Narconomics: How to Run a Drug Cartel

by Tom Wainwright

For this reason, no analyst of the beef industry would calculate the price of a live steer mooching around on the Argentine pampa using restaurant data from New York City. Yet this is effectively how the value of heroin seized in Afghanistan or cocaine intercepted in Colombia is sometimes estimated.

First, there is an overwhelming focus on suppressing the supply side of the business, when basic economics suggests that addressing demand would make more

In other words, it’s not that the eradication strategy is having no effect. Rather, the problem is that its impact is felt by the wrong people.

The more they spread the word about their good-value, high-quality drugs, the more they risk arrest: when a product is illegal, there is only so much advertising one can do.4 The result is called a network economy. Players deal only with people who are part of their network, whether they be family, friends, neighbors, or former cellmates, rather than participating in an open market.

(some criminologists believe that the fall in violence in New York City in the 1990s was partly due to drug dealers’ adoption of mobile phones). The Internet age, in which drugs are ordered online and delivered in the mail, takes this process a step further: dealers no longer even need to leave their homes.

The vast increase in spending on border security has inadvertently transformed the people-smuggling business from an optional, cheap, amateur affair into a near-compulsory, very expensive, and cartel-dominated one. It is a gift to organized crime.