Economic aspects of illicit drug markets and drug enforcement policies

Supply-side response to declining heroin purity: fentanyl overdose episode in New Jersey

The inelastic price demand observations characteristic of illegal drug markets have led to the conclusion that the burden of a negative supply shock would be completely reflected to consumers. This paper argues that the increasing availability of prescription opioids may threaten heroin sellers' profit margin and force them to find alternative methods to compensate buyers in the event of a supply shock. We investigate the 2006 fentanyl overdose episode in New Jersey and argue that the introduction of non-pharmaceutical fentanyl, its spatial distribution, and the timing of overdose deaths may have been related to trends in heroin purity. Using medical examiner data, as well as data from the Drug Enforcement Administration, Office of Diversion Control on retail sales of prescription opioids in a negative binomial specification, we show that month-to-month fluctuations in heroin purity have a significant effect on fentanyl-related overdoses, particularly in those areas where prescription opioids are highly available.

What economics can contribute to the addiction sciences

AIMS

The addiction sciences are intrinsically multi-disciplinary, and economics is among the disciplines that offer useful perspectives on the complex behaviors surrounding substance abuse. This paper summarizes contributions economics has made in the past and could make in the future towards understanding how illegal markets operate, how prices affect use, how use generates various consequences, and how policy shapes all three.

METHODS

Review of literature, concentrating on illegal drugs as insights concerning markets are particularly salient, although we also mention relevant studies from the alcohol and tobacco fields.

FINDINGS AND CONCLUSIONS

Economics offers tools and topical expertise that usefully complement other disciplines associated traditionally with the addiction sciences. Its value goes far beyond the ability to monetize non-monetary outcomes or to calculate a cost-benefit ratio.

Measuring the Cannabis Market in Finland—A Consumption-Based Estimate

According to a frequently voiced opinion drug seizures represent 5 to 10 percent of drug traded in the market. In this article we estimate the size of the Finnish cannabis trade by calculating the number of users and the amount of the substance consumed in a year. We divide the subjects into five different groups based on the annual frequency of use: experimenters (1–4 days), modest occasional users (5–12 days), frequent occasional users (13–51 days), weekly users (52–181 days) and, finally, daily users (182–365 days).

The highest number of users was found in the group of modest occasional users, while daily users were accountable for the greatest share of total consumption. According to our calculations the amount of seized cannabis corresponds to 10–23 percent of the total amount on the market which means that authorities operate more effectively than what is generally believed.