Such a strategy, if successful, would shift coca production to whatever country is next best at producing it; since coca can be grown in many different places, this shift is not likely to result in a very large increase in cost. Published estimates suggest that the cost of producing drugs abroad and transporting them to the United States represents only about 1 percent of their street price.
So, even if we succeed in doubling the cost of coca—which seems unlikely, given experience with elasticity of supply of other crops—the result would be only about a 1 percent increase in the price of cocaine and a correspondingly small decrease in the amount consumed. Thus, economic analysis suggests that pressuring other countries not to produce drugs is probably not a very effective way of reducing their use.
One interesting issue in the economic analysis of crime is the question of which legal rules are economically efficient. Loosely speaking, which rules maximize the total size of the economic pie, the degree to which people get what they want?
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This is relevant both to broad issues such as whether theft should be illegal and to more detailed questions, such as how to calculate the optimal punishment for a particular crime. Consider the question of laws against theft. At first glance, it might seem that, however immoral theft may be, it is not inefficient. If I steal ten dollars from you, I am ten dollars richer and you are ten dollars poorer, so the total wealth of society is unchanged. Thus, if we judge laws solely on grounds of economic efficiency , it seems that there is no reason to make theft illegal.
That seems obvious, but it is wrong. Opportunities to make money by stealing, like opportunities to make money in other ways, attract economic resources. If stealing is more profitable than washing dishes or waiting on tables, workers will be attracted out of those activities and into theft. As the number of thieves increases, the returns from theft fall, both because everything easy to steal has already been stolen and because victims defend themselves against the increased level of theft by installing locks, bars, burglar alarms, and guard dogs.
The process stops only when the next person who is considering becoming a thief concludes that he will be just about as well off continuing to wash dishes—that the gains from becoming a thief are about equal to the costs.
The thief who is just on the margin of being a thief pays, with his time and effort, the price of what he steals. So the existence of theft makes society as a whole poorer, not because money has been transferred from one person to another, but because productive resources have been diverted out of the business of producing and into the business of stealing.
A full analysis of the cost of theft would be more complicated than this sketch, and the social cost of theft would no longer be exactly equal to the amount stolen. It would be less to the extent that people who are particularly skillful at theft earn more in that profession than they could in any other, giving them a net gain to partly balance the loss to their victims. It would be higher to the extent that theft results in additional costs, such as the cost of defensive precautions taken by potential victims.
The central conclusion would, however, remain—that we will, on net, be better off if theft is illegal. This conclusion must be qualified by the observation that, to reduce theft, we must spend resources on catching and punishing thieves.
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Theft is inefficient—but spending a hundred dollars to prevent a ten-dollar theft is still more inefficient. Reducing theft to zero would almost certainly cost more than it would be worth. What we want, from the standpoint of economic efficiency, is the optimal level of theft. We want to increase our expenditures on law enforcement only as long as one more dollar spent catching and punishing thieves reduces the net cost of theft by more than a dollar.
Beyond that point, additional reductions in theft cost more than they are worth.
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This raises a number of issues, both empirical and theoretical. The empirical issues involve an ongoing dispute about whether punishment deters crime and, if so, by how much.
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While economic theory predicts that there should be some deterrent effect, it does not tell us how large it should be. Isaac Ehrlich, in a widely quoted and extensively criticized study of the deterrent effect of capital punishment, concluded that each execution deters several murders.
Other researchers have gotten very different results.
One interesting theoretical point is the question of how to choose the best combination of probability of apprehension and amount of punishment. One could imagine punishing theft by catching half the thieves and fining them a hundred dollars each, by catching a quarter and fining them two hundred each, or by catching one thief in a hundred and hanging him. How do you decide which alternative is best?
At first glance, it might seem efficient always to impose the highest possible punishment.
The worse the punishment, the fewer criminals you have to catch in order to maintain a given level of deterrence—and catching criminals is costly. One reason this is wrong is that punishing criminals is also costly. A low punishment can take the form of a fine; what the criminal loses the court gains, so the net cost of the punishment is zero. Criminals generally cannot pay large fines, so large punishments take the form of imprisonment or execution, which is less efficient— nobody gets what the criminal loses and someone has to pay for the jail.
A second reason we do not want maximum punishments for all offenses is that we want to give criminals an incentive to limit their crimes. If the punishments for armed robbery and murder are the same, then the robber who is caught in the act has an incentive to kill the witness. He may get away, and, at worst, they can hang him only once.
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One final interesting question is why we have criminal law at all. In our legal system, some offenses are called civil and are prosecuted by the victim, while others are called criminal and are prosecuted by the state. Why not have a pure civil system, in which robbery would be treated like trespass or breach of contract, with the victim suing the robber?
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Such institutions have existed in some past societies. In fact, our present system of having the state hire professionals to pursue criminals is actually a relatively recent development in the Anglo-American legal tradition, dating back only about two hundred years. Derk Wiersum was the lawyer for Nabil Bakkali, a crown witness in a case against 16 men accused of five murders.
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