Free trade – The market for prohibition

Free trade – The market for prohibition

By M. L. Simon

Free trade-The market for prohibition

The market in prohibited substances is one of the clearest examples of free market unfettered capitalism that can be found anywhere on the planet.

It is the essence of supply and demand in the face of numerous hostile forces. These hostile forces help illuminate the nature of market economics.

Let us start at the beginning. The beginning is demand. People want. And they are willing to make a certain effort to get what they want. Ever since we mostly left the barter system, we measure wants in dollars or some other medium of exchange. So we have demand.

What limits demand? The amount of effort required to satisfy demand. We buy beans by the pound but not diamonds. Why? Because diamonds cost way more. So we can say as a general rule that as price goes up, demand goes down.

So we have demand. From demand comes supply. I know where to get beans for 60 cents a pound, and I can sell them for a dollar. After all the expenses are accounted for, I will have a few beans left over for myself. Sell enough pounds of beans, and I will soon be eating more than beans.

What limits supply? If the price of beans goes below my cost of supply, I’m not going to be buying any more beans. In fact, if the price of beans goes below my cost to deliver them to the customer, I’m certainly going to reduce my bean buys.

So by the magic of the market where people can exchange information on supply, demand and prices, supply comes into balance with demand, with the price always fluctuating in order to keep supply and demand in balance.

How does this apply to dope? Government policy in this area is to unbalance the supply and demand factors in order to disrupt the market. How does this work? The government goes looking for “contraband.” Sometimes the government can find it. Government claims it finds10 percent. I claim it is closer to 1 percent. In any case, this risk factor means I can’t be sure any particular shipment will get through. But I have customers. So what do I have to do? Until I can be assured of a steady flow, I have to ship more than initial demand would account for. These extra shipments will be accounted for in the price I can charge. A risk premium.

The risk premium brings extra supplies on the market—a lot of extra supplies. This means I have to have more customers. I have to PUSH the dope. If I don’t push the dope, my market collapses. After all, these are agricultural commodities we are talking about, vegetable matter or refined vegetable material. Eventually, the distribution channels get efficient, the bribes regularized, and prices drop. Always. Supply and demand balance at a price.

Repeat—supply and demand balance at a price. No government anywhere ever has been able to beat this law of human nature for very long. In fact, if you say that life and death balance at a certain rate of energy flow, you have the essence of biological relations. If cats can’t deploy the energy to run fast enough, there will be more rabbits. If the rabbits get too slow, there will be more cats, for a while—until it all comes back into balance.

Just so with the market for prohibited substances. Government can disrupt the markets for a time. But they always come back into balance, which is why fighting drugs spreads them. This is how markets destroyed the Soviet Union. Markets can be understood. They can be, to a certain extent, regulated. Information can be gathered and disseminated. Good suppliers can be separated from the bad. But the one thing you cannot do is to prevent supply and demand meeting at a price.

I put this misunderstanding down to the lack of economics training in school. If more people understood economics, fewer would fall for the illusion of prohibition.

This week’s saying: What is the difference between a pile of vegetables and a million dollars? Prohibition.

Ask a politician: Do you support drug prohibition because it finances criminals at home or because it finances terrorists abroad?

This week’s politician:

Senator Mitch McConnell (KY)

Voice 202-224-2541

FAX 202-224-2499

M. Simon is an industrial controls designer and independent political activist. (c) M. Simon – All rights reserved. Permission granted for one-time use in a single periodical publication. Permission also granted for concurrent publication on the periodical’s www site.

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