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Informing America’s Policy on Illegal Drugs: What We Don’t Know Keeps Hurting Us
constraints, an exogenous event removing one farm from production should generate an increase in product price that induces another farm to enter, restoring the original status quo. If cocaine production fits this simple competitive story, then geographic substitution of cultivation may even be one-for-one, entirely negating the effectiveness of crop-reduction efforts in Colombia.
Committee discussions with government analysts of drug production suggest that cocaine production may fit the simple competitive story in some important respects. First, resource constraints do not prevent substitution from occurring. A variety of current and potential source countries appear to have plentiful land suitable for growing coca, as well as the requisite labor supply. Second, there are no obvious barriers to the entry of new farms to replace those in which production ceases.
However, open empirical questions regarding deterrence and adaptation suggest that cocaine production may not fit the story in other important respects. Deterrence occurs if potential growers in country A, observing the success of U.S.-led crop-reduction efforts in country B, decide not to initiate production because they anticipate that the U.S. government will lead successful crop-reduction efforts against them as well.12 In the context of the current policy debate, deterrence can counter the prediction of the New York Times article that success against coca cultivation in Colombia will inevitably lead to a resurgence of coca growing in Peru or Bolivia.
Static competitive theory abstracts from the adaptation by growers and governments, which may be an important consideration in evaluation of crop-reduction policy. Static theory contemplates a single enforcement action by government followed by an immediate response by growers. The reality, however, is a dynamic of action and reaction as envisioned in the theory of sequential games. In the absence of deterrent effects, the effectiveness of crop-reduction policy depends on (1) how quickly potential growers commence new planting following the disruption of production elsewhere and (2) how quickly governments become aware of new planting and act to suppress it. In the presence of deterrent effects, adaptation issues become more subtle as responses (1) and (2) become linked together.
In summary, land on which cocaine can be grown is plentiful. There is evidence that past campaigns against coca growers have caused produc-
Viewed from the perspective of economic theory, deterrence departs from the simple competitive story told above in that the success of crop-reduction policy in country B now does more than raise the price of cocaine; it also changes the expectations of potential growers in country A.