Download Marijuana - UCSB Economics

Marijuana
Controlled Substances
1
Marijuana in the news
Dispensaries
back country plots
2
Policy Issues
Enforcement Costs
Helicopters
Ecological damage to public forest lands
Danger to hikers etc. from armed & ruthless growers
Enforcement benefits
3
Canadian Enforcement Costs
4
UK Harm Scale
5
6
7
Maricopa Highway, State 33
8
Pine Mountain Ridge Road
9
10
Reyes Campground Looking North
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12
13
14
15
Questions About Crime
What are the Social Policy Options Towards Victimless
Crimes?
education problem
 prevention
health problem
 cure for addicts and abusers
fiscal problem
 control use through taxes
law enforcement problem
 focus on demand?
users
 focus on supply?
distributors
16
Market Analysis
Compare and contrast
free market
enforcement
fiscal policy
 excise tax as a control device
17
Market Analysis
concepts
market supply
 marginal cost of production: the additional cost of one more
unit
 cost of production equals the sum of marginal costs
 revenue = price * quantity sold
market demand
 price some consumers are willing to pay
 expenditure = price * quantity bought
 consumer surplus: a measure of welfare for those consumers
willing to pay above the market price
18
Market Analysis
Concepts
supply and demand
 determines the market price
the marginal cost of production = the marginal value of
consumers
 the quantity demanded equals the quantity supplied
 profit = revenue - cost of production
profit, or producer’s surplus, is a welfare measure
 total welfare benefit = consumer’s surplus + producer’s
surplus
19
Market Supply
Marginal
Cost
Marginal Cost
of Production
Cost of
Production
20
Quantity Produced
Quantity
Market Demand
Consumer
Surplus
Market
Price, PM
Market Demand
Revenue
R = PM QM
21
Quantity Demanded, QM
Market Supply and Demand
Consumer
Surplus
Triangle
Market
Price, PM
Supply
Profit =
Revenue Cost
Demand
Cost of
Production
Trapezoid
Quantity Demanded
and
22 Produced, QM
Enforcement Policy: Search, Confiscate, Resale
Price,
Marginal
Cost
Search, Confiscate,
Resale: Supply
2 PM
Free
Market
Supply
PM
PM
2a
a
23
Quantity Produced
Price,
Marginal
Cost
Enforcement Policy: Search, Confiscate, Resale
Search, Confiscate,
Resale: Supply
Search,
Confiscate
and
Resale
Price, PS, C, R
Free
Market
Supply
Free
Market
Price, PFM
2a
Demand
a
24
Quantity Produced
and Demanded, QS, C, R
Enforcement Policy: Search, Confiscate, Burn
Search, Confiscate, Burn: Supply
Price,
Marginal
Cost
QM / 2
Search, Confiscate,
Resale: Supply
2 PM
Free
Market
Supply
PM
2a
PM
a
25
QM
Quantity Produced
Enforcement Policy: Search, Confiscate, Burn
Price,
Marginal
Cost
Search, Confiscate, Burn :
Supply
Search, Confiscate,
Resale: Supply
Search,
Confiscate
and
Burn
Price, PS, C, B
Free
Market
Supply
Free
Market
Price, PFM
2a
Demand
a
26
Quantity Produced
and Demanded, QS, C, B
Fiscal Policy: 50% Excise Tax, Government Keeps the Revenue
Price,
Marginal
Cost
50 % Excise Tax
Supply
Tax/unit = 0.5 Price/unit
Revenue - Tax = $20,000
2 Plots*P - 2 Plots*T = $20,000
2(P - T) = $20,000
2(P - 0.5P) = $20,000
P = $20,000
2 PM
Free
Market
Supply
PM
2a
PM
a
27
Quantity Produced
Fiscal Policy: 50% Excise Tax, Government Keeps the Revenue
Price,
Marginal
Cost
50 % Excise Tax
Supply
Tax/unit = 0.5 Price/unit
Revenue - Tax = $20,000
2 Plots*P - 2 Plots*T = $20,000
2(P - T) = $20,000
2(P - 0.5P) = $20,000
P = $20,000
2 PM
Free
Market
Supply
PM
2a
PM
a
28
Quantity Produced
Fiscal Policy: 50% ExciseTax, Use Revenue to Buy Marijuana
50 % Excise Tax and Buy
Program
Supply
50 % Excise Tax
Supply
Price,
Marginal
Cost
Price, P
with a 50
%
Excise Tax
and Buy
Program
Free
Market
Supply
Free
Market
Price, PFM
2a
Demand
a
29
Quantity Produced
and Demanded, Q
Fiscal Policy
an excise tax is cheaper than
enforcement & more effective
30
Questions About Crime
What are the Social Policy Options Towards Victimless
Crimes?
education problem
 prevention
health problem
 cure for addicts and abusers
fiscal problem
 control use through taxes
law enforcement problem
 focus on demand?
users
 focus on supply?
distributors
31
Education
Let an informed public make a choice
An individual would weigh the benefits against the costs
If the benefit/cost ratio exceeds one
 smoke
 drink
Could impose costs on others
 driving under the influence
 second hand smoke
Protection of Minors
 blandishments of advertising
 influence of peers
32
Health
Treat substance abuse
Need to identify the abusers
 many citizens are not covered under health plans
Difficult to cure addicts
33
Fiscal Policy
Use excise taxes, a tax per unit, to control demand
tax per pack of cigarettes
tax per bottle of gin
Policy moderates rather than eliminates use
lacks the moral suasion of a law prohibiting use
34
Law Enforcement
Control demand?
hard to keep tabs on numerous users
loss of respect for the law
 people like to party
Control supply?
at home
 search and destroy policies have a low success rate
abroad
 interdiction of supply has low success rate
 we export our enforcement problem to:
producing countries, e.g. Bolivia, Peru, Colombia
Trans-shipment countries, e.g. Mexico
35
What are the Tradeoffs
Among Policy Options?
Review
INTRODUCTION (facts or trends, graphics, themes)
Current policy issues. What did we discuss?
History of California Prisons. Have they always been overcrowded?
History of California Offense Rates. Have they always been high?
The Economic Approach to Crime Control (graphics)
Outline for Today: 09/22/2011
Syllabus: course details
Syllabus: Assignments by Lecture Number
Current Criminal Justice Policy Issues
Trends in California imprisonment and crime levels
Questions about crime trends and imprisonment trends
The Economics of Crime Control
38
38
California Index Offenses per Capita and California Prisoners per Capita, 1952-2010
CAINDXPC
.04
.03
.02
.01
.00
55
60
65
70
75
80
85
90
95
00
05
10
90
95
00
05
10
CAPRPC
.005
.004
.003
.002
.001
39
.000
55
60
65
70
75
80
85
The Economics of Crime Control
Objective: minimize the sum of damages to victims and
expenditures on the criminal justice system
Damages to victims = loss rate* offenses, or in symbols r*of
Expenditures on the criminal justice system, abbreviated CJS,
for law enforcement, trials (district attorneys, public
defenders, judges) and operating jails and prisons
40
The Graphics of Total Cost, TC
TC = r*OF + E
Total Cost (E)
$
Economic Paradigm
1. Choose objective
e. g. minimize sum of
damages to victims plus
expenditures, E, on CJS
2. Describe states of the world
(options for choice)
Total cost curve (E)
Minimum Cost
3. Choose the best option
Optimal Expenditure
41
E on CJS
What Have We Learned
Even if crime is controllable, the optimal level of crime (
and damages to victims) is not zero
There comes a point where spending more on crime
control, i.e. the CJS, costs more than is saved by reducing
damages to victims, and this is where total costs start to
rise above their minimum
42
What If Crime, Or Some Types
of Crime, are Not Controllable
43
The Graphics of Total Cost, TC
TC = r*OF + E
Total Cost (E)
$
Minimum Total
Cost is no
Expenditure on
CJS, E=0
r*OF(E)
45 degrees
optimum
E on CJS
0
44
The Graphics of Total Cost, TC
TC = r*OF + E
$
Total Cost (E)
Minimum Total
Cost is no
Expenditure on
CJS, E=0
r*OF(E)
45 degrees
optimum
E on CJS
0
45
What Did We Learn From
Prohibition, 1919-1933?
The argument was: misuse or abuse of alcohol can have bad effects
Drunken husbands beat their wives
Drunken mothers mistreat their children
But the majority of people did not want to give up alcohol
Following the passage of the Volstead Act in 1919, we witnessed rumrunners, speakeasies, people making beer and bathtub gin
46
Review
THE IMPACT OF CRIME ON SOCIETY
How much FBI Index Crime is There?
What are the Four Index Crimes Against Property?
What are the two main effects of crime on social welfare? (graphics)
47
Outline and Issues 9/27/2011
 Course logistics: gauchospace
 Criminal Justice System (CJS) & economic paradigm: where
do the values (prices) come from to evaluate the states
(outcomes) of the CJS?
 How much crime is there? How do we know?
 Crime has two effects:
Redistribution of welfare from the victim to the perpetrator
Opportunity cost or waste of resources for defense
How is Crime Measured
 Victimization Surveys of Households
U S Dept of Justice, Bureau of Justice Statistics, Criminal
Victimization
 Citizen (Victim) Reports to Police
U S Dept of Justice, FBI, Uniform Crime Reports
A Theme for this Course
 Criminal Justice System is in crisis.
Courts told former Governor Schwarzenegger to find housing for
prisoners or release them early
City and County jails are overflowing and a revolving door policy
is in effect. Repeat offenders clog the system
Not enough judges and prosecutors
It Has Not Always Been This Way
 The Criminal Justice System had been relatively stable in the
decade after World War II
 What happened? That is the story of this course.
 We will review the history of criminal justice in the 60-plus
years since WW II.
 We will suggest policies that will help turn things around
now. In brief, what is needed is triage, i.e. to use scarce
resources that will improve public safety the most.
Questions about crime
 Is crime a real problem or a media induced problem?
 Is crime an economic problem?
 Are we getting our money’s worth for the dollars we spend
on police, jails, and prisons?
Taking Crimes
 Robbery
 Burglary
 Auto Theft
 Larceny
Two Perspectives On Crime
 No Problem
 It’s Bad
Thief’s
Income
$12,000
Total or Social Income Line:
Thief’s + Victim’s Income
$11,000
Income Redistribution
$9,000
Income Distribution
$6,000
$1,000 social
cost of defense
$3,000
$6,000
$11,000
$12,000
Victim’s Income
Defense
Private
Crime
Generation
Politicians
Public
Offense Rate,
Damages to
Victims
We over-react to crime
and we do not triage
Fear
Media
Questions about the Operation
of CJS
 If crime is going down, why are we devoting more
resources to its control?
 If drug offenders are mostly non-violent, why do we
send them to state prison instead of rehabilitation?
Bad effects from taking crimes
 Victim has less incentive to be productive
 Victim has more incentive to spend time and money on
defense
 Analogous to war: guns vs. butter
 What is society going to produce?
defense against crime?
or goods and services?
Review
JOBS AND CRIME
Policy issue: Arizona gun laws
Question: What did we learn from the seriousness survey?
Question: What is the most important economic perspective about
economic conditions and crime?
Long run: investment in human capital ( education & job experience)
Tradeoff between leisure & income (graphics) , i.e TIME IS MONEY
61
Today 9/29/2011
Policy Issue: Gun Laws (Arizona)
Seriousness ratings for ten behaviors
How much would you pay to prevent your bike being
stolen?
Experimental issue: Do economic conditions cause
crime?
How to study for this course!
Lecture course: go to lectures
No section and no TA
Look at outline slide at the beginning of each lecture
with the major points and a summary slide at the end of
each PowerPoint with the major points
Be familiar with the graphical analysis in the class notes
& the PowerPoints
Look at last Winter’s (2011) midterm for clues
Read (listen, look, Google) the news and keep up with
criminal justice system stories
The Economy and Crime
 Is crime affected by the business cycle?
 Do economic factors cause crime?
Outline
 Seriousness Survey
What can we learn from the survey?
 Crime File
Victims
Jobs and Crime
 Jobs and Crime
Why do some people get involved with crime?
SERIOUSNESS SURVEY
RATE THE SERIOUSNESS OF EACH OF THE FOLLOWING
BEHAVIORS ON A SCALE FROM ZERO( LEAST SERIOUS)
TO TEN( MOST SERIOUS):
MEDIAN W11 F11
1. HOMICIDE
_10
10__
2. MASS POISONING ( e.g. TYLENOL) _ 9
9__
3. FORCIBLE RAPE
_ 9
_10_
4. ARSON: SET FIRE TO A GARAGE _ 7 __7
5. SELLING HEROIN
_ 7
_7_
6. AUTO THEFT
_6
_6_
7. EMBEZZLEMENT OF $1,000
_ 5
__5
8. PROSTITUTE IN A HOUSE OF PROSTITUTION _ 4
__3
9. POSSESSION OF MARIJUANA
_ 2 __1
10. SNIFFING GLUE
_ 2 __1
Consistency from year to year
Median seriousness Scores Fall 2011 and Winter 2011
10
homicide
9
y = 0.8367x + 1.1633
8
R2 = 0.9882
Poisoning
Winter 2011
7
Forcible rape
7
Arson,
Selling heroin
6
Auto Theft
5
embezzlement
4
Prostitute
3
2
,1Pot Possession, Sniffing glue
1
0
0
2
4
6
Fall 2011
8
10
12
Conclusions
Consistency from year to year
Triage is possible: we can separate the more serious
behaviors from the less serious behaviors
Distribution of Homicide Scores in F
2011
Histogram
Frequency
50
43
40
30
20
10
0
0
0
0
0
0
0
2
0
0
1
2
3
4
5
6
7
8
3
0
Seriousness score
9
10
Three ? Views on Pot, Fall 2011
Histogram
25
Frequency
20
20
15
10
8
7
5
5
3
3
1
1
0
0
0
6
7
8
9
10
0
0
1
2
3
4
5
Seriousness Scores
Score: 0-2, 35
Score: 3-5, 11
Score: 6&7, 2
24, a score of 1, would carry a majority vote, 32, a score
of 2, would carry a 2/3 vote
The more serious the behavior, the less
disagreement about policy. Fall 2011
Months Served in CA Prison Vs. F ’11 Seriousness Scores
Months Served in California Vs. Fall 2011 Seriousness
120
0.1906x
y = 9.445e
R2 = 0.693
Homicide
Months Served
100
80
Rape
60
40
Arsont
20
Possession
Vehicle Theft
0
0
2
4
6
Seriousness Scores
8
10
12
Questions About Crime
 Does the Business Cycle Affect Crime Rates?
 Does an Individual’s Life Cycle Affect Crime Rates?
 Why do some people live socially unproductive lives?
Two Points About Economic
Conditions and Crime
 Relationship of Crime to the Business Cycle
Short Run: Business Cycle
Is Phil Cook wrong?
California: the misery index and crime
 misery index = unemployment rate + inflation rate
 Relationship of Crime to the Life Cycle
Long Run
Investment in Education
Role of the Family
Earnings
low value
high
$480
slope of the iso-preference
curve through the 24 hour
endowment is the lowest
wage at which you are
willing to work
$96
$0
0 hours
dropout is unwilling to work for $4/hr
24 hours
Leisure
(learning)
REVIEW
DETERRENCE AND THE DEATH PENALTY
Policy issue: The Death of the Death Penalty Newsweek, CA
The Arguments: Pro Vs. Anti, NIJ video
Debate: Is the death penalty a deterrent?
Homicide and executions, CA compared to other statespp
76
Outline 10/04/2011
 The Death Penalty
Arguments
 Philosophical and moral (lexicographic ordering)
 Practical: Is it a deterrent?
Impact on the criminal justice system: Detention (prison building
era) dominates
 Operation of the Death Penalty
 Homicide and Executions
Schematic of the Criminal Justice System
Causes ?
Weak Link
Offense
Rate Per
Capita
Crime Generation
Expected
Cost of
Punishment
(detention,
deterrence)
Expenditures
Crime Control
Questions About Crime
Does the Expected Severity of Punishment Deter
Crime?
expected severity = probability of punishment * severity of
punishment
e.g. in LA County: 0.005*death penalty
Why Do We Keep Building Prisons at Great Expense to
Warehouse Convicts?
Doesn’t deterrence work?
Do we have to rely on detention?
Controversy About the
Death Penalty
 Death penalty is the most severe sentence.
Does it deter crime?
 Opponents of the death penalty say no.
Their evidence? Critiques of studies that indicate the death
penalty is a deterrent.
 Why are so few murderers who receive the death
sentence executed in California?
Death sentence appeases the proponents.
Few executions appeases the opponents.
Executions in the US 1930-2007
http://www.ojp.usdoj.gov/bjs
Peak to Peak: About 65 years
Bureau of Justice Statistics
Peak to Peak: 50 years
Policy Impact of Opponents
to the Death Penalty
 As an instrument for crime control, deterrence has been
a casualty of the argument about the death penalty.
The argument: if the death penalty does not deter
murderers, then deterrence must not work as a control.
 As a consequence, society relies more and more on
detention for crime control.
Society builds more and more prisons.
U.S.
Questions About Statistical
Studies of Deterrence
 Do we know enough about the factors that cause crime?
Can we find variables that will control for variation in crime
generation?
 We have better measures for the factors that control crime
than for the factors that cause crime.
Unknown variation in crime generation may mask the effects
of crime control.
Get
Expect
Source: Report to the Nation on Crime and Justice
REVIEW
STRATEGIES TO ESTIMATE DETERRENCE
What is the critique of econometric studies of deterrence?
What is the evidence for deterrence?
89
Schematic Model
Controls:
Imprisonment rate
Clearance ratio
Causes
Homicide
Empirical Study of Certainty, Severity, &
Causality
Murder Rate Regressed on Clearance
Ratio, Imprisonment Rate & Suicide Rate
12
10
8
.8
6
.4
4
.0
-.4
-.8
1970
1975
1980
1985
Residual
1990
Actual
1995
2000
Fitted
2005
Evidence Against the Death
Penalty Being a Deterrent
Contiguous States
Maine: no death penalty
Vermont: death penalty
New Hampshire: death penalty
Little Variation in the Homicide Rate
Source: Study by Thorsten Sellin in Hugo Bedau, The Death
Penalty in America
Isaac Ehrlich Study of the
Death Penalty: 1933-1969
Homicide Rate Per Capita
Control Variables
probability of arrest
probability of conviction given charged
Probability of execution given conviction
Causal Variables
labor force participation rate
unemployment rate
percent population aged 14-24 years
permanent income
trend
911 call
(characteristics of household Participants unknown)
Random Assignment
code blue
code gold
patrol responds
patrol responds
settles the household
settles the household
verbally warn the husband
take the husband to jail
for the night
That’s all folks!