The US cocaine market shrank by roughly 50% from 2006 to 2010, but it is too early to determine the cause.

Uncle Sam's Cocaine Nosedive

A Brief Exploration of a Dozen Hypotheses

Beau Kilmer

ResearchPosted on rand.org May 4, 2016Published in: After the Drug Wars: Report of the LSE Expert Group on the Economics of Drug Policy / J. Collins (Ed.) (London: The London School of Economics and Political Science, 2016 ), p. 67-75

Heavy consumption of cocaine has created a tremendous amount of morbidity and mortality, with the US having spent billions of dollars domestically and internationally trying to reduce its availability.

In the late-2000s, there was an unprecedented decline in the US cocaine market: RAND estimated that the total consumption of pure cocaine decreased by roughly 50% from 2006 to 2010. Concurrently, the purity-adjusted price increased by more than 40% at the retail level.

Despite the size and the swiftness of the consumption decrease, there is no consensus about which policies or factors are responsible for the drop.

This essay briefly explores twelve hypotheses for the decline which are neither exhaustive nor mutually exclusive. It pays special attention to the period immediately preceding the consumption decrease, noting that there was a 40% decline in the purity-adjusted retail price from 2000 to 2006. Whether this price decrease was simply part of a larger trend, attributable to policy decisions, a random fluctuation or something else, has yet to be determined.

If further research suggests that much of the consumption drop in the US is attributable to supply-side polices, this does not mean that supply reduction is the optimal approach for reducing problem consumption; much depends on the particular drug, stage of the epidemic, characteristics of the country and the perspective of the decision maker. It would, however, challenge the conventional wisdom that supply-side interventions can do little to influence mature consumption markets.

Key Findings

  • There is no consensus about the policies or factors responsible for the drop.
  • This paper highlights a number of potential explanations for the reduction in cocaine consumed in the U.S. and/or reduction in Colombian cocaine available for consumption that are neither mutually exclusive nor exhaustive and fall into three general categories: supply-reduction policies, other explanations for a reduction in supply, and a shift in demand for cocaine in the U.S.
  • The drop may have resulted from a 'perfect storm' of events such as the rapid increase in manual eradication, increase in interdiction, reduced availability of sodium permanganate, instability in Mexico, increase in non-U.S. demand, etc., that had more of an impact occurring together than they would have had separately. However, this is very much an open question.
  • Even if future research shows that much of the drop did result from supply-side policies, this does not mean that reducing supply is the optimal approach. Much depends on the particular drug, the stage of the epidemic, the characteristics of the country involved, and the decision maker's perspective.
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Document Details

  • Copyright: London School of Economics and Political Science
  • Availability: Non-RAND
  • Year: 2016
  • Pages: 9
  • Document Number: EP-66463

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