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A false reading of legalization’s effects

Over at the “Reality-Based Community,” Keith Humphreys has a post: How Legalization Can Expand a Black Market

In it, he claims: “new research from the London School of Economics shows that legalizing prostitution increases, rather than decreases, human trafficking.”

This, he feels, gives him the authority to proclaim:

But in the meantime, wise heads in the policy world will not take it as a given that legalizing something will necessarily shrink the black market.

Wrong.

First of all, the commenters over there have already destroyed the argument by noting at least two major flaws: the lack of accepted global standards regarding the definition of human trafficking; and the fact that the study doesn’t explore methods of regulation.

But let’s go to the study itself.

If Keith had bothered to read the entire article, he would have found the authors note that the study methodology:

…cannot provide a conclusion as to whether legalizing prostitution would result in increased trafficking after legalization.

In order to come up with the conclusions that Keith loved, they had to turn to anecdotal information.

There may be some useful information in the data gathered by this study — but there certainly isn’t any in the way of supported evidence regarding regulated legalization of prostitution and the effect on human trafficking.

Keith makes another bone-headed statement in his post:

…demand for prostitution, gambling, drugs and the like is highly elastic. When the demand-suppressing effect of illegality is removed, demand can increase, sometimes dramatically.

Yes, it’s true that when illegality is removed, demand can increase, sometimes dramatically. However, that doesn’t have anything to do with elasticity.

Elasticity is an economic term that measures how much one economic variable affects others (not the effects of something like legalization). People like Humphreys often claim that demand for drugs is highly elastic because it supports their view that if we raise prices we can control use. And they use as evidence articles that show an increase in prices reducing overall use (which is not evidence of whether a commodity is relatively inelastic or relatively elastic, but simply a matter of whether it is elastic at all — which pretty much everything is).

Here’s a brief description of elasticity:

Assume the following:

  • If I sell a prime rib dinner at $15, 100 people will buy it.
  • If I raise the price to $20, only 60 people will buy it.

This is clearly a situation of relative elasticity. When I raise the price, not only did the numbers buying go down, but they went down so significantly that I go from bringing in $1,500 to only bringing in $1,200.
Instead assume:

  • If I sell a lobster dinner at $15, 100 people will buy it.
  • If I raise the price to $20, only 90 people will buy it.

This is a situation of relative inelasticity. Sure, the total number of people buying it went down, but now instead of bringing in $1,500, I am actually bringing in $1,800! Most people were willing to pay the increased price, and so I can benefit from raising the price. (That’ll change, of course, if a restaurant down the street offers lobster at $18).

With illegal drugs (and gambling and prostitution), as long as competition isn’t there to drive the price down, or you haven’t maxed out the PED (price elasticity of demand), suppliers can raise the price and people will pay it. Sure, a few will drop out, but enough will pay it to make the suppliers realize an overall increase in revenue, making them stinking rich. They will continue to raise that price until it reaches that maximum.

That is price elasticity of demand in its basic form. (Note, there is also price elasticity of supply as well as other economic functions.)

The junk economics used by Humphreys doesn’t help add any reality to the community.

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19 comments to A false reading of legalization’s effects

  • DonDig

    “The reality based community
    Everyone is entitled to his own opinion, but not his own facts.”

    Who said that anyway? Was this like on some recently discovered stone tablets somewhere?
    Everyone is entitled to his own opinion as well as his own facts.
    (Haven’t they ever heard of statistics, or multiple eye-witness reports?)
    We all create our own reality. Once you enter a discussion it’s all abstraction (and not reality) anyway.
    What are they smoking over there?
    They’re looking to find answers that cannot be found. Tricky, tricky. Good luck!

    • Duncan20903

      .
      .

      Well since you’re speaking of orders from a deity carved on stone tablets, for some unknown reason I’ve started calling out the religionist prohibition on their flagrant disregard for the 9th Commandment. Heck, if they’re Catholic that’s a mortal sin and they’re going directly to hell, no passing go, no collecting $200.

  • Servetus

    The best advice on these matters was uttered nearly 600-years ago:

    “…it would be well if public sins could be eradicated, but that strumpets must be tolerated to prevent greater evils.” – Bishop of Constances, Bohemia, 1436.

  • claygooding

    Colorado Springs opted out on pot shops,,of course I had to ask if they opted out on state taxes collected in the other cities that did sell pot..

    And another football player booted from his team for marijuana and other crimes that would not have been crimes except the marijuana was there,,don’t these successful sports figure know how hard it is for prohibs to use the layabout with no ambition rant?? It was hard enough explaining how the last 3 or 4 Presidents managed to get up in the am to run for office and now successful professional athletes just ruining years and millions of dollars worth of propaganda by being successful at everything except passing a piss test.

  • DdC

    Feds only bust Commerce.

    This analysis by Pete and Humptydumpty’s gossip only addresses commerce that is not legal in any state. Or can Obama tweak federal law to please a few states. Thankyou very much. Or the redneck states could have opted out of the civil rights act and Johnson could have tweaked it to permit a few states special privileges. Obama said in clintoneze that he would not waste funds busting individuals or patients in states with laws. He has no jurisdiction unless the individuals sell it or exchange it. He hasn’t busted individual patients but states do and have busted most of the 800,000 a year. Especially the other states with cop written initiatives that include limits the feds don’t have any authority over. States busting patients for growing more than the limits or busted for selling it. That is the options until the bogus CSA is over turned. Appeasing prisons and profiteers at the expense of taking away what we already have. Politicians aren’t in it for we the people. Wall St wages the Ganjawar for profits and keeping competition prohibited. How hard is that to comprehend? This entire post is a moot point since as it stands no state can sell it or give it away as a charity. So it won’t effect prices. I think its a wrong road to head down when it comes out the same as the dung worriers dialog.

    Oh goodie, more politicking with peoples lives.

    California Dems Say “No!”
    to Medical Marijuana Crackdown,
    Federal Interference in CO, WA

    Commerce is NOT included in Prop 215

    CSA deems reasonable amounts as state jurisdiction.
    10h amendment. NO sales or charity give away or exchanges.
    This is the clintonspeak Obama used when he said he would not waste funds busting individuals and patients. He hasn’t. States busted most of the 800,000 individuals and patients a year.

    Raich v Gonzales, the Supreme Court decided anything over 100 plants with or without intent to sell is Commerce. Treasury Dept. IRS. Busting dispensaries mainly who have not paid taxes. No matter how righteous a dispensary is. Reason common sense and decency have nothing to do with the shuck and jive prohibition. How fucking hard is that to understand? Local politicians appeasing their constituents with more shuck and jive. Oh there’s a surprise…

    Only CA has provisions for individuals without limits or reasons to use. Every other state initiative written by politicians and cops do. Forcing a catch 22 political game with the Feds. Can’t buy it and limits prohibit growing since a plant yields more than an ounce.

    Profiteers are willing to toss out the baby with the bath water. For temporary profits at the expense of what we already have to provide for ourselves. A burden for some republicans without connections and seniors without caregivers or in corporate housing trying to forbid it on the same shuck and jive prohibitionists use. This is degrading to hear so many cheer on any morsel when the law is what is in need of over turning. Not more incremental retardation. The CSA is a lie to include cannabis. The only legal means is to remove it and then sell it as Commerce or raw vegetables. But times a wasting and the Feds are already set up to distribute through Big Pharma, keeping Hemp a controlled substance out of Wall St competition. The refs are here. None of the excerpts debate it or bring it up.

    Do we really want to grant a politician president power to disregard the Constitution more than we think he has already without our blessings. To ask him to change Federal law for a few states is as silly as the rednecks asking Johnson for a few states having Jim Crow and segregation. He can’t tweak it just because it would be better for we the people. Lies run the Ganjawar, for Wall St profits and profits perpetuating the wars. Big Ag/Pharma, the Military and Prison Industrial Complexes control the conversation and those continuing to toss these carrots at vulnerable people every few months are cruel, stop it! Over turn the CSA as the MTA was. Or don’t let cops write your catch 22’s on tax dollars to boot.

    Here’s what i posted and had deleted, with links many seem to find in their way maybe?

    Methinks Thou Dost Protest Too Much

    http://i50.tinypic.com/2822gif

    • DdC

      Denver Auditor Suggests 3.5 Percent Tax
      Gallagher warned Denver City Council members in a letter sent to Councilman Charlie Brown Monday, that the city’s 5 percent tax rate plan risks sending users back to the “dark shadows of the black market.”

      Taxable goods
      Food for preparation and consumption in the home is generally not taxable, nor are prescription medications. By contrast, restaurant meals are often taxed.

      They’ve outlawed the number one vegetable on the planet.
      Timothy Leary quotes

      N.H. Becomes 19th State to Legalize MMJ

      “Allowing doctors to provide relief to patients through the use of appropriately regulated and dispensed medical marijuana is the compassionate and right policy for the state of New Hampshire, and this legislation ensures that we approach this policy in the right way with measures to prevent abuse,”

      The law takes effect immediately, but it may be well over a year before the program is up and running. Patients must obtain a registry ID card from the state and buy their marijuana only at special nonprofit dispensaries, and administrative rules for those facilities could take up to 18 months to finalize.

      Hassan, a Democrat who took office this year, indicated she would support a medical marijuana program – so long as it controlled the legal supply of marijuana by requiring patients to buy it from dispensaries instead of allowing them to grow it themselves.

      The law allows patients with cancer and other conditions to possess up to 2 ounces of marijuana obtained from nonprofit dispensaries.

      Incrementalretardation…
      What happens when cops write initiatives.

    • DdC

      and so it begins, Incremental Retardation

      DEA Raids Seattle-Area Dispensaries
      By Mike Hughes · Thu Jul 25, 2013
      Federal agents raided several medical marijuana dispensaries in the Seattle area Wednesday evening. Drug Enforcement Administration spokeswoman Jodie Underwood confirmed the raids but would not give specific details of the operation.

  • Freeman

    Harrumphrey-Dumpty is claiming once again that words mean exactly what he chooses them to mean, neither more nor less:

    Economists tell me that with the term “elasticity” are really two types, market participation elasticity and then demand elasticity of established market participants. Legalization of a market could affect one, both or neither of these, which makes the net effect hard to forecast.

    [Citation Needed]

  • Frank W

    Talkleft links to the 2014 U.S. Drug Control budget. No need to worry about false effects or anything like that. The complete triumph of the Police State.
    http://www.talkleft.com/story/2013/7/24/22859/3714/crimepolicy/No-Money-for-Federal-Defense-But-Costa-Rica-Gets-New-Computers

  • Servetus

    Big Man Bill O’Reilly has picked up the racist gauntlet and is bloviating once again in favor of drug laws that get young black males locked up in prisons:

    … “race hustlers and limousine liberals” who “yell about the number of black men in prison for selling drugs,” saying the claim that black men are targeted by drug laws is “one of the biggest lies in the history of this country”….

    I don’t even own a limousine, nor do I yell at people. I blog. By contrast, white race hustler Bill O’Reilly probably rides in a limo, and he yells at people all the time, including guests on his show. O’Reilly and his news buddies are on a racism binge that appears designed to promote racial conflict. So naturally they love their racist drug war.

  • Duncan20903

    I just can’t recall an instance of the cops getting wise to something so quickly. Heck, it was at least 6 years before they got clued in to the existence of synthetic cannabis.

    E-cigarette vaporizers being used for illegal purposes, police watching marijuana use with devices

    • darkcycle

      Heh. Got my first gen cannabis e-cig and recipe in 2010, moved on to second, third, and now the forth gen hand held vape just this week. Uses pure CO2 extracted Honey oil, with dual heating coils and voltage adjustable battery. and had become the device I reach for the most often (but never before noon, or it’s all over).
      I must say, sitting at the FBI waiting for my fingerprints to be taken for the last set of clearances, my e-vape kept me cool, clam (yes, I said clam…it’s a Northwest thing) and grinning like an idiot.

    • B. Snow

      Once again people are basing shit off of their “fears” = ala “Moral Panics & Folk Devils”.

      “Students are among the customers McNaughton fears stores are now targeting.

      Whether they’re going to buy Skittles or juice or what have you, they’re seeing these products. So they’re constantly exposed to these products at the stores and that’s another one of the tactics they use to try to draw in the youth,” McNaughton said.”

      And FWIW, Surely I’m not the only one who feels this (bolded part) of her statement is just tacky as Hell?

      Now, pardon moi – But, that is one seriously uncouth bytch right there…

      Currently, e-cigarettes are not regulated by the FDA.

      Even though most stores won’t sell them to customers under 18, there’s currently nothing to keep them from doing it.

      A spokesman for the Tobacco Vapor Electronic Cigarette Association says the association is pushing for regulation that would ban the sale of vaporizers used for smoking marijuana and other drugs.

      Well then – Ive been considering trying the E-cig thing for awhile. But if the Vaporizers are small enough now that they look (more or less) the same = I suppose I should go pick one up for future possibilities/use…

      Even if it sits in a drawer for months or years – however long – it’ll be there when/if I need it… Kinda like people are doing with firearms these days.
      But, good luck finding reasonably priced ammo to go to a range and practice with – for now…

      Any recommendations? on a Vaporizer that is, and/or E-cig brand?

      I suppose I could go pickup an ‘enthusiast magazine’ and look there.
      I did the same a while back for the “MJ now legal in CO” article for the historic appeal I think it was just Colorado in that particular mag = and was semi-baffled by what are apparently hash-bongs? I had no clue they made those!
      Heck, I’ve only seen hash a handful of times and tried it a couple, and that was like a dozen years ago.

  • DdC

    Cannabis psychosis: are politicians making the situation worse?

    The findings of the study, which was published in the International Journal of Drug Policy, suggest that legislative efforts to tackle the problem of cannabis psychosis were at best ineffective, and at worst, counterproductive.

    Using Pot To Save Brains!
    Conservatives Have Larger ‘Fear Centers’ in Their Brains
    Drugwar Lies Linked to Schizophrenia

  • DdC

    How the Pentagon Papers Came to be Published
    By the Beacon Press Told by Daniel Ellsberg & Others
    Forty-one years ago, Beacon Press lost a Supreme Court case brought against it by the U.S. government for publishing the first full edition of the Pentagon Papers. It is now well known how The New York Times first published excerpts of the top-secret documents in June 1971, but less well known is how the Beacon Press, a small nonprofit publisher affiliated with the Unitarian Universalist Association, came to publish the complete 7,000 pages that exposed the true history of U.S. involvement in Vietnam.

    Nixon’s Treason
    Nixon lied to schedule Ganja #1

  • darkcycle

    Breaking News: Pope Favors locking people in a cage for using cannabis.
    http://latino.foxnews.com/latino/news/2013/07/25/pope-francis-speaks-against-drug-liberalization/

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