It Snowed in Ferguson: the Logic of Prohibition

Earlier this month, I argued the logic of prohibition. The gist of the economics is this: if a market exists, outlawing it rearranges the institutions supporting exchange, but does not necessarily eliminate trade.

Consider hydromorphone hydrocloride, aka dilaudid. Dilaudid is a powerful analgesic, stronger than morphine, and classified on schedule II in the US (Substances in this schedule have a high potential for abuse which may lead to severe psychological or physical dependence. [source]). Despite its potency and potential for abuse (just ask any med-surg RN), dilaudid seldom joins the pantheon of street drugs the way MDMA, peyote, LSD, and marijuana do. Or more importantly, the way its close cousins morphine and heroin do. And why is this the case? Price elasticity. Dilaudid is a semi-synthetic opioid—its manufacture is a delicate process requiring specialized equipment and knowledge. Morphine and heroin require no hydrogenation process, and are therefore (relatively) less capital-intensive. These differences are reflected in the relative prices and the attending quality control and legal institutions in each market. Consumers can still obtain the pleasant effects of their opioid of choice, the costs simply move margins between strike price and risk premium. The market itself is not destroyed by prohibition.

I've come to wonder lately if there isn't a similar market for racial animus. What would a world look like if the legal market for bigotry were thwarted? As with opioids, I expect there might still be some underlying demand and a creative entrepreneurial class to serve that demand. I expect that by forcibly denying bigots, no matter how loathsome their intentions, the freedom to refuse association that they may turn to less accountable institutions that serve similar purposes.

You may read this and say something like, "hey, this guy is claiming that the 1964 Civil Rights Act caused blue-on-black brutality in Missouri. What a jackass." Let me disagree with the first half of that statement. I am not claiming that an end to the oppression of minorities created hate in anyone's heart. I am claiming that given the existence of hate, the institutions meant to govern it matter a great deal. What we seem to have done is apply a liberal dose of wishful thinking to the dilemma of hate in America. You can legislate a market in bigotry away no more effectively than you can a market in opium. Product bans in alcohol put power in the hands of crooked mobsters. Product bans in narcotics put power in the hands of crooked cartels. Product bans in bigotry put power in the hands of crooked police. Bigotry is scandalous and obscene. If the constituency has an interest in reducing or eliminating its trade, an orderly wind-down in an open setting of voluntary exchange is far better than employing para-military state thugs to harass and murder with impunity and unaccountability.

As I mentioned to Sarah, good cops are good; good institutions are better.