economics of drug dealing (freakonomics)
TRANSCRIPT
Economics ofDRUG DEALING
SUDHIRVENTAKESH
STEVENLEVITT
PENETRATING THE GANGQ. How do you feel being poor and Black in America?
A) Very GoodB) GoodC) Bad D)Very Bad
MCDONALDS VS DRUGBoard of Directors
VPs VPs VPs
Franchise Franchise Franchise
Sales Man
Sales Man
Sales Man
WAGE RATES
Local Leader: $100,000 Per Year
Regional Leader: $200,000 Per Year
Board of Directors: $400,000 Per Year
Foot Soldiers: $3.5 Per Hour
RISKY JOBAnnual Death Rates Per Person
Foot Soldiers in the gang: 7%
Inmates on death row: 2%
Inner city Black teens During crack peak: 1% U.S Military force in IRAQ: 0.5%
THEORY Vs PRACTICE
Economic principles in the Real World
“Would you stand around here when all this shit is going on? No, right? So if I gonna be asked to put my life on the line, then front me the cash man”
A “compensating differential” is the increment to wages thatA worker requires to leave him indifferent between performing Two tasks, one which is more unpleasant than the other
THEORY Vs PRACTICEGame Theory
“If we start shooting around there [the other gang’s territory], nobody, and I mean you dig it, nobody gonna step on their turf.But we gotta be careful, ‘cause they can shoot around here tooAnd then we all fu**ed.”
Every Two-person game has a Nash Equilibrium
THEORY Vs PRACTICEEconomic principles in the Real World
“You got all these niggers below you who want your job,
You dig? If you start taking losses, they see you [as]
Weak and shit”
Cash flow constraints dictate that the local leader cannotMake large losses in any month