Ray Fisman at Slate bring us Narco Economics. A new study that could help Mexico win its war on drug traffickers.
This article spends most of its time discussing the interesting concept of “forensic economics” being explored by student Melissa Dell, really mostly an academic exercise at this point, having to do with the effect of channeling routes through Mexico (controlling or not controlling towns/roads) on drug trafficking organizations.
But Fisman sees this and, having completely slept through Economics 101, comes up with a completely nonsensical conclusion:
Once you add up these various effects, itâ€™s easy to see how Mexicoâ€™s drug war has cost more than 40,000 lives over nearly five years, and counting. Itâ€™s also easy to understand calls to bring the war to a halt: For all the human tragedy and billions in economic cost, traffickers merely reroute their smuggling operations around the piecemeal interventions of the police and military. Yet that is precisely the point of drug-interdiction effortsâ€”not to eliminate all drug trafficking, but to raise its costs. Raising costs squeezes the margins of Mexican smugglers who, like all good businessmen, will scale back their operations, thus reducing the supply that reaches the U.S. market.
Let’s see that again:
Raising costs squeezes the margins of Mexican smugglers who, like all good businessmen, will scale back their operations, thus reducing the supply that reaches the U.S. market.
I’ve tried re-reading the article to discover if Fisman is really being sarcastic instead of stupid, but I find no evidence to support that (feel free to set me straight if I missed something).
Let’s try the Economics for Dummies approach.
- If there is demand, supply will follow.
- Rising costs don’t result in reduced supply, but rather are passed on to the consumer.
- The higher the price, the higher the quantity that will be supplied.
- Squeezing suppliers merely results in pushing for more ruthless suppliers to rise to the top to take advantage of higher prices (black market economics)
Drug traffickers are used to having 10-20% of their product seized in the normal course of business and they simply plan to supply more to make up for it (at the source, the cost is ridiculously low). And yet, somehow making their route… inefficient is going to do them in?
Fisman then makes it even worse by using a variation on the ridiculous “more people dying means we’re winning” meme.
And even the rise in local violence may ultimately have a silver lining. The increased factional violence that has accompanied government crackdowns may ultimately weaken all of the governmentâ€™s adversaries. And itâ€™s not just rival cartels that take advantage of weakness to attackâ€”itâ€™s also led to a splintering among the dominant cartels as lower-level commandants split off to compete with their former bosses.
Gee, that might actually work long-term if the laws of economics were repealed and there were no black market profits involved in the drug trade. But since that’s unlikely, then all it means is a continual shifting of power to fill each vacuum that occurs.
When I took economics in college, it was at 8 am. I’m not a morning person and found it to be excruciating. I often fell asleep. Yet somehow I managed to get through that class without being entirely clueless.