Gang / Drug Econ 101

Warning: Language - Among other things, at the end of the video this nerdy, white professor guy uses the word that white people are forbidden to use. He's reading a gang member's statement as part of an example proving a point. Still, those easily offended may want to close their ears.

The model proposed by the professor is an interesting one. I think it's somewhat flawed - maybe because it's dated, maybe because it's a localized example.

The major flaw that I see is that he probably understates the situation of the lowest level dealers. He points out that the actual rate of pay is less than minimum wage. That's quite possibly true. However, I think there is more to the "indentured servant" angle than he discusses. Often, the lowest level dealers are dealing as much to support their habit as to make money.

In an extremely simplified example, the bottom rung guy buys (or is fronted) five rocks with the intent to use two and sell three. He buys all five for $100; he spends the night hanging out on the street and sells the three for $40 each. Thus he gets a $20 profit and he gets to get high. McDonalds could probably offer him more money and even a higher chance at promotion (although, let's be honest, it is harder work). However, flipping burgers doesn't give him crack for his own use. He's going to go back again and again to the same mid-level dealer so that he can earn some money and feed his addiction.

Found at Tom's Place