Cash flow, canabis and CBA scopes

By Dave Anderson:

From Reuters:

But Ciudad Juarez�s rising murder rate, currently at about 250 per month, appears to put it well ahead of other notorious world crime capitals such as South Africa�s Cape Town, Moscow, Baghdad, and Papua New Guinea�s capital Port Moresby, according to the Mexican and Foreign Policy studies.

In fact, in Ciudad Juarez during the first day of the conference where the Mexican study was presented, eight people were murdered in the city�s streets, including a prosecutor, a lawyer, two policewomen, a clown performer and a gardener...

Perhaps most worryingly is not that 10,000 troops and elite police stationed there have failed to stop the drug violence, but that local officials say they have everything under control.

I recently spoke with a leading drug market researcher and a former professor of mine who taught the most difficult and enjoyable class I took in grad school. He broke down the illegal drug market into four categories; diverted prescription drugs, specialty drugs/psychedelics, cannabis products and then expensive illicits. The first three categories have comparatively minimal social costs on aggregate; he favors maintaining prohibition on cannabis but recognized reasonably people with slightly different value weights could easily disagree.

His big focus is on the expensive illicit drugs that were further broken down into the uppers (cocaine products/meth) and downers (opiates), with the proviso that opiates are slightly less bad than uppers as maitenance dosing and replacement strategies can work to maintain individual functionality with addicts. He strongly (and convincingly) argued that this fourth class of drugs should be strongly prohibited because the social costs of prohibition, while high, are significantly lower than the social costs of massively increased addiction due to cheaper now licit drug production costs. 

 The one big question I had in this conversatin was about his modeling assumptions. I was curious about the geographic scope of the cost-benefit analysis. He stated that his modeling assumptions were limited to the US domestic market because the data availability and data reliability for integrating those streams into his model.

I argued in August, 2008 that we should consider the foreign policy costs of prohibition in that it creates a massive pool of black-market economic rents for someone to collect, and the black market delegitimatizes and weakens states in which they dominate --- in this case Mexico.

Traditional heavy sweeps and applying quasi-COIN tactics to Juarez do not seem to have either reduced the level of violence in the city; instead violence is still increasing, nor has it had a demonstrable impact on the availability of expensive illicits, althoughcocaine's street price has increased, which implies a drop in total consumption.  

The largest revenue stream for the cartels is marijuana smuggling, so cutting off a significant chunk of cartel cash flow by legalizing or at least decriminalizing canabis in the United States may be a net win in any cost-benefit analysis that incorporates foreign policy costs and benefits as well as domestic social welfare calculations.