HOW POLITICIANS IGNORED BASIC ECONOMICS TO CREATE THE FENTANYL OVERDOSE CRISIS

Would there be any fentanyl bought or sold if all recreational drugs were legal and had zero costs for smuggling? Evidence is that recreational drug users would not buy any fentanyl given the choice, but fentanyl is progressively pushed into the recreational drug supply chain, as the penalties for drug smuggling rise. So accidental fentanyl overdoses are created entirely, almost 100%, from drug prohibitions.

I once bought and ate an eight-pound lobster from a seafood market in Princeton, California. It was nowhere near Maine, and I had never seen a lobster like that for sale in Maine or Massachusetts. This is a basic rule of economics, that the most premium products are exported the furthest, because they justify the most shipping costs. I never saw a good prime steak for sale at a grocery store in Western Kansas, Wyoming, or Colorado, because those steaks were the ones shipped to Kansas City, Chicago, and New York. Are you going to ship eight steaks that sell for $4 a pound or one that sells for $64 a pound?

The rule is the higher the cost of shipping, the more expensive or stronger the product shipped, pound for pound.

Another rule of economics is that there are some products which people buy more of when the price goes up. The classic “Giffen good” is bread. Suppose the poor make $10 a week. If bread is $1 they will buy a loaf of bread for $1 and a piece of meat for $9. If the price of bread goes up to $5, they will buy two loaves of bread and no meat.

The rule is that if everything is too expensive for people to buy, they spend all their money on the cheapest thing.

If the entire cost of drugs is the cost of smuggling, and fentanyl is the smallest and the cheapest to smuggle, then as drugs become more expensive, recreational drug users will eventually spend all their money on fentanyl. People in prison spend all their time taking fentanyl and zero time playing racquetball. This is not by choice, but because given the high costs of smuggling things into prison, they eventually devote all their efforts to the most premium product relative to smuggling costs.

As the cost of shipping steak goes up, restaurants that sell “steak and potatoes” combine more and more free bread and french fries and salad with a tinier more premium steak. A court actually ruled somewhere that a can labeled “pork and beans” is not false advertising, but is expected to be beans with pork flavoring, meaning rendered pork fat. Similarly, a bag labeled cocaine is eventually presumed to be worthless powder combined with a tiny quantity of fentanyl.

Consumers want actual pork, not pork fat and beans, just like drug users want actual cocaine, not worthless powder and fentanyl. The difference is that pork costs more to make than beans, whereas fentanyl does not cost materially more to make than marijuana or cocaine. So it is entirely the shipping cost – in this case the penalties for smuggling – that causes people to sell larger volumes of powder from the local store pretending to be cocaine, flavored with tiny quantities of the strongest drug relative to shipping costs, fentanyl.

The cost of making most drugs, from marijuana to cocaine to fentanyl, is so small relative to the costs of smuggling that it is basically zero. So the higher the cost of smuggling – the higher the legal penalties for drugs – the greater percentage of drug traffic is devoted to the drug that best covers shipping costs, fentanyl. If the costs of smuggling get sufficiently high, so that nobody can afford to ship cocaine or heroin or even marijuana, they are forced to ship fentanyl and sell it as cocaine or heroin, by mixing it in to increase the potency of other garbage and filler.

Once you need a firearm to protect your stash when selling any drugs, so that you can get 20 years or life for smuggling heroin or marijuana with a firearm, higher sentences for fentanyl including death will effectively appear equal and have little deterrent effect to influence a smuggler’s choices. A person is equally averse to 20 years in prison as death, and will only transport drugs if he thinks he can avoid getting caught entirely. So once a smuggler’s most rational strategy is to avoid getting caught, a rational smuggler will devote his entire energies to fentanyl.

The supply of people who will respond to the money offered by recreational drug buyers, even irrational people, is as endless as the supply of people who buy lottery tickets. No matter how many people you lock up, the buyers will just pay someone else to fill their shoes.

You can overcome the deterrent with economies of scale, by shipping more in each shipment, which favors professional smuggling specialists, rather than yuppies hobby smuggling through the airport or with a hidden compartment on their sailing trip. So the more criminal you make it, the economics shifts trafficking to more violent professional criminal suppliers making larger single shipments needing more guns to protect them. We would be better off with hippie suburban people buying drugs from their honest friends who don’t put fentanyl in cocaine. And just lock up the users if their families want someone locked up, rather than turning their habit into a subsidy favoring the most dangerous criminals, as sentences and shipment dollar values get higher.

Is basic economic theory correct, that says fentanyl is the most premium product relative to shipping costs and also a Giffen good, so that the higher the cost of shipping from criminal sentences for smuggling, and the more drugs cost in general as drugs become more scarce, the more or at least the greater percentage of fentanyl people will buy and the less other drugs like cocaine? And even as the actual preferences of users cause fentanyl to be labeled as other drugs? Evidence suggests this is the case.

In the extreme case that cocaine and heroin and marijuana and fentanyl were all legal, they would be produced in almost unlimited quantities for near zero price, so that there would be no reason to include fentanyl in any other drug. People who wanted heroin and cocaine and marijuana and THC gummies would all buy the products they actually wanted – like buying an actual can of pork instead of beans and tiny amount of pork fat – and get the products they wanted with zero fentanyl in them. If smugglers were not penalized, no products would contain fentanyl and people on Spring Break would purchase zero fentanyl and cops would come into contact with zero fentanyl.

So paradoxically like a Giffen good, the higher penalties for drugs and for fentanyl, the more resulting fentanyl overdoses, and the more total people put in prison. Supposed deterrents cracking down on drugs geometrically expand the people harmed by violence and prison sentences, while pushing more and more recreational drug users into fentanyl often labeled as something else. Penalties for fentanyl increase fentanyl overdoses, while geometrically increasing violence and the number of relatively ordinary people in prison and the number of relatively ordinary families ruined with violence and prison sentences.

It would not be the same with heroin or opium which, despite being extremely addictive, are also bulky to ship and easy for dogs to smell. In the case of those drugs, higher criminal penalties might cause people to shift into cocaine. The advent of fentanyl alters the economics of drug criminalization, so that the equilibrium level of shipping with arbitrarily high penalties results in greater total community damage than if the penalties were lower. Getting tough on drugs in the presence of fentanyl, increases and exacerbates the damage, while getting elected for torturing your neighbors, just like all the other bad economics which politicians use to get elected while increasing misery.