The Economics of Gang Life

http://gregmankiw.blogspot.com/2006/09/lively-levitt-lecture.html

Steven Levitt, author of Freakonomics, discusses the economics of being in gang. It's fascinating to break down the thought-process of young inner city kids, and to think that joining a gang that makes profit by selling crack is actually a highly rationale decision. Levitt remarks at one point during his lecture that being a crack dealer in a gang is the worst job in America, yet he acknowledges the potential benefits of an inner city teenager doing just such a thing.

A street-trader in a crack cocaine gang in Chicago earns $3.50 an hour, and if he is in on the street selling cocaine for 4 years he has a 25% chance of dying. These are horrifying conditions, but the potential payoffs are enormous. If a street-trader becomes in charge of a small part of turf, with street dealers working for him, he will earn $100,000 annually. For a young inner-city kid, who cannot go to university, or get anything but a minimum-wage earning job, earning $100,000 is tremendous, and it is obvious why a young inner-city teenager would be lured into joining a gang.

There are two problems with this situation.

First, there is a 25% chance that these street-dealers will die if they stay in the gang for four years, and such a loss of life, at the hands of other humans, is simply not acceptable.

Second, talent that could be going to university and subsequently benefiting society is instead going into violent drug-dealing gangs.

So what should be done?

The most critical component of a solution to get inner-city kids off the streets and into productive society is education. And this is government's responsibility. Inner-city public schools are simply not able to effectively craft productive members of society, and are often a recruiting ground for gangs. Furthermore, inner-city public schools have a vicious lack of motivation cycle, whereby academic success is in some instances simply not possible.

Government should provide vouchers to good inner-city students to go to private schools that provide far better education than inner-city public schools. Funneling more and more cash into public schools will not do much at all to help; the best bet for inner-city school kids with potential is to be educated in an environment in which they will not be exposed to gang violence, as well as receive a great education.

But what about getting the kids that are already on the streets, off?

That is a more difficult question to answer, as members of gangs have probably subscribed to the dogma of the gang, and endorse gang life over all else. They are most likely resistant to taking other life-paths.

Instead of trying to convince individual gang members of the ills of joining gangs, of which they are certainly aware, and disregard, the best solution is to attack the problem at the source: get rid of gangs altogether. How can such a lofty ambition be accomplished? The solution is actually fairly simple. Gangs derive practically all their revenue from the black-market sale of drugs, so if the black-market for drugs is eliminated, gangs will have no source of revenue, and will thus cease to exist. So how do we eliminate the black-market? Legalize drugs. All of them.

The black market exists because it is illegal to produce, consume, and sell drugs such as cocaine, marijuana, ecstasy, etc. Making them legal and available at licensed stores removes the black market, and allows a private and far more efficient market to arise. One might say that legalizing drugs will result in widespread consumption and the subsequent degradation of society, but to that point I argue that drugs are widely available now, and their consumption is not overtly widespread, at least not to the point of bringing society to its knees. Furthermore, drugs sold legally could be taxed, and the revenue gained from drug taxes could be used to fund school vouchers, or the police department in the inner city.

I disagree with drug illegalization on a theoretical, moral basis. Yet the illegalization of drugs has a far more widespread effect than just my objection to it. It is my strong belief that the legalization of all drugs will significantly reduce the impact gangs have on the inner city, allowing inner city kids to become productive members of society, instead of gang members trained to kill.