Etica y narcotráfico

Vi ayer este video del presidente de Uruguay José Mujica, quien es especial en muchos sentidos. Lo que me interesó especialmente, sin embargo, fue el comentario donde afirma que "el narcotráfico rebaja la ética de la delincuencia." Sugiere, obviamente, que hay ciertas normas que incluso los delincuentes respetan. Pero la llegada del narcotráfico ha hacho que incluso algunas - o todas - de esas reglas existentes se rompan, o se eliminen. 

Hay artículos fascinantes sobre las reglas en organizaciones criminales (libro). Y la pregunta es por qué el narcotráfico reduce el estándares éticos (aun más) . Y quizá la respuesta es económica. Los altos incentivos económicos transforman el crimen en una competencia de vida o muerte. 

Illegal Cocaine Markets and Violence in Colombia

Using different measures for the extent of coca cultivation as independent variables to be instrumented, we find that a 10% increase in the value of coca cultivation in a municipality increases homicides by about 1.25%, forced displacement by about 3%, attacks by insurgent groups by about 2%, and incidents with land mines by about 1% (p. 39).

That is from this paper by Daniel Mejia & Pascual Restrepo.

Measuring Crack Cocaine and its Impact

One problems to study the causes of violence in Latin America is the lack of data on drug activity. For example, we do not know how much of the violence is caused by conflict among drug cartels.  

In a new paper Fryer et al (Economic Inquiry, July 2013. A draft - 2006 - is here) argue: 

Numerous social indicators turned negative for Blacks in the 1980s and rebounded a decade later. We explore whether crack cocaine explains these patterns. Absent a direct measure, we construct a crack prevalence index using multiple proxies. Our index reproduces spatial and temporal patterns described in ethnographic accounts of the crack epidemic. It explains much of the 1980s rise in Black youth homicide and more moderate increases in adverse birth outcomes. Although our index remains high through the 1990s, crack's deleterious social impact fades. Changes over time in behavior, crack markets, and the user population may have mitigated crack's damaging impacts.

Although, clearly, the paper does not address the effect of violence caused by conflict among drug cartels, methodologically, the idea of the index can be very useful to analyze violence in Latin America. 

The index in the paper:

. . . we construct an index based on a range of indirect proxies (cocaine arrests, cocaine-related emergency room visits, cocaine-induced drug deaths, crack mentions in newspapers, and DEA drug busts). . .

The findings 

We find that our measure of crack can explain much of the rise in Black youth homicides, as well as more moderate increases in a wide range of adverse birth outcomes for Blacks in the 1980s. . . 

Although our crack index remains high through the 1990s, the deleterious social impact of crack fades. One interpretation of this result is that changes over time in behavior, crack markets, and the crack using population mitigated the damaging impacts of crack. Our analysis suggests that the greatest social costs of crack have been associated with the prohibition-related violence, rather than drug use per se.

Real estate prices when danger goes away

The average house price in Rio has increased by 165% over the past three years, says the UN. Values have risen faster in favelas where the drug gangs have been pushed out of sight. According to SecoviRio, an association of local real estate agents, property prices rose 50% in the first week after the initial three favelas were taken by police.

From this article by J. Watts in The Guardian.
HT: Fermando Franco.  

"War on drugs"

Ernesto Zedillo in the book "Rethinking the “War on Drugs” Through the US-Mexico Prism" (2012) says:

Hopefully, the reader will find that notwithstanding the reservations expressed by some authors about the inconvenience of “rolling the dice,” the arguments and evidence presented at the conference on balance point very strongly in the direction of a serious reconsideration of the policy approach for dealing with the drug problem over so many years. The economic and human costs paid both in the United States as well as in the countries where the drugs come from, ques- tion in a profound way, the validity of such policies. The American colleagues who tell us that any significant change in the strategy is unlikely to happen in the United States essentially for political reasons may be right. But it doesn’t mean that those concerned, for good reason, about this problem should give up. On the contrary, the resistance to change should encourage more and better research and a bigger effort to foster a rational discussion of the drug problem. This e-volume aims to contribute towards these ends.

The book is available here.  

It is time to think differently about the war on drugs

Photo from Wikipedia

It is time to think differently about the war on drugs. The mess we are in cannot continue. The poor and disadvantaged suffer the most. Cocaine must be legalized and regulated, and heroin should follow. The prohibition of drug markets has generated more violence. It is clear that we must regulate, but the question is how.

That is from my article, with Javier Calderón, "Legalize it?," in the Latin America Policy Journal, a publication by a group of Harvard Kennedy School students. (Free registration). 

Violence and Economic Development in Colombian Cities

This paper studies the socio-economic determinants of violence in the seven most important cities in Colombia. Derived from theories rooted in classic works, including Becker's paradigm, criminal inertia, social disorganisation, urbanism and strain, we formulate several hypotheses on the socio-economic determinants of violence. To test these hypotheses, a dynamic panel data analysis is employed. The analysis shows that cities’ deprivation and high population density are strong predictors of homicide rates. Comparing the results among Colombian cities, we find support indicating that city-level homicide rates are influenced by the city's level of development. Moreover, we find evidence that economic growth, inequality, poverty and human capital influence violence in the cities studied, which could generate negative effects on the economic and social development of Colombia.

That is from a new paper by Alexander Cotte Poveda (Journal of International Development, October 2012). A draft is here. 

Probably the analysis should have added governance or efficiency of the judiciary (or a proxy of them) as explanatory variable. 

The author explains: 

Another finding consistent with our hypothesis (Hypothesis 2) concerns drug seizures, measured as marijuana, cocaine, and coca seizures, where the relationship between violence and drug sized is negative and significant for marijuana seizures, indicating that a higher level of drug seizures generates a lower motivation to commit an illegal activity. However, Becker et al. (2004) have demonstrated that drug trafficking as an illegal activity for suppliers and consumers is a not efficient strategy to drug control, whereas legalizing drug use and taxing consumption may be more effective than continuing to prohibit the use of drugs.

Google can help win the war on drugs (?)

Schmidt has discussed at least three different ways that Google can help us win the War on Drugs: creating a way for citizens to safely report criminal drug activity without threat of retribution from narco-criminals; enabling real-time intelligence sharing between military and police; and providing a way to analyze all the data out there about individuals, bank accounts and cross-border money flows.

And,

Imagine a type of Wikileaks for people who fear the Mexican cartels but still want to speak out? Sunlight, as they say, is the best disinfectant. The article is here. 

In some towns in Latin America even the police might know who is involved in drug production and trafficking. Will Google help improve the enforcement of institutions in Latin America? [May be]. One way to strengthen institutions is probably to have the police and intelligence services from richer countries involved [although the historical evidence is not encouraging]. 

I prefer however to think about how Google can help legalize (or regulate) drug production and trafficking, or how Google can reduce the negative consequences when (if) drugs are legalized (or regulated).

Let's say drugs are regulated (one can produce, trade, and consume drugs like any other product under certain regulations). If the economic logic is right we would expect that profits of drug businesses will go down. Since barriers of entry will decrease without the legal prohibition, supply will increase, reducing margins. How would drug cartels respond to this situation? May be they will try to substitute drug activity with other illegal activities, such as kidnapping or extorting. May be the most relevant question in the long run is how Google can help fight kidnaping and related crimes.

Cocaine Flows to the U.S.

That is from Alvarez (June 2012). She analyzes gang violence in El Salvador, Costa Rica, and Nicaragua. The conclusions are interesting, especially regarding the complexity of the link inequality-violence.

What do economists know about crime?

At least one thing: 

. . .  [E]nforcement of drug prohibition encourages violent dispute resolution (p. 22 of the chapter).

The chapter is here, the book is here.  

U.S. Drug War Expands to Africa

In a significant expansion of the war on drugs, the United States has begun training an elite unit of counternarcotics police in Ghana and planning similar units in Nigeria and Kenya as part of an effort to combat the Latin American cartels that are increasingly using Africa to smuggle cocaine into Europe. 

The growing American involvement in Africa follows an earlier escalation of antidrug efforts in Central America, according to documents, Congressional testimony and interviews with a range of officials at the State Department, the Drug Enforcement Administration and the Pentagon.

Read more here (NYT).

The war on drugs has brought unspeakable violence to Mexico and Central America. What makes US government officials think that the results would be different in West Africa? Do these officials have any idea of the suffering and pain that the war brings especially to the poorest in Central America? 

Guatemala paper of the day

From the new paper "The Consequences of Expanding Domestic and Transnational Drug Trafficking Organizations for Guatemala and for Hemispheric Drug Policy," by Charles D. Brockett (May 2012). 

There are two contradictory trends at work in contemporary Guatemala regarding DTOs - [Drug Trafficking Organizations]. On the one hand there has been a fragmentation of control, in part as a consequence of the government scoring some notable arrests of leading drug kingpins. Indeed, it is important to note, as will be discussed later, that both Guatemala and the U.S. have enjoyed some important successes recently in the War on Drugs. Picking off kingpins, however, can be a mixed blessing . . . violence often increases with DTO fragmentation.

The author writes: "Some readers undoubtedly will find more detail than they wish" (p. 2). Actually it is the most concrete paper I have seen so far on this issue. 

Why in Guatemala?

Colombian DTOs began seriously seeking routes for their cocaine to the U.S. through Guatemala and Mexico in the mid and late 1980s as U.S. pressure in Florida succeeded in raising the costs of more direct access across the Caribbean. Guatemala's attractions for narcotraficantes were concisely identified by a top DEA official in his 2002 congressional testimony as: "location, porous borders, sparsely populated coastlines, highway infrastructure and ongoing corruption problems" (U.S. House, "Guatemala": 61). By the early 1990s between 15 to 25 percent of Colombian cocaine reaching the U.S. first passed through Guatemala; by the end of the decade it had reached almost half (Smyth, "New Kingdom," "Guatemala's"). One major route utilized fast boats from Colombia up the Pacific coast to El Salvador from where drugs were trucked hidden among produce to Guatemala; a parallel route did the same on the Caribbean side up to Honduras. On the Caribbean side, were also frequent flights by small aircraft to hundreds of landings strips in the rural east of either Guatemala or Honduras. If sent to Honuras, the cargo was again often moved by produce trucks up to Guatemala.10

Graph of the day

The graph is from the new paper "Drug trafficking and violence in Central America and beyond" by Gabriel Demombynes (April 2011). 

The abstract:

This paper examines the relationship between narcotics trafficking and violence in Central America. The first part of the paper addresses particular questions posed for the 2011 World Development Report and examines several competing hypothesis on the drivers of crime in Central America. A key finding is that areas exposed to intense narcotics trafficking in Central America suffer from higher homicide rates. Drug trafficking has corrupted state institutions, which have been overwhelmed by the resources deployed by trafficking organizations. The second part of the paper reviews the reasons drug trafficking and anti- trafficking enforcement are associated with violence in general and considers policy options.

HT: @m_clem
Addendum: See a very good paper on institutional change and how to improve the police. 

Killings

From a NYT article by Randal C. Archibod:

Suddenly, killings have plummeted in El Salvador, one of the most violent countries in Central America and a source of growing worry over gangs and organized crime. 

But the possibility that the reduction in violence resulted from a secret deal between the government and gang leaders to halt killings in exchange for better prison conditions has rattled El Salvador’s political establishment and led to various explanations from government leaders. Keep reading . . .  

This is the hot topic on crime in the region these days. 

Crime and violence will keep decreasing in some countries, or will start decreasing in others given the current movement to legalize drugs in the region. Who looses of decriminalization? The drug cartels and the intermediaries. More killings will only accelerate the movement in favor of legalization (regulation) which is gaining momentum in Latin America. The rational strategy for drug cartels, and gangs, is to make agreements to reduce killings. The price of killings might be getting too high for them. 

HT: Marginal Revolution. 

In Honduras, a Catastrophe Long Foretold

Mark Ungar claims in a  NYT article referring to the recent fire in a prison in Honduras:

With more than 80 homicides per 100,000 people (compared to about 5 in the United States), Honduras has the world’s highest official homicide rate, according to the United Nations. The country is saturated by gang violence. Drug traffickers control many of the state agencies responsible for fighting the gangs, as well as the territory of the country’s six northern states.

The fire in the prison that killed more than 300 inmates is sad and lamentable. Ungar concludes:

 . . . [C]riminal investigation must be improved so that more cases are brought to court. The abysmally low percentage of violent crimes that actually lead to trials — fewer than 5 percent, by some estimates — can be increased through crime mapping; improving the quality of police reports; and support for citizen initiatives to provide crime statistics.

I would like to see improvements in these areas. However they seem unlikely because as the author argues "Drug traffickers control many of the state agencies . . ." 

It is interesting that the author does not mention in the article that drug trafficking is driven by the drugs demand in the US. 

The economic incentives for drug trafficking are so high that probably the only long term solution is drug legalization in the region. Of course this is a complex issue, especially when one thinks about how to legalize it, what to legalize, etc. 

It was a step in the right direction when the president of Guatemala said he wanted to make drugs legal in the region. The topic of drug legalization used to be a taboo in Guatemala, for example. Nowadays however more and more people are looking at it as one of the few ways out, if not the only one [I was against legalization in the past but the death toll is just too high]. When one looks at the literature on drug prohibition and violence the conclusion is very clear. In previous post on the link between drugs and violence I have looked at some research and commentaries. For example:

[i]ncreasing drug law enforcement is unlikely to reduce drug market violence.

The war on drugs increases drug-trade related violence. 

The fundamental problem is that drugs are illegal.

Drug trafficking groups, rational, non-rational, or both?

One non-rational characteristic of Mexico's trafficking groups is their tendency to divide and divide again. From the almost monopolistic Guadalajara Cartel which towered over the country's drug trade in the 1970s have sprung many of the current groups we see today. These splits have often been driven by personal vendettas and family feuds. The Federation that dominated the business in the early 2000s split when Joaquin·Guzman, alias "El Chapo," apparently ordered the murder of the brother of·Juarez Cartel leader Vicente Carrillo Fuentes -- this despite the fact it would likely have been safer and more profitable to stay in a unified mega-group.

Read it all here. HT: Sonja Wolf.

Trafficking Networks and the Mexican Drug War

This is Melissa Dell's job market paper, Trafficking Networks and the Mexican Drug War

The abstract:

Drug trade-related violence has escalated dramatically in Mexico during the past five years, claiming 40,000 lives and raising concerns about the capacity of the Mexican state to monopolize violence. This study examines how drug traffickers’ economic objectives influence the direct and spillover effects of Mexican policy towards the drug trade. By exploiting variation from close mayoral elections and a network model of drug trafficking, the study develops three sets of results. First, regression discontinuity estimates show that drug trade-related violence in a municipality increases substantially after the close election of a mayor from the conservative National Action Party (PAN), which has spearheaded the war on drug trafficking. This violence consists primarily of individuals involved in the drug trade killing each other. The empirical evidence suggests that the violence reflects rival traffickers’ attempts to wrest control of territories after crackdowns initiated by PAN mayors have challenged the incumbent criminals. Second, the study accurately predicts diversion of drug traffic following close PAN victories. It does this by estimating a model of equilibrium routes for trafficking drugs across the Mexican road network to the U.S. When drug traffic is diverted to other municipalities, drug trade-related violence in these municipalities increases. Moreover, female labor force participation and informal sector wages fall, corroborating qualitative evidence that traffickers extort informal sector producers. Finally, the study uses the trafficking model and estimated spillover effects to examine the allocation of law enforcement resources. Overall, the results demonstrate how traffickers’ economic objectives and constraints imposed by the routes network affect the policy outcomes of the Mexican Drug War.

Some numbers:

. . . the probability that a drug trade-related homicide occurs in a municipality in a given month is 8.4 percentage points higher after a PAN mayor takes office than after a non-PAN mayor takes office.

. . . the presence of a predicted drug trafficking route increases the value of illicit drug confiscations in a given municipality-month by around 18.5 percent.

Slate has an article on the paper:

What happens when a law-and-order mayor gets elected? All hell breaks loose: Dell estimates that the drug-related homicide rate almost doubles relative to “control” towns where the PAN wasn’t elected. And it’s not the result of traffickers warring with police, but rather traffickers fighting with each other. Dell conjectures—based on anecdotal evidenceabout the drug war—that police efforts tend to weaken a cartel’s grip on a town just enough that competing traffickers see an opening to come in and fight for control of the town. Indeed, when a rival cartel controls a neighboring town, the effect of a PAN win on the drug-related homicide rate is several times higher.

This map shows drug trade routs: 

Fascinating !!! I have also posted about another great paper of hers: "The Long Run Effects of Historical Institutions." She is doing amazing work. 
HT: Chris Blattman's Blog.

Living in Fear in Mexico, Trapped Between Drug Gangs and the Police

A new paper titled "Living in Fear: Mapping the Social Embeddedness of Drug Gangs and Violence in Mexico" by Dıaz-Cayeros et al. reports:  

Narcos’s social roots are particularly deep among the middle class, and to a less extent among the poor. Our results suggest that in high and middle violence regions close to forty percent of middle class Mexicans are compelled to give money to the drug gangs in exchange for protection. Moreover, among the middle class, close to forty percent have turned to the narcos for help in low violence places while thirty-four percent do so in high violence places. These results mean that the narcos in Mexico are present everywhere and even where violence is not particularly severe.

Our findings suggest that public strategies emphasizing exclusively military action are not likely to affect the social embeddedness that protects drug gangs and criminal organizations. This is particularly true because the Mexican state can’t count on police corpses that can offer an alternative over the narcos to ordinary citizens. The police lacks citizen trust within communities because they engage in similar forms of behavior as the drug gangs. Our results demonstrate that in low violence places the police preys mostly on the middle class and the poor, and that in high violence places they target disproportionately the middle class. Furthermore, our list experiments demonstrate that the police prey the most uneducated citizens. 

The abstract of the paper:

Citizens in Mexico are trapped in between two illegitimate forces – the drug gangs and their criminal organizations and the police who are supposed to protect them. Through the use of list experiments within the Survey on Public Safety and Governance in Mexico (SPSGM), we measure the pervasiveness of drug gang activity as it pertains to strategies of coercion (extortion) and co-optation (offering help) to ordinary citizens. The list experiments also allow us to provide a mapping of the geography of drug activity and the extent to which not only the drug gangs, but also the police, engages in strategies of coercion. The paper seeks to provide a better understanding of which groups are most vulnerable and where is it that drug gangs have become most embedded in society. Our findings suggest that although narcotraficantes extort citizens the most in high violence regions and the police does so in low violence ones, both forms of extortion are present everywhere in Mexico. This has triggered a spiral of fear: drug gangs signal unambiguously that they are in control and will punish anyone who provides information to the government, while the police can’t credibly signal that they can regain control of the streets. Police corruption is hence an essential part of the story of Mexico’s violence. Ever more fearful citizens have turned to the narcos for help, we demonstrate, and hence many tacitly –or even openly– support them. The paper results suggest that public strategies emphasizing military action and harsh treatment might not affect the social embeddedness that protects drug gangs and criminal organizations. Instead, enhancing citizen trust within communities and shifting the reputation of police forces while improving the adjudication of justice are more likely to strengthen the social fabric [the graphs are taken from the paper].

 

 

Games of death

     Game theory models used to analyze crime usually assume that there is an external authority that enforces institutions. From example, if the government increases punishment, by setting up the death penalty, a centralized authority will make sure that the death penalty is enforced. In some countries however this is not guaranteed because the government itself is infiltrated by crime and corruption. In this context the institutions that matter are those that emerge from the interaction among individuals. The set of formal institutions is empty. Informal rules are all that matter.

Why do people kill? There are numerous reasons, but lets consider only two reasons: (1) killing for income and (2) killing for power. Other cases are not well defined within these categories.


Examples of killing to gain income are: (a) drug cartels competing for profits, (b) drug cartels killing informants, (c) gangs competing for territory, (d) gangs killing innocents (extortions), (e) thieves killing victims, and (f) political, electoral, killings.

An example of killing to gain power happens when (g) gang members kill innocents as rite of passage.  Less defined cases are: (h) “macho-related” killings, (i) some types of killings of women.

Regarding killings to gain income, we can assume that the purpose of agents is to maximize profits. In the second case, killings to gain power, we can assume that the purpose of the killer is to maximize power.

Giving these assumptions we can set up “games of death” to enlighten our understanding of high crime in countries characterized by a formal institutional vacuum.

(a) Drug cartels competing for profits

A traditional Cournot model used to understand oligopolistic behavior could be used to understand competition among drug cartels. Drug cartels competing for territory, trade routes for example, engage in cartel wars. If a cartel uses a trade route that “belongs” to another cartel retaliation occurs: cartel A will kill members of cartel B, which will foster farther retaliation, cartel B will kill members of cartel A. The process ends up in equilibrium where the reaction functions of both cartels cross each other.  

A relatively stable amount of people will die every period as long as: (1) one cartel interferes with the interests of the other, (2) cartels keep recruiting members, (3) cartels are relatively homogeneous, which rules out the possibility of a take over. If a take over happens the relevant model is that of a monopoly, killings due to cartel wars drop to zero. The monopoly solution also emerges in the case of perfect cooperation among cartels. The Cournot case also applies to case (c), gang competition for territory. In both cases a Nash equilibrium is likely to emerge.

(b) Drug cartels killing informant(s)

In this case the cartel unilaterally, in a dictator’s game way, decides to kill the informant(s). The killing happens as long as informants (journalists for example) venture to express opinions that harm interests of drug cartels. This case also applies to (d) gangs killing innocents, and (e) thieves killing victims, when the victims do not resist. The simplest case of (f) political, electoral, killings lays also in this category, as well as (g) gang members killing innocents as rite of passage.   

(g) “Macho-related” killings

Either because if alcohol or drugs consumption, or because of genetic aggressiveness, etc. One individual challenges another to a fight, the other one accepts or not, and one of them kills the other one (three more solutions are possible).  In contrast with the other cases, this one obeys more to culture or genes, and an important component of non-rational behavior is involved. Therefore there is not a well-defined equilibrium. A similar situation happens with (i), some types of killings of women.

Implications

Given a formal institutional vacuum, the incentive structure (e.g. of drug business), and the social structure (e.g. gang activity), the outcome is massive killings (a sort of “wild west”). To reduce the killing building a set of formal institutions is key. Working on the side of incentives (e.g. legalizing drugs) reduces “only” (a) and (b). 

Legalization won't kill the cartels but it will let justice systems to focus on other areas

Drug cartels diversify their portfolio as well, from the NYT:

For one thing, if marijuana makes up 60 percent of the cartels’ profits, that still leaves another 40 percent, which includes the sale of methamphetamine, cocaine, and brown-powder and black-tar heroin. If marijuana were legalized, the cartels would still make huge profits from the sale of these other drugs.

Still, legalization would deliver a significant short-term hit to the cartels — if drug trafficking were the only activity they were engaged in. But cartels derive a growing slice of their income from other illegal activities. Some experts on organized crime in Latin America, like Edgardo Buscaglia, say that cartels earn just half their income from drugs.

The author concludes:

What it [legalization] won’t do, though, is stop the violence in Mexico.

The article is interesting because it criticizes what is starting to become a mainstream idea on drug policies (or at least, more mainstream than it used to be, and probably more mainstream among civil society than among government officials). 

What the author does not say, and probably does not know, is the relative profitability of each illegal activity. A cartel might be willing to kill because the opportunity cost of loosing a drug route is very high, but they might not do it for CD production in the black market, for example. The relative profitability of drug trafficking seems to be higher than CD production, there are not many reports of killings from CD production and trading (for example). With CD production, and even kidnapping, the difference is that the illegal markets is in the developing countries themselves. Drugs on the other hand are demanded mainly outside the borders, that makes a difference.  

What drug legalization (and not just marijuana) will do is to reduce the portfolio of activities of cartels and allow the justice system to focus on the activities that can not be legalized. Justice systems in Mexico and Central America are too weak to handle drugs, kidnapping, etc., lets legalization take care of a portion on that, and lets strengthen the justice system to focus on the rest. 

We know that when the economy does not generate job opportunities illegal entrepreneurship emerges, legalizing drugs (or some of them) will make illegal entrepreneurs to be innovative and create new business ventures, that it why economic growth is important, and not just drug legalization. The problem is that drug related crimes is killing very valuable social capital in developing countries.