Detecting Illegal Arms Trading

I always love it when I see a paper that only an economist could write. An ingenious new study by Stefano DellaVigna and Eliana La Ferrara definitely fits that description.

The issue they tackled is detection of illegal arms trades that defy United Nations embargoes. Their idea was to use the information embedded in stock markets to tease out indirect evidence of the illegal deals. Legitimate weapons dealers that obey the embargoes are hurt by them, while illicit dealers benefit. So DellaVigna and La Ferrara examined how the stock prices of weapons dealers in different countries are affected by events that raised and lowered the likelihood that the embargo will be rescinded. They found that the stock prices of arms sellers in countries more likely to house illicit dealers (e.g. countries with more corruption and less rule of law) rise when events prolong embargoes, whereas stocks of arms dealers in countries like the U.S. fall in response to the same news.

While this is not the sort of evidence you could use to convict somebody, it is an excellent example of what some are calling the “forensic economics” movement. In a column in last week’s Philadelphia Inquirer, the conservative talk-radio host Michael Smerconish called for forensic economists (myself in particular) to apply our tools to terrorism. More to come, perhaps.

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  1. Rita: Lovely Meter Maid says:

    Steven Levitt: “I always love it when I see a paper that only an economist could write.” Ah, for the love of Zeus, I’m wringing my hands in anguish here! My dear, dear, potentially misguided Levitt, have we not yet learned to use a modicum of caution when mocking papers? Remember you not, Steven of Levitt, the woesome AC/DC imbroglio of only a day ago? A mere day has passeth, and you are back to this bouncy attitude of savoir faire (shakes head sadly). Oh well. I really wrote this so I could employ the term: imbroglio, so I guess it’s all good.

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  2. Rita: Lovely Meter Maid says:

    Steven Levitt: “I always love it when I see a paper that only an economist could write.” Ah, for the love of Zeus, I’m wringing my hands in anguish here! My dear, dear, potentially misguided Levitt, have we not yet learned to use a modicum of caution when mocking papers? Remember you not, Steven of Levitt, the woesome AC/DC imbroglio of only a day ago? A mere day has passeth, and you are back to this bouncy attitude of savoir faire (shakes head sadly). Oh well. I really wrote this so I could employ the term: imbroglio, so I guess it’s all good.

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  3. Declan Chellar says:

    “I always love it when I see a paper that only an economist could write.”

    I didn’t think you were mocking the paper. I thought you meant you actually loved it.

    Did I miss something?

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  4. Declan Chellar says:

    “I always love it when I see a paper that only an economist could write.”

    I didn’t think you were mocking the paper. I thought you meant you actually loved it.

    Did I miss something?

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  5. Brick Cheney says:

    Can Rita read?

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  6. Brick Cheney says:

    Can Rita read?

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  7. Mark McClellan says:

    The last time I played a game like “Silver Falls”, millions of people weren’t slaughtered in ethnic cleansing when I quit the game.

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  8. Mark McClellan says:

    The last time I played a game like “Silver Falls”, millions of people weren’t slaughtered in ethnic cleansing when I quit the game.

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