The underground market for drugs is like any other market economy. Like all other markets, it is governed by the forces of supply and demand. When speaking about these concepts, it is valuable to have a concrete definition to return to. Supply, as defined in “Essentials of Economics” is “The ability and willingness to sell (produce) specific quantities of a good at alternative prices in a given time period, ceteris paribus.” (Schiller, 50). Similarly, demand is “The ability and willingness to buy specific quantities of a good at alternative prices in a given time period, ceteris paribus.” (Schiller, 50).
Regrettably, the demand for drugs is considered to be relatively inelastic (at least in the short term). As a result, an increase in prices, generally speaking, may not lead to a substantial decrease in the quantity of drugs demanded. In essence, addicts will buy no matter the price. Factors that affect demand may include income level, the time frame (i.e. spring break or New Year’s Eve), and the availability of other substitute goods.
In illegal drugs, as with most other goods, there are substitute goods available. When the price is high, consumers who are either unwilling or unable to pay, turn to other goods that are less expensive. Consumers will also shift to other goods if the product becomes too difficult to obtain. One of the most common substitutes for illegal drugs happens to be prescription drugs. Oxycodone, or Oxycotin is the main prescription drug used as a substitute for heroin since it is a powerful opioid, both are a derivative of poppies. At the same time, alcohol and cigarettes both function as substitutes, both are habit forming and addictive. There has been some thought to the idea that restrictive or prohibitive policies increase the consumption of substitute goods, such as alcohol, which then generate their own negative externalities. Externalities are costs that third parties bear. The negative effect of alcohol is widely acknowledged, reduced inhibitions leading to drunk driving and abuse as well as other negative externalities.
Supply of drugs is relatively elastic and an escalation in price will usually cause a large increase in the quantity of narcotics supplied. Several of the factors that affect supply include; government restrictions, seasonal and weather conditions, and the price and availability of factors of production.
With attention to supply and demand, government has two principal courses of action. Harm reduction (through education and information) or fixed, restrictive policies such as custom controls, and tough or extreme sentencing such as Thailand? Employs. Or, yet more policies imposing on freedoms such as no-knock police raids, incarceration, and confiscation of private property. Police has been known to resort to a form of setup and blackmail to gain informants, as neither users, nor dealers consider themselves victims.
All things considered, the key difference between the two approaches is that...