Recessions and Vice

The impact of a recession on the economics of the illegal drug industry should seem obvious. People have less money, so they spend less on drugs. As a recent Irish Time article notes,

After 15 years of huge growth the trade has crashed, alongside the wider economy. Stockbroking firms don’t report on the condition of the cocaine business, but crime data from a number of sources reveal that the drug trade has contracted significantly in the recession and is now just as distressed as the housing market.

The value of drugs seized in 2010 was the lowest for 15 years, at €30.9 million, indicating a return to the levels of activity common before the boom. Long term, the drug-seizure trend has mirrored the wider economy: after rising steadily from the mid-1990s, it peaked in 2007 and 2008, with Garda seizures of more than €100 million worth of drugs in each of those years, before declining rapidly.

But this seems to fly in the face of conventional wisdom regarding drug use, which fears the ability of drugs to create their own demand. A fear which is used to justify the massive amounts of money spent in an attempt to constrain supply. It shouldn’t matter if people have less money, addiction should be the best guarantee for stable sales. A view which better explains the prevalence of drug use among the poor.

I wonder if what is happening in Ireland is merely a structural adjustment towards cheaper products–more meth than marijuana. It would make sense that drug gangs, used to a more affluent recreational drug use market would see declining sales as they inevitably leverage their existing sales infrastructure to market cheaper products.

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