Wednesday, August 29, 2007

Basic laws of economics

I think the first half of Simon Jenkins' article in today's Guardian is largely correct. Efforts to curb heroin supply from Afghanistan have gone poorly. I worry that he attributes too much of the failure to incompetence and not enough to conditions; like the shortage of troops last year when the Helmand insurgency really got going. Pointing out that wouldn't be worth a post though.

It is the second half of his article that troubles me as it is entirely premised on this little nugget:

"Every schoolchild economist knows demand will always attract supply."


Jenkins thinks he's really bloody clever but his little "basic law", as the blurb at the beginning of the article calls it, is clearly untrue. Consider this example:



I would love to own a talking taco that craps ice cream. There is clearly demand for such a product and yet I've never found a supplier. That's because it is impossible to produce. Similarly my demand for going into space is unlikely to be sated any time soon. It cannot be provided at a price I can afford to pay.

Now, drug demand will usually be relatively inelastic, it will only fall slowly with rising prices, because addiction makes addicts willing to absord quite a high increase in price, they'll steal if they need to. Still, the idea that it is impossible to seriously reduce the quantity of something bought and sold through increasing the cost of supply alone is obviously wrong. If we make using heroin as expensive as going to space then people won't be able to afford it and heroin addiction will plummet.

The important question is, therefore, whether it is practicable to increase the price enough that heroin users start giving up. Understanding that question requires the kind of hard analysis that simplistic and arrogant statements like Jenkins' are designed to avoid.

Cross-posted from CiF Watcher.

5 comments:

Sir James Robison said...

...Jenkins thinks he's really bloody clever but his little "basic law", as the blurb at the beginning of the article calls it, is clearly untrue...

Got it in one, Matt.

Mountjoy said...

My understanding is that a lot of heroin from Afghanistan ends up being consumed by Labour-supporting barristers from Islington who read the Grauniad. Does Jenkins have a basic law of economics for that too?

Vino S said...

I see you are missing what i think was the main point of the article. A lot of crime and anti-social behaviour flows from drug use. The argument is that, by legalising it, we would dismantle the criminal networks that make their money form this and reduce the need of addicts to steal for a fix. If people are serious about reducing crime, this is something that should be considered. After all, until about 1970, doctors regularly used to prescribe heroin to addicts. That, arguably, kept heroin addiction under control. It only really rose in the 70s, 80s and 90s.

Matthew Sinclair said...

That wasn't remotely the main point of the article.

William Gruff said...

Forbidding Br*tish soldiers from destroying the poppy fields that they have been photographed walking through (in the course of their duties) and are thus in possession of, so as not to 'alienate' the natives, may have something to do with the supply problem.