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Back to the Drug War: The Street Price of Cocaine

To build on my recent post on the drug war (as well as to a broader enterprise on this subject), I took a look at the 2009 World Drug Report to check out the stats on the street price of cocaine.  This is a key metric, as one of the stated goals of US anti-drug policy is to force the street price of drugs upward so as to discourage purchase.

Further, it is a useful metric of drug war success as the expectations would be that increases military activity in producer and trafficking countries (like Colombia and Mexico) as well as increased attempts at both interdiction at the border and stricter law enforcement within the United States would crimp supply and therefore drive up price.  It is basic market-based economics.  However, despite an ever-increasing amount of pressure on cocaine producers, traffickers, pushers, and users, the trend line for almost two full decades in clearly in the wrong direction if one is looking for success from US drug policies.  It hardly bespeaks of good return on investments for American taxpayers.   Further, one should keep in mind that the timeframe reflected below is an era of ever-increasing anti-drug spending.  For example, 1998 into the 2000s is the period of Plan Colombia, an intense increase in anti-drug spending in Colombia by the United States.

image

The data are from page 220 of the 2009 World Drug Report [PDF] and I plugged them into Excel and produced the above.

Now, my point is quite simple:  we are spending billions of dollars a year to try and stop cocaine production and the trafficking of said substance into the United States.  We are not getting what we are paying for.  The numbers above clearly demonstrate that even with increased crop eradication and constant “record seizures” of the drug by land and at sea are not accomplishing the stated goals of the policies and therefore calls into serious question whether they are worth the expenditures in question.  Indeed, it is quite clear that the ability of coca famers to produce enough coca leaf to overtake whatever successes that are accomplished in crop eradication and cocaine seizures is quite clear.  Such overproduction is simply the cost of doing business.  This is a lesson, by the way, that we need to keep in mind in Afghanistan, where the policy direction it towards crop eradication of opium poppies.  I predict now that even if thousands upon thousands of hectares or opium poppies are eradicated, that the poppy farmers will be able to out produce the eradicators.

Recognizing fully that these are complex issues, it seems to me that one of the first things that have to be made clear to the public (and it is highly unpopular message) is the simply fact that we are not getting what we are paying for in the drug war.  People think that we are getting security and success from the process, but in point of fact the policies are utter failures.

We need a radical reassessment of what we are doing here instead of pretending like the policies are worth the billions spent annually on this failed policy.  The problem is that we typically look at this issue wholly from a position of fear (fear that our kids will become addicts, for example) rather than logic and an actual cost/benefit analysis.  Indeed, our entire drug policy is built on irrational fears (see, e.g., the movie Reefer Madness).

Some of my previous writings on the subject by topic are listed below:

 

Afghanistan

Crop Eradication

Drug Price

Seizures

War on Drugs (General)

Related Posts:

About Steven L. Taylor
Steven L. Taylor is Professor and Chair of Political Science at Troy University. His main areas of expertise include parties, elections, and the institutional design of democracies. He is the author of Voting Amid Violence: Electoral Democracy in Colombia and is currently working on a comparative study of the US to 29 other democracies. He earned his Ph.D. from the University of Texas and his BA from the University of California, Irvine. He has been blogging at PoliBlog since 2003. Follow Steven on Twitter

Comments

  1. steve says:

    My favorite book on this topic is Cop In The Hood by Peter Moskos. He also notes that the price of cocaine has changed very little. We try to treat drugs the same way we treated alcohol during Prohibition, with the same bad results. The War on Drugs is all costs with no results.

    Steve

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  2. TangoMan says:

    Now, my point is quite simple: we are spending billions of dollars a year to try and stop cocaine production and the trafficking of said substance into the United States. We are not getting what we are paying for. The numbers above clearly demonstrate that even with increased crop eradication and constant “record seizures” of the drug by land and at sea are not accomplishing the stated goals of the policies and therefore calls into serious question whether they are worth the expenditures in question. Indeed, it is quite clear that the ability of coca famers to produce enough coca leaf to overtake whatever successes that are accomplished in crop eradication and cocaine seizures is quite clear.

    You’re overreaching quite a bit with your analysis. You’ve set up a form of strawman argument by stating that the goal is “to try and stop cocaine production and the trafficking of said substance into the United States” and then you show that a falling cocaine price over time indicates that more supply is getting through and thus the policy is failing to meet it’s goals.

    What though of a policy which is designed to serve as an impediment to distribution? How would we judge the success or failure of that policy? On the same data table you cite is price data for cocaine in a number of other countries. Let me throw a few data points into this example:

    United States: US Street price, 2007 = $120/gram
    Denmark: US Street price, 2007 = $74/gram
    Belgium: US Street price, 2007 = $67/gram
    Netherlands: US Street price, 2007 = $59/gram
    Portugal: US Street price, 2007 = $55/gram
    Switzerland: US Street price, 2007 = $73/gram

    Other than Norway and Iceland (pop. 317,000) with prices of $164/gram, the US price is far higher than other markets.

    There must be some reason that cocaine costs more in the US than it does in landlocked Switzerland. If policymakers hold the position that a benefit is delivered to society when cocaine costs more rather than less, then clearly it would follow that the Drug War is working because it is providing benefit to the US. The question that remains is whether the premise of benefits being delivered is an accurate reflection of real life and also the secondary issue of value gained for funds expended.

    The longitudinal data on wholesale prices, from 2001 to 2007 show a price increase from $21,500/kg to $31,000/kg. Why is that? Do you know? If you don’t then it becomes a little hard to argue that you can infer that the cause of the 1990 to 2007 price decline is solely because of the cocaine producers unlimited ability to put more crops into production thus continually boosting supply thereby causing the resultant price decrease. Your data also shows (from my cursory pass) that the ratio between street price and 100% purity price is increasing, which is suggestive that the price drop that you’re showing is partly a reflection on decreasing purity that arises from increasing cutting of cocaine with fillers.

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  3. TangoMan:

    You are incorrect. One of the goals of US drug interdiction policy is to reduce supply and therefore drive up price. Indeed, the vast majority of US anti-drug policy is very much focused on the supply side. Why else do you think that we spend so much money in Colombia? That is a supply-side policy.

    This is not a strawman–not at all. If it seems like one it is probably because US anti-drug policy is ultimately pretty simplistic.

    The point on cocaine price in the US, which you are utterly ignoring, is that that over almost two decades (indeed, even before that, but I don’t have the data handy) the price has not gone up despite all the spending.

    BTW, I agree that prohibition drives up price, but it isn’t driving it up enough to actually decrease demand.

    However, you are eliding the fundamental point, and it is that we have spend billions and the wholesale price has trended downward.

    If you don’t then it becomes a little hard to argue that you can infer that the cause of the 1990 to 2007 price decline is solely because of the cocaine producers unlimited ability to put more crops into production thus continually boosting supply thereby causing the resultant price decrease.

    However, the fact of the matter is (and I will post on it later) the cultivation rate has been steady, if not trending upward during the period of all this spending. So, yes, it can be demonstrated that the producers simply are able to keep up production. It is all quite straightforward.

    Your critique doesn’t address the basic point, btw, which is to demonstrate that we actually are getting something for the money we are spending. Slight variations in purity don’t cut it (no pun intended).

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  4. anjin-san says:

    Might be interesting to look at the harm to society done by drugs in the U.S. as opposed to Denmark, with its lower drug prices. How much is each spending on it’s prison system on a per-capita basis? What are the rates of violent crime related to drugs? The list goes on.

    The high price of cocaine in the U.S. is not stopping anyone from doing drugs. I did the stuff for 15 years, in all that time I can recall one 2 week period when it was pretty difficult to get the stuff. People who cannot afford coke will look for more bang for their buck, often by doing meth, which is much nastier stuff even than coke.

    History teaches us that where there is a demand, there will ALWAYS be a supply.

    What are we getting for the money we are spending? Politicians can blow smoke about how they are “tough on drugs”. We have a thriving prison industry with the highest incarcaration rate in the world. A high percentage of black males is in the justice system. Police departments are corrupt. Our rights are eroded. The police have become more militarized. And people are doing just as many drugs as they ever were.

    I was in the nightclub business for 20 years. I have been on the road with major rock bands. You know where the most drugs were? In high school. It was the Costco of drugs.

    To say we are getting royally screwed on our investment is an understatement.

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  5. TangoMan says:

    You are incorrect. One of the goals of US drug interdiction policy is to reduce supply and therefore drive up price.

    I realize that we’re working on blogs here, so precision can’t be the order of the day, but my argument wasn’t directed at how you stated the policy in your comment “to reduce supply and therefore drive up price” it was directed at how you stated the policy in your original piece “to try and stop cocaine production and the trafficking of said substance into the United States.”

    It is a strawman to say that the policy is designed to stop cocaine production and therefore the policy is a failure if cocaine production isn’t stopped and, in fact, more supply is coming into the US.

    The policy as you clarified it in your comment is to reduce supply and drive up price. It was to this policy that I was addressing the international comparison. There are two ways to judge the success of this policy – 1.) contemporaneous comparison within the international system; and 2.) longitudinal comparison within the US.

    When both are considered, then we’re at a stalemate, because the contemporaneous data shows that the policy delivers results, while the longitudinal data shows that the policy is failing.

    The debate should shift, I believe, to first evaluate which metric is the most useful to use in judging policy efficacy.

    BTW, I agree that prohibition drives up price, but it isn’t driving it up enough to actually decrease demand.

    I’d refine your statement to read that it’s not driving the price up enough to actually decrease demand to an arbitrary level which you, or others, feel is significant enough to justify the War on Drugs policy. The reality in the drug marketplace, and in most other marketplaces, is pretty simple, a marginal price increase will yield a marginal demand decrease.

    However, you are eliding the fundamental point, and it is that we have spend billions and the wholesale price has trended downward.

    It might seem like I’ve elided the point but that’s only if you discount the two metrics I mentioned above and focus your analysis solely on longitudinal comparisons. The cross-national data shows quite clearly that the price of cocaine is higher in the US than in most every other Western nation.

    So, yes, it can be demonstrated that the producers simply are able to keep up production. It is all quite straightforward.

    I didn’t argue that they couldn’t. I argued that there were limits on how far that growth curve would take them. Land for cultivation is limited, especially so land that is not easily accessed. Yes, there is still slack in the system but that slack is being payed out and at some point the slack is gone and then the limits kick in. I have no clue where those limits lie. My point is that at some point the lack of slack will end the cycle of distributors simply pushing more product through the drug pipeline in order to overwhelm the effect of drug seizures.

    Your critique doesn’t address the basic point, btw, which is to demonstrate that we actually are getting something for the money we are spending.

    I didn’t realize that this was the central point of the argument. Frankly, on a cost/benefit analysis, I’m not sure of where I stand because I haven’t looked at the data and arguments. I’m certain that we’re getting something because our drug prices here are more expensive than elsewhere which means that there is lower consumption than would be the case if prices were lower. This position is built on the supposition that less drug consumption is better than more drug consumption.

    Might be interesting to look at the harm to society done by drugs in the U.S. as opposed to Denmark, with its lower drug prices.

    I agree that a properly conducted study of this sort, with proper controls, would be an interesting addition to the debate.

    We have a thriving prison industry with the highest incarcaration rate in the world.

    As a stand-alone fact that doesn’t bother me in the least. It’s only if there is unjust incarceration that I would be concerned. So, a user of drugs who has committed no crimes in support of his drug habit is someone I would consider to be unjustly incarcerated. Someone who has committed non-drug crimes in order to facilitate their involvement with drugs is someone I consider to be justly incarcerated.

    A high percentage of black males is in the justice system.

    Again, same rationale as above. The simple fact of racial disparity doesn’t bother me. Unjust incarceration though should be stopped.

    Police departments are corrupt.

    You mean like “black people are . . . ” and “Polish people are . . . ” Your blanket statement is meaningless. Some police are corrupt, some aren’t. Some departments are corrupt, others are not. Some are corrupted by drug money, others are corrupted from other influences.

    Our rights are eroded.

    Certainly, but this complaint coming from liberals stinks too much on the hypocrisy scale in that they’re always so willing to throw rights under the bus so long as they advance some agenda dear to the liberal vision of how society should function. You guys have no legitimacy when it comes to the issue of “rights being eroded” and it’s best for you to leave that issue to others, people with more credibility, to argue.

    The police have become more militarized.

    Certainly. Drug investigations and encounters do give police more opportunity to act in militarized manner, but I don’t think that the drug war is the cause of this. Police are acting out on their warrior fantasies – this is a cultural matter, and the vision of how police function in society has changed over the years.

    And people are doing just as many drugs as they ever were.

    I’m not so sure about that. They’re still doing drugs and there are sub-cultures which do a lot of drugs, but just as we’ve seen reductions in the rate of smoking and alcohol consumption, I’m under the impression that the rate of illegal drug consumption has also fallen. If you have data that shows that the rate is increasing, or has remained static, while the rate of consumption for alcohol and tobacco are decreasing, I’d like to see that data.

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  6. steve says:

    Per Moskos, cocaine was about $230 per gram in the early 70s. The price has dropped.

    “There must be some reason that cocaine costs more in the US than it does in landlocked Switzerland.”

    Demand? About 16% of Americans have reported using cocaine. The next highest country is about 4%. Looking at annual prevalence, we are 2 1/2 times ahead of Switzerland. Cocaine does not appear to be that popular there.

    http://en.wikipedia.org/wiki/List_of_countries_by_prevalence_of_cocaine_use

    Steve

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  7. It is a strawman to say that the policy is designed to stop cocaine production and therefore the policy is a failure if cocaine production isn’t stopped and, in fact, more supply is coming into the US

    But I didn’t say that. I said that part of the policy is so disrupt supply that price will increase to the point that users will stop using. As such, looking at price over time is perfectly valid metric.

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  8. And, by the way, the whole point of the discussion is a cost/benefit analysis. It is a discussion that we, as a country, never have. Instead we end up talking about whether drugs are bad or really bad and therefore ignored the billions we are spending to no effect.

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  9. anjin-san says:

    Certainly, but this complaint coming from liberals stinks too much on the hypocrisy scale in that they’re always so willing to throw rights under the bus

    For a guy who thinks blanket statements are meaningless, you sure make a lot of them.

    Unjust incarceration though should be stopped

    Yes it should. Sadly the “war on drugs” makes injustices large and small so much easier to come by.

    Drug investigations and encounters do give police more opportunity to act in militarized manner, but I don’t think that the drug war is the cause of this

    It may not be the cause, but it certainly greases the skids…

    Some police are corrupt, some aren’t

    I never said otherwise. But I do doubt there is a police department of greater than 20 men in this country that is untouched by corruption. In extreme, but not all that uncommon cases, the difference between the good guys and the bad guys is that the “good” ones have guns, badges, and the force of law behind them.

    And people are doing just as many drugs as they ever were.

    Allow me to elaborate. People who want to do drugs are doing just as much as they ever were. The peak of illicet narcotics use in the US was probably 1979. Use is down, but not because of any success in the war on drugs.

    For one thing, we know the stuff is between bad for you and deadly, depending what you are using. This was not the case in the 1970′s, when cocaine was not widely regarded as being addictive. “Recreation drug use” was still a buzzword back then.

    In a lot of circles where it was once accepted, drug use is simply no longer kosher. My generation is sophisticated about the dangers of drugs, and I pass that hard won knowledge to young people any time I get a receptive audience. Times that by millions. A heartfelt message from someone who has actually been there is more effected that a hundred canned talks by a D.A.R.E. officer.

    So is drug use down? Sure. So is smoking, so is drinking, and so is eating crap that is really bad for you, at least among adults. We found out the hard way what the costs are. The war on drugs had little to nothing to do with it, and it has caused a great deal of damage to society along the way.

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  10. TangoMan says:

    And, by the way, the whole point of the discussion is a cost/benefit analysis. It is a discussion that we, as a country, never have. Instead we end up talking about whether drugs are bad or really bad and therefore ignored the billions we are spending to no effect.

    I’m with you on this front. I recognize that there are pros and cons to both sides, that there are costs and benefits, but absent specific data I’m not sure how to arrive at a decision which, to my standards, properly weighs costs versus benefits.

    Demand? About 16% of Americans have reported using cocaine. The next highest country is about 4%. Looking at annual prevalence, we are 2 1/2 times ahead of Switzerland. Cocaine does not appear to be that popular there.

    I’m open to that argument, but I don’t think it’s really going to pan out because it assumes that drug suppliers are shipping excess product to Switzerland and the result of this excess supply is a lowering of price. Cocaine is, I’d say, about as fungible as oil, so there exist plenty of opportunities for market arbitrage. What I think is more likely is that there are fewer interdictions and there is greater competition on the supply front, meaning that there is less risk to suppliers in Switzerland so this results in greater supply competition than is seen in the US where the risk to suppliers is greater.

    How valid is self-reporting though? Will others, especially those who are heavily in invested in the uniformity of mankind proposition, accept the reasoning that different groups have different propensities? I think that you’re going to have a hard time selling the notion that some groups are more prone to drug abuse than others.

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  11. Michael Reynolds says:

    The drug war puts a lot of African-Americans in prison. So long as that is the case, TanoBrimelow will argue fort it.

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  12. [...] HOME|ABOUT|POLICIES|CONTACT|FEEDS|CONTESTS|LINKS « Previous | Home | Next » Drug War 101 (With an Emphasis on Coca [...]

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  13. [...] (Note:  originally written and posted at OTB) [...]

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  14. Zach says:

    Am I to take the good linear fit here to mean that I’ll be paid to do cocaine in 2020?

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  15. The Q says:

    By the way what is the definition of “wholesale street price”? Is this the price the street dealer sells it to the customer? or is this the price the dealer gets it for before mark-up?

    It seems to me that $100 is the retail price (and in fact according to Steve Plunk, you can actually buy a G for a $60 retail price in some cases…just kidding, he wouldn’t know the price of blow, since he only does crack..or so it seems judging by his comments).

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  16. Robert says:

    The problem with the graph you reference is that it doesn’t show what the price of cocaine would be BUT FOR the war on drugs. While it is hard to construct an alternate reality, there is good reason to believe it would be significantly lower if the war on drugs wasn’t taking out drug lords, making trafficking harder, and actively campaigning against drug use/trafficking.

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  17. @Robert,

    Yes, sans the Drug War the price would be quite a bit lower. But part of what interdiction should do is drive price up and yet during the year that we spent the most money on interdicting cocaine the price went down. Do you not see the problem there?

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  18. [...] such, when I pointed out that from 1990-2007 that the wholesale price of cocaine has declined, the reason for doing so is to [...]

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  19. Matt says:

    Wow I had no idea coke prices was running so far below the national average here.

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  20. [...] such, when I pointed out that from 1990-2007 that the wholesale price of cocaine has declined, the reason for doing so is to [...]

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  21. [...] “Back to the Drug War: The Street Price of Cocaine“, Steven L. Taylor, Outside the Beltway, 16 May 2010 [...]

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  22. kal says:

    how are adulterants taken into account in this analysis?

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