Italy to Include Prostitution and Illegal Drugs in GDP

Bloomberg reports that Italy will now begin including its shadow economy in the country's GDP, in an effort to reduce the national deficit:

Italy will include prostitution and illegal drug sales in the gross domestic product calculation this year, a boost for its chronically stagnant economy and Prime Minister Matteo Renzi’s effort to meet deficit targets.

Drugs, prostitution and smuggling will be part of GDP as of 2014 and prior-year figures will be adjusted to reflect the change in methodology, the Istat national statistics office said today. The revision was made to comply with European Union rules, it said.

Who Does Marijuana Legalization Hurt?

In our most recent podcast, "Are We Ready to Legalize Drugs? And Other FREAK-quently Asked Questions," we discussed drug legalization.  Here's what Steve Levitt had to say on the benefits of legalizing marijuana, as compared to crack cocaine:

So crack cocaine is a really devilish drug because it gives you such an intense high for such a short period of time that your desire is just to get high over and over and over. It’s highly addictive, and it’s really hard to function when you’re a crack addict. But what it makes me think is that this experimentation we’re doing now with policy towards drugs like marijuana, and potentially it would be expanded over time is a good idea. Because I think when it comes to marijuana, the social costs of the prohibition of marijuana are just really low. Very few people in the United States are being killed over marijuana. The gangs are not making their money off marijuana. Marijuana in some very real sense is too cheap. It’s too easy to grow yourself and so it isn’t the source of all of the ills that come with prohibition. And so, so the gains of legalizing marijuana for society are much smaller than the gains would be to legalizing cocaine if you could control how the outcome came.

But does marijuana legalization really harm anyone?  Like poor minorities, for example?  Michael Kinsley, Andrew Sullivan, and David Frum recently debated that  question, as well as legalization in general, for Bloggingheads TV.  In an accompanying blog post, Sullivan points to Reihan Salam's recent post on the subject:

Kids Attracted to Medical-Marijuana Candy?

A new paper in JAMA Pediatrics finds that a small number of children are showing up in Colorado emergency rooms having unintentionally ingested marijuana. It seems they are gobbling up their grandparents' medical-marijuana candy. The paper is gated but Medical News Today summarizes:

As background information, the authors, from the Rocky Mountain Poison and Drug Center, Denver, explained that medical marijuana has higher levels of tetrahydrocannabinol (THC) than when used recreationally. They added that medical marijuana is sold in candies, soft drinks and baked goods. ... There is concern that parents/grandparents may not disclose their use of medical marijuana because of the perceived stigma associated with the drug.

When Hacking Is the Smaller Crime

Here's a fascinating article in the Yale Journal of International Affairs, by Paul Rexton Kan of the U.S. Army War College, about cyberwar between non-state agents -- in this case, Anonymous versus Los Zetas, the Mexican drug cartel. Read the whole thing; here's the first paragraph:

In the fall of 2011, two clandestine non-state groups—a hacktivist collective and a Mexican drug cartel—stared each other down in the digital domain, with potentially fatal real world consequences for both sides. Los Zetas, a Mexican drug trafficking organization composed of former members of Mexico’s Special Forces, kidnapped a member of Anonymous, the global hacking group, in Veracruz on October 6th. In retaliation, Anonymous threatened to publicize online the personal information of Los Zetas and their associates, from taxi drivers to high-ranking politicians, unless Los Zetas freed their abductee by November 5th. The release of this information on the Internet would have exposed members of Los Zetas to not only possible arrest by Mexican authorities, but also to assassination by rival cartels. Unconfirmed reports suggest that Los Zetas then attempted to “reverse hack” Anonymous to uncover some of its members and to threaten them with death. As a consequence, a few members of Anonymous sought to call off the operation and disavowed those members who wanted to go forward. With time running out and locked in a stalemate, Los Zetas released their kidnap victim on November 4th with an online warning that they would kill ten innocent people for each name that Anonymous might subsequently publicize. Anonymous called off its operation; each side appeared to step back from the brink.

(HT: LTC Scott Kelly)

FREAK-est Links

1. Gary Becker and Kevin Murphy on the failed war on drugs.

2. Selling beer at college football games worked out pretty well for the University of Minnesota this season: $907,000 in alcohol sales and fewer incidents.

3. The Economist's 2012 in charts.

4. Hedging hackers: firms create fake data to defend against data thieves.

Are Brazilian Drug Lords Giving Crack the Boot?

The AP reports that Brazilian drug lords are colluding to get rid of crack cocaine even though it will result in millions of lost dollars. Why? Because crack customers have made their jobs unmanageable:

"Rio was always cocaine and marijuana," [former police chief Mario Sergio Duarte] said. "If drug traffickers are coming up with this strategy of going back to cocaine and marijuana, it's not because they suddenly developed an awareness, or because they want to be charitable and help the addicts. It's just that crack brings them too much trouble to be worth it."

A lawyer for the gangs confirms this:

Drug Dealers in the Netherlands Now Selling Marijuana

A few months ago, I discussed the tourist drug ban in the Netherlands, with a focus on my town, Maastricht.  NPR just ran a story on the intermediate term effects of the new regulations.  Some of the “coffee shops” (places where one could buy a pre-rolled or roll-you-own joint for €3) have reopened, as I predicted; others have not. Unsurprisingly, what has happened is that drug dealers, who previously had dealt only in hard drugs, are now also selling marijuana illegally.  While total consumption of weed has probably dropped, buyers are worse off, as are coffee-house owners, with the main beneficiaries being drug dealers.  As always, something that raises price in a legal market will increase demand in the illegal market.

Banned Products, Available in Poor Countries

In a recent Harry Hole mystery novel, The Leopard, Jo Nesbø (an economist as well as novelist) has Harry ask someone, “Where would you go to get it [a particular anesthetic] now?” and is answered, “Ex-Soviet states. Or Africa….The producer sells it at bargain-basement prices since the European ban, so it ends up in poor countries.” When rich countries ban something, they increase its supply to poor countries that refuse to ban it.  Prices are lowered to consumers there.  Rich countries’ safety is enhanced, poor countries’ worsened, with the only consolation that consumers in poor countries become able to obtain the harmful substance at lower prices.  Are people in each country better off, worse off, or what?

How Will Rio's Arrest Bounty Play Out?

An interesting e-mail from a reader:

Hello. My name is Thiago, and I am writing from Brazil. I always read freakonomics posts thru my rss reader and I saw a news today that inspired me to write to you.
 
Rio de Janeiro's  police started a new policy to incentivize cops to arrest the most wanted drug dealers. The prize: 15 days off and one weekend in a beautiful island at Angra dos Reis with all costs included.

I wondered if this incentive will have a positive effect, whereas there are bad cops who are bribed by drug dealers. What if these bad officers began to been rewarded by drug dealer with tickets to Disney instead of arrest them?

The New HIV Drug

An FDA panel just approved the first drug recommended for preventing infection by, rather than limiting the effects of the HIV virus.  Part of the discussion by panel members was classic economics, expressing concerns that the drug’s availability would reduce people’s willingness to take as much care, in particular that it might reduce condom use.  

The same issue has been mentioned and analyzed in various economic studies, including old ones about the effects of mandating car seat-belt use on automobile accidents, and about the impact of sex education on teenage sexual activity and pregnancy.  Any insurance or safety measure generates a moral hazard; the important issue is the net effect on the outcome of interest -- in this case, HIV infection.