Narconomics: How To Run a Drug Cartel

by Tom Wainwright

armed groups that control the cocaine trade in Colombia act as monopsonies. Under normal market conditions, coca farmers would be able to shop around and sell their leaves to the highest bidder. That would mean that in times of scarcity, coca buyers raised their bids, and the price of the leaf went up. But Colombia’s armed conflict is such that in any given region, there is usually only one group of traffickers that holds sway. That group is the sole local buyer of coca leaf, so it dictates the price, just as Walmart is sometimes able to set the price of the produce it buys. This means that if the cost of producing the leaf goes up—owing to eradication, disease, or anything else—it will be the farmers who bear the cost, not the cartel.