Is prohibition increasing drug prices, or is the government just ripping everybody off? The lobster pot theory on marijuana price. (major edit on 16 December 2012)Just a minor theory that I have not done any serious research on, yet.
I hear that lobster traps are incredibly ineffective. Yes, lobster fishers catch plenty, but when the traps are watched it seems that many lobsters crawl all over them, even enter and take the bait without being caught, and the lobsters that show up on our plates are the exceedingly stupid lobsters. When the lobster industry catches a large number of lobsters, it really does not affect the lobster population in any meaningful way. A bit of information I recall from a TV show about lobster fishing, but I could not find the video online. What I did find is this, a study like the one the fisherman was describing:
LTV - Observations/Data (see the videos at this link)My suspicion is that the drug war is much like lobster fishing and our public servants are only catching the exceedingly stupid segment of the drug trade. The evidence for my theory? Law enforcement uses increasingly larger amounts of manpower, technology, and money, yet the price of the contraband they are chasing continues to drop. We are not examining a cause/effect relationship with lobster fishermen and street chemists, no not at all. It is just an interesting parallel to what is going on with the drug fishermen, aka, law enforcement.
Based on our observations of approximately 24 videos obtained during the summers of 1998-2000, we have drawn a number of conclusions, a few of which are listed below. For more details about these studies see our first manuscript on the subject (Jury and Watson, 2001) in the Publication section of this website.
1. A large number of lobsters approach and enter traps, yet typically we only catch 1-3 per trap haul because the vast majority escape. We estimate that 10% of the lobsters that approach a trap enter, and of the ones that enter, only 6% are caught. Over 75% of the lobsters that escape the trap do so through the entrance. Video 1, on the right, shows a lobster escaping through the entrance to the kitchen.
2. Lobsters are very active around traps during the day, as well as the night. This confirms other field observations indicating that lobsters in their natural habitat are not as strickly nocturnal as previously thought.
3. Agonistic encounters around traps appear to limit entry and stimulate exits. Video 2 shows a large lobster chasing away smaller lobsters and then entering the trap. Small lobsters are very hesitant to enter, while larger lobsters tend to move right in like the one shown in this video.
4. Once in the trap, lobsters tend to "defend" the resource. Video 3 demonstrates this behavior. This also limits entry and it is probably one of the main behaviors that lead to trap "saturation".
For years I have heard people I respect greatly talk about certain aspects of drug prohibition, like Dr. Milton Friedman:
According to Penn & Teller, the price of "a bag" of heroin had dropped from $30 to $4 while the purity has risen dramatically. From 5% heroin for the 1970s $30 bag, to 95% for the $4 bag. This matched the hearsay information I'd heard in a late 1980s trip back to college. The younger students were talking about heroin being used again and they seemed unaware that it was ever considered expensive.
I had to do a little hunting around to discover how much product is in a "bag" and it appears to be 100mg (0.10 grams). After revealing this information about the price drop/purity increase, all of the "experts" that P&T cite say throughout the video that drug prohibition and enforcement increase the consumer price of whatever is being prohibited. As good, sound common sense as this makes, it does not appear to be correct. It is so good and sound that Penn and Teller refuted it before a single interviewee asserted that drugs are "more expensive" and those assertions made it right past the editors. Dr. Friedman said the same thing, over and over again, while he was alive, that drug prohibition efforts created an artificially inflated price for those products.
In the case of heroin, there was once a cartel that kept the price high. I believe The French Connection was based on that cartel. It was not law enforcement keeping the price high as much as it was a tight knit community of heroin producers and traffickers.
One of my Economics professors (in the 1990s) compared the heroin market with the marijuana market of the 1970s. Heroin had protected geographic territories, protected by "gangsters," and the consumers could not easily switch suppliers. Indeed, the suppliers were in collusion and kept the price high. The raw material came from poppies that could not be cultivated just anywhere and there was some other processing involved.
I am not sure what happened to the heroin cartel. Like most cartels, it seems to have fallen apart.
Marijuana, on the other hand, is both industrial and a cottage industry. It is a plant that is easy to grow almost anywhere, and with sex and violence* could be cultivated into a quality product. People setup large indoor growing operations, and some try outdoor growing, while others grow small amounts in their basements, spare bedrooms, closets, garages, sheds, and just about anyplace else you can think of.
Marijuana, generally illegal in US States, and federally illegal throughout the country, seems to run about $300/oz. for "high grade" in most of the USA, according to http://www.priceofweed.com/, which seems to be a "grade" that was unavailable in the 1970s and superior to anything sold then. The PBS Frontline series investigated in 2011 and reported a production price of $1,606/Lb., or $100.375/oz., making it quite profitable at a 300% markup. They also reported that the 2011 end-user price is not much different from the price today. Also, from a cursory look at their reporting, the street price has more to do with the average income where it is being sold than anything else. But what of the historic price?
This short internet article gives some clues:
The Price of Marijuana
October 5, 2009
. . . Due to the increasing supply of this drug and the proximity of the border to Mexico, marijuana’s value has taken a full swing throughout the 90’s. Today, Marijuana can be purchased in Mexico for $100 to $200 per kilogram. Along the southwest border, Mexican marijuana goes for $400 to $1000 per pound and can also be bought for wholesale for $150 – $300 a pound. In the northwest and Midwest sections of the US, the average price of marijuana runs from $700 to $2000 per pound. California sells it at a high for about $2000 to $6000 per pound. . . .
So, what we are seeing is the opposite of what one would expect, the opposite of what Friedman predicted, and the opposite of what Penn and Teller's guests stated without challenge. The federal government certainly is not spending any less money on prohibition. Also, the information cited above came before Colorado and other States made marijuana relatively or completely legal at State level. So what is the deal?
First, as Dr. Milton Friedman cited in (I believe) an appearance on Donahue in 1980, if the general citizenry is not in agreement on a particular law or category of law, then the law is not going to stop them from continuing to behave contrary to that law. Friedman cited alcohol prohibition. In addition, I will cite the 55 MPH national speed limit (passed by Congress and signed by Pres. Nixon in 1974), that was largely ignored. Also, I will raise "hand roll" cigarette tobacco vs. "pipe cut" tobacco, where folks like me use the much cheaper pipe variety to avoid the excessive tax ($24/lb) on the cigarette variety, a tax that is supposed to discourage me from smoking cigarettes.
Since there appears to be little or no public resistance to illicit drug use, plenty of willing customers, and the sellers are not getting a monopolistic price, not even an unconscionable price, not even a high price, for their product. What it appears is that the consumer is getting a quite reasonable price for non-pharmaceutical drugs.
Federal, State and local governments all go "begging" to the taxpayer for more "enforcement" money, yet they do not seem to be able to impact the price, at all. They have no trouble filling jails with the folks who just "jump into the boat" so-to-speak, yet they do not put a dent in the alleged problem that they keep saying they need more money to fight. The prohibition has shaped up to be nothing more than a bureaucrat full employment scheme.
On this point I am in complete agreement with Dr. Friedman, and not enough people point this out. Most of people advocating and enforcing the prohibition in no way advocate jailing millions of people for possessing a little pot. The people who came up with this had no intention of creating the actual results that we see today. No, the vast majority of these people are well intentioned folk who think they are saving many more people from horrible mistakes.
These are the good intentioned people who pave the road to Hell. Quite a few of them sincerely believe that you or I will run out and try heroin if it becomes legal. They also sincerely believe that their efforts are preventing us from purchasing heroin right now. I will fully admit, I have no idea where to get heroin at this moment, and it might take me all of a weekend to figure it out. Availability is not what prevents me from trying it, or marijuana, at all. I simply have no desire to try it.
Additionally, all reports estimate the size of just the marijuana market at $50 Billion +/- $40 Billion, which shoots another hole into the "money buys everything" theory. The collection of customers and sellers in that market do not seem to have been able to buy any political cover at all with all that money. The efforts in legalization have come from libertarian moral quarters, in opposition to those opposed on moral grounds. In the case of Colorado 2012, the citizens passed legalization by referendum, over the objection of their elected officials.
Could it be that some of that money was used by the illegal producers to keep it illegal and create an artificially high price due to a hostile/risky environment? Possibly, but unlikely. At least there does not seem to be any evidence pointing to a drug lobby fueled by pot growers. The "keep it illegal" crowd appears to be driven by well meaning people who are sincerely against individual choice.
For the record: No, I do not favor any prohibitions, I do favor strict enforcement of damages against anybody who damages property or injures people, sober or not. Also, it should be the property owner's call if he wishes to allow intoxicant users (or anybody else) to be on his property, including businesses.
*"Sex and violence" in the sense that the female plants must not be exposed to pollen from the male plants, so the male plants are killed. If there are no male plants around, a female plant may switch sexes and pollinate other plants, so plants must be watched somewhat carefully and any switchers must be cut out.
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