I have heard several times from state legislators.  Let us re-examine the list of controlled substances already listed above, which have all been legal (medicinally) for several years.  Then I would like someone to tell me which of those drugs (or their street alternatives, i.e. heroin) have been legalized because sick people are allowed to use them for medical reasons?  Hold on…you mean the answer is zero?  How can that be?  Medical use is clearly the gateway towards legalization…right??  Hmmm, perhaps not.

                Finally, Mr. Broxson thought it necessary to mention that we should not legalize such an option because it is against federal law.  We must keep in mind that Mr. Broxson fancies himself a constitutionalist, so my question is where in the US Constitution do the States give the federal government the power to regulate such things?  (Hint:  it doesn’t).  The states created the federal government with a certain amount of power that was limited, not the other way around.  I think it would be refreshing to hear people that claim to be students of the Constitution and champions of State’s rights not cowering to the claims to power lawlessly made by the federal government.  It is possible that if true defenders of the Constitution had been around 80 years ago, our political climate may be much more inclined towards actual justice and a moral (not to be confused with use of the law for legislating morality) use of the law than it is today.

                To deny people the use of a drug that can make a difference in a significant chronic or critical condition is unambiguously immoral; and borders on cruelty.  Those of us who claim to champion liberty and the American ideal should exercise caution in using the government as an implement of force for controlling behavior that might be contrary to our own beliefs and mores; particularly when that use of force can result in unnecessary harm to another individual.  Keep in mind that if we buy into the (anti)logic that keeping marijuana illegal for medical use because of the risk of people using it illegally for recreation is not appreciably different than the argument that guns should be illegal so criminals don’t hurt others.