the LI curve

Among LI’s most precious trumpeted and sometimes trumpery opinions is our belief that the suppression of the market in drugs – cocaine, methamphetimines, heroin, marijuana, ecstasy, etc – can’t work in any system in which there is something like free enterprise and something like democracy. We’ve gone over and over the reasons that bans on consumer products that are a, easy to supply, and b., have an enduring demand are not only going to be inefficient, but will also create more harms as they become more efficient. Call this the LI curve. Like the Laffer curve, you can draw it on a napkin. Please feel free to do so.

The interesting thing about this is that the original ban on narcotics made the elementary mistake of assuming that narcotics was like the feathers of endangered species – the act was specifically modeled on acts forbidding interstate commerce in eagle feathers. The supply of eagles, and hence eagle feathers, is inelastic – making it relatively easy to ban without a significant cost in liberty (contra the libertarian assumption that all liberties attaching to property are of the same type and value). Again – our argument is not that regulating a consumer product (as opposed to a durable) leads to such harms – our argument is that banning does, banning being that degree of regulation that leads to non-regulated black markets. So our argument isn’t that regulating, say, the sale of cigarettes will lead to harms outweighing the benefits of regulation – that question can only be answered by the type of regulation enforced. However, our argument is that as the regulation leads to the banning point, it becomes more harmful. You can just see a sentence like that last one leading to a beautiful curve on a graph on a blackboard, can’t ya?

We found more evidence for the LI curve in an article about the consequences of drug law enforcement in summer’s Social Science Quarterly (class, get out your copies!). The authors of “Drug Enforcement and Crime: Recent Evidence from New York State,” Edward Shepherd and Paul Blackly, studied 62 counties in New York state from 1996-2000. They used a “set of models that evaluate the effects of recent drug arrests on
reported rates of assault, robbery, burglary, and larceny.”

Shepherd and Blackly set up the argument in the following way.

Let it be given that an increase in drug related arrests indicates an intensification of police effort to enforce drug laws. (a premise they argue for in various ways, and which makes sense, given the period they are working in – there’s no report of some suddenly new drug in this period, save perhaps a spike in meth). So – following the broken windows idea – does the increase in drug related arrests lead to a decrease in crime or not? The argument that it does goes like this:

I. Drug use or participation in illegal drug markets may increase crime because (1)
the pharmacological effects of drug use (e.g., an increase in aggressive tendencies or a lessening of inhibitions) may lead individuals to commit crimes; (2) dependency on or addiction to illegal drugs may lead to economic crimes (e.g., robbery or assault) to obtain income to purchase drugs; and (3) participation in illegal markets by buyers or sellers may lead to systemic violence. Goldstein (1985) developed this ‘‘tripartite conceptual framework’’ to evaluate the potential links between illicit drugs and crime that provided the basis for additional research (Goldstein et al., 1989, 1997). Illegal drug markets operate in an elaborate ‘‘underground economy’’ consisting of
importers and manufacturers, transporters, wholesalers and retailers, and small seller networks. There is no recourse to legal mechanisms for dispute resolution, which results in violence or other forms of crime to settle conflicts (Miron, 1999). High prices and profits associated with illegal drugs also provide incentives for others to enter the market, leading to more violence, such as turf wars over control of sales territories.”

On the other side, the argument that it doesn’t goes like this:

II. “In contrast, enforcement of drug laws may lead to increased crime when (1) distribution networks are disrupted, leading to disputes over market share and informal contractual arrangements within these drug markets; (2) disruptions in the market lead drug sellers to switch to other forms of economic crime that are considered substitutes, such as robbery or burglary (Kuziemko and Levitt, 2001); (3) drug users resort to crime as a result of physical or psychological withdrawal, or from behavioral changes resulting from ending their self-treatment of medical conditions; (4) prices and profits increase for remaining sellers, providing more incentive for potential suppliers to engage in crime to obtain a share of the market and leading to more economic crime by users who need to obtain income to support a habit; (5) resources spent
on drug enforcement are diverted from investigations and arrests for other types of crime that may increase as a result (Rasmussen and Benson, 1994; Benson, Leburn, and Rasmussen, 2001); and (6) the imprisonment of drug users and sellers takes prison cells that are in short supply, resulting in the early release of other criminals, prison overcrowding, or new prison construction.
Other crimes can be expected to increase due to lower rates of incarceration and because the resources used to expand prison capacity could have been used for other purposes (Kuziemko and Levitt, 2001).”

Those with a sufficiently dialectical turn of mind can see that this dichotomy doesn’t correspond, point for point, with our own argument about the effects of drug banning. Our argument would predict that black markets would form and reform on a cycle of violence – violence being an ultimately economic regulatory resource precisely because it doesn’t have to remain at a constantly high level. Violence, in other words, seeks an equilibrium too.

However – who cares? On with the show. What will emerge behind curtain no. I or curtain no. II?

Are you puzzled? Are you on the edge of your seat? Has anything this exciting occurred in the Social Science Quarterly in … well, a number of quarters?

The answer, according to Shepherd and Blackly, is no. II! (ohmygods are heard from the astonished throng). Yes, the “evidence favors the view that drug enforcement activities
are associated with increases, not decreases, in nondrug crime.” Or to put it in the more persnickety, social sci terms of the article:

“Turning first to the results for the four drug arrest variables, there is substantial evidence that drug arrests have a significant positive (adverse) impact on the rates of nondrug crimes reported in New York State. Increases in Total Drug Arrests are associated with higher crime rates for all the offenses considered except aggravated assaults.”

By four drug arrest variables, S and B mean:

Total drug arrests measures the number of arrests per 1,000 residents for three types of Part II drug abuse violations as classified by the U.S. Department of Justice, Federal Bureau of Investigation (1984): Hard Drug Sales, the manufacture and/or sale of nonmarijuana drugs; Hard Drug Possession, the possession of nonmarijuana drugs; and Marijuana Sales, the
manufacture and/or sale of marijuana.

It isn’t that S. and B.’s model is uncriticizable. There is no segregation, for instance, of endogenous and exogenous types of harm – in other words, if robberies between drug dealers increase and robberies between drug dealers and convenient store employees decrease because of increased drug arrests, we’d like to know. But still, once again, the evidence flies in the faith of the firm American faith that we can deal with drugs by banning them (and then, coyly, capturing the market for mood alteration by producing massive prescription drugs).

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On our funding drive. Well, the local radio station has made fifty thousand some dollars in the last couple of days. LI, however, has had not a single pledge since last week. Such zippo action is driving us to despair. We are even tempted to tear up our copy of the 1000 moneymaking ideas of GREAT entrepreneurs! which we have been keeping under our pillow. Please consider us the next time you are giving quarters to a beggar. We need your support!