Informing America's Policy on Illegal Drugs What We Don't Know Keeps Hurting Us (2001) / Chapter Skim
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5 Supply-Reduction Policy
5 Supply-Reduction Policy
Pages 137-186
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From page 137... ...
It is inevitably difficult to assess the effects of the diverse activities that, taken together, comprise the nation's effort to diminish illegal drug trafficking and use. The present state of knowledge varies considerably across the different policy instruments, with a considerable amount known about some instruments and little at all about others.
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From page 138... ...
The discussion in Chapter 6 pays particular attention to both the declarative and deterrent effects of sanctions against use of illegal drugs. Given the high rate of incarceration under current drug sentencing and its financial and human costs, such research is imperative.
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From page 139... ...
In this chapter, we concentrate on enforcement and other policy instruments that aim to reduce drug supply. We discuss the problems of measuring or otherwise estimating the effectiveness of supply-reduction efforts, assess current knowledge of retail drug markets, explain why an understanding of these markets is important for supply-reduction policy, and assess knowledge of the extent to which arrested drug dealers may be replaced by others.
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From page 140... ...
That is what we aim to do in this chapter and the next. We note, however, that findings of either efficacy or inefficacy cannot determine whether the nation should enhance, reduce, or abandon efforts to reduce drug supply and to enforce drug laws.
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From page 141... ...
Such enforcement adds the threat of arrest to all the other reasons that already exist to avoid using illegal drugs and brings current drug users into the criminal justice system, where they can be sent to jail or sent to drug treatment alternatives to jail. Plausible Efficacy: Reasoning About Supply-Reduction Efforts To begin our analysis of supply-reduction instruments, it is useful to lay out the logic that links supply-reduction policy to drug use.
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From page 142... ...
Indeed, the best current estimates of the elasticity of cocaine consumption with respect to price is that it lies between -0.59 and -2.5: if accurate, this means that a 10 percent increase in the price of the illegal drugs will lead to at least a 5.9 percent reduction in overall levels of use. Apparently it is not true that all drug users will do anything or pay any price (although some of them will do a lot and pay a lot)
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From page 143... ...
and of enforcement efforts (which expose drug dealers to the specific threat of arrest by government agents)
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From page 144... ...
For these reasons, impulseresponse analysis of supply-reduction policy poses a formidable challenge. In the absence of data on drug supply, impulse-response analysis of supply-reduction policy has mainly sought to connect policy to domestic drug prices.
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From page 145... ...
Time-series data describing spending on enforcement are often juxtaposed with data on drug prices, the idea being that the effects of enforcement should be seen in the price data. We first examine issues that arise in impulse-response analysis relating specific enforcement activities to particular fluctuations in domestic drug prices.
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From page 146... ...
The discussion below focuses on issues that would arise even if satisfactory data were available. Enforcement Activities and Domestic Drug Price Fluctuations Efforts to connect specific enforcement activities to particular price fluctuations must inevitably confront the basic fact that enforcement activities are not the only notable events that may affect drug prices.
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From page 147... ...
Moreover, the time path of the response may vary geographically, depending on the nature of the drug distribution networks and enforcement activities in different locales. If a single enforcement activity could be undertaken in isolation, as in a laboratory experiment, it would be relatively straightforward to track the time path of the response in drug prices.
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From page 148... ...
Enforcement and Long-Term Price Trends Impulse-response thinking has often been used to infer the broad effectiveness of interdiction and domestic enforcement policy from longterm trends in drug prices. The Institute for Defense Analyses (IDA)
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From page 149... ...
The question is: What should be made of these features of drug prices? It has been particularly common to observe that in the 1980s, sharp increases in spending on domestic enforcement and interdiction coincided with sharp decreases in the domestic prices of cocaine and heroin.
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150 (suo!
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From page 151... ...
At the same time, the fact that the prices of illegal drugs have remained well above the prices of similar legal commodities suggests that policies seeking to reduce drug supply have had some effect on prices. It is difficult to go beyond these broad statements in the absence of a deeper understanding of the manner in which drug markets have operated in the nest 20 tJ 1 1 years.
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The Office of National Drug Control Policy estimates that from fiscal year 1981 to 1989, federal spending on treatment doubled and spending on prevention increased by a factor of 8 (Office of National Drug Control Policy, l999b)
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First, as we discussed in Chapter 3, the STRIDE data do not constitute a representative sample of retail prices. second, even if the price data were valid, price measures only the pecuniary cost of buying illegal drugs.
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From page 154... ...
bound the markup between 65 and 267. Finally, the border to retail markup is reported by the Office of National Drug Control Policy (1997b)
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The reasons for the coffee markup and the cocaine markup are likely to be very different. For illegal drugs, a relatively substantial fraction of the costs may be due to risk and asset seizures.
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Systems research can do much more to inform supply-reduction policy if a model's assumptions and parameter values have firm foundations. The central requirement is empirical research illuminating how drug production, transport, and distribution respond to interdiction and domestic enforcement activities.
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From page 157... ...
However, this potential cannot be realized quickly or easily. The committee recommends that the Office of National Drug Control Policy and other agencies support a sustained program of data collection and empirical research aiming to discover how drug production, transport, and distribution respond to interdiction and domestic enforcement activities.
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From page 158... ...
The geographic substitution suggested by the balloon effect has potentially strong implications for the effectiveness of crop-reduction policy. The New York Times article contains this passage: "One additional concern, both in Andean capitals and in Washington, is that any success against coca cultivation in Colombia will inevitably lead to a resurgence of coca growing in Peru or Bolivia." The article does not offer an explicit argument for this prediction, but the basis appears to be static competitive economic theory.
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From page 159... ...
Committee discussions with government analysts of drug production suggest that cocaine production may fit the simple competitive story in some important respects. First, resource constraints do not prevent substitution from occurring.
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These issues arise as much in discussion of domestic law enforcement as in discussion of interdiction policy. The remainder of this chapter examines questions related to domestic enforcement, beginning with the structure of retail drug markets.
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do policy interventions that increase the risks of selling cocaine or other illegal drugs (for example, an aggressive program of seeking out and arresting drug dealers) deter persons from dealing illegal drugs?
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We summarize below current knowledge and significant outstanding questions about aspects of retail drug markets that are especially important for policy analysis. The topics discussed are the social organization of retail drug markets, price determination in retail markets, issues of labor supply, and the problem of estimating demand functions and price elasticities of demand for illegal drugs.
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From page 163... ...
However, the committee is unaware of the existence of any research on the relations, if any, among social organization, prices, and purity. Two studies describe ways that drug markets have changed in response to increased police pressure (National Development and Research Institutes, 1998; Curtis and Wendel, 1999~.
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From page 164... ...
Moreover, sellers of highly adulterated powder cocaine in bars do not want to service injectors and freebasers, because doing so would attract unwanted attention. In an interview with two committee members, Richard Curtis of the John lay College of Criminal Justice described a situation in which a classical musician in New York sold cocaine to midtown clients, many of whom were in the fashion industry.
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Price Determination The forces that determine the retail prices of illegal drugs are not well understood. It is clear that prices are highly dispersed.
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Without reliable knowledge of how retail prices are determined, one can only speculate about the effectiveness of such programs. Ethnographers who study drug dealers and consumers can carry out some of the needed research.
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From page 167... ...
Therefore, it has not been possible to use the methods of labor economics to study labor supply in markets for illegal drugs. There have, however, been several ethnographic and other less formal studies of labor supply in retail drug markets.
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From page 168... ...
In summary, the available evidence is incomplete and conflicting on the extent to which drug dealing is a substitute for legitimate employment. A much better understanding of labor force participation and supply by drug dealers and potential drug dealers could be obtained if the
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From page 169... ...
Existing estimates of demand functions and price elasticities should be treated as suggestive first steps that are not conclusive. LAW ENFORCEMENT AND RETAIL MARKETS Two main objectives of law enforcement operations against retail drug markets are to reduce the number of drug dealers that operate in a city (or other geographical area)
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From page 170... ...
The state of knowledge of the relations among drug prices, search costs, drug-use prevalence, and drug consumption is discussed in Chapter 2. This section discusses what is known about the effectiveness of law enforcement operations in reducing the number of retail drug dealers in a city.
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From page 171... ...
The lack of data on the relevant outcome variables (numbers of drug dealers, search costs, prices, consumption) is a major obstacle to estimating the effectiveness of law enforcement operations against retail drug dealers.
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The sections that follow summarize current knowledge of deterrence and adaptive behavior and replacement and incapacitation of dealers. The committee concludes that very little is known about the effectiveness of law enforcement operations against retail drug dealers.
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. If, however, arrests occur primarily when drug dealing is highly visible and disruptive to the community, then measures of arrests could well be useful as indicators of the visibility of drug markets and the disruption that they cause.
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It is also possible that drug sales increased at locations that were separated from the SMART sites by more than two blocks. In summary, it is clear that drug dealers engage in various forms of adaptive behavior.
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To illustrate how replacement in drug markets works, it may be helpful to focus on the short-run response of a single local retail crack selling operation, as described by Curtis. In New York City, Curtis observed crews consisting of a crew boss or owner and his sellers or slingers.
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From page 176... ...
Focusing on the replacement of local crews provides an incomplete picture of whether recent increases in the incapacitation of drug dealers have resulted in significant reductions in local drug markets. The capacity to disrupt illegal drug markets will also depend on whether large numbers of the drug market's most powerful operatives have been incapacitated.
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From page 177... ...
He associates the recruitment of juveniles as a supplyside response to the growth in demand and as replacements for the incarcerated adults (Blumstein, 1995~. Conclusions and Recommendations The committee concludes that little is known about the effectiveness of law enforcement operations against retail drug markets.
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Carrying out these recommendations is a prerequisite to acquiring a better understanding of the effectiveness of law enforcement actions against retail drug markets. In addition, it is necessary to explore alternative approaches to law enforcement.
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From page 179... ...
and 36.8 percent black (Bureau of Justice Statistics, 1999:342~. Among persons convicted for felony drug offenses in state courts in 1996, 45 percent were white and 53 percent were black (Bureau of Justice Statistics, 1999:432; note that there are no comparable data for 1997~.
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From page 180... ...
Based on the 1998 NHSDA data, it has been estimated that 74.3 percent of all current (past 30 day) illegal drug users are white, 15.4 percent are black, and 10.3 percent are Hispanic, substantially equivalent to their proportions of the adult population.
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From page 181... ...
These data are needed to better understand the impact of interventions on intensity of consumption and the operation of retail drug markets. The same survey research would enable the nation to make progress in determining how well enforcement meets the normative expectation of evenhandedness.
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From page 182... ...
Caulkins, J., and P Reuter 1998 What price data tell us about drug markets.
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From page 183... ...
1999 Toward the Development of a Typology of Illegal Drug Markets. Unpublished paper presented to the Committee on Data and Research for Policy on Illegal Drugs, National Research Council, Washington, D.C., May 1999.
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National Research Council 1999 Assessment of Two Cost-Effectiveness Studies on Cocaine Control Policy. Committee on Data and Research for Policy on Illegal Drugs.
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Cities. Report prepared for the Office of National Drug Control Policy and the National Institute of Justice.
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From page 186... ...
Uchida, eds., Drugs and Crime: Evaluating Public Policy Initiatives. Thousand Oaks, CA: Sage.
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