Do black web markets lower the violence associated with drugs?

by on June 4, 2014 at 2:20 pm in Economics, Law, Medicine | Permalink

It seems maybe so, from a new paper by Judith Aldridge and David Décary-Hétu, the abstract is this:

The online cryptomarket Silk Road has been oft-characterised as an ‘eBay for drugs’ with customers drug consumers making personal use-sized purchases. Our research demonstrates that this was not the case. Using a bespoke web crawler, we downloaded all drugs listings on Silk Road in September 2013. We found that a substantial proportion of transactions on Silk Road are best characterised as ‘business-to-business’, with sales in quantities and at prices typical of purchases made by drug dealers sourcing stock. High price-quantity sales generated between 31-45% of revenue, making sales to drug dealers the key Silk Road drugs business. As such, Silk Road was what we refer to as a transformative, as opposed to incremental, criminal innovation. With the key Silk Road customers actually drug dealers sourcing stock for local street operations, we were witnessing a new breed of retail drug dealer, equipped with a technological subcultural capital skill set for sourcing stock. Sales on Silk Road increased from an estimate of $14.4 million in mid 2012 to $89.7 million by our calculations. This is a more than 600% increase in just over a year, demonstrating the demand for this kind of illicit online marketplace. With Silk Road functioning to considerable degree at the wholesale/broker market level, its virtual location should reduce violence, intimidation and territorialism. Results are discussed in terms of the opportunities cryptomarkets provide for criminologists, who have thus far been reluctant to step outside of social surveys and administrative data to access the world of ‘webometric’ and ‘big data’.

Here is a write-up in Wired.  For the pointer I thank Andrea Castillo.

1 Anon380483 June 4, 2014 at 2:48 pm

Maybe, but this paper does nothing to prove it as far as i can tell.

2 David Wright June 4, 2014 at 9:41 pm

+1. From the wired write-up:

“Aldridge and Decary-Hetu’s study, still being reviewed for publication by a journal they declined to name, doesn’t offer crime statistics to back up that argument. Instead, it uses slightly convoluted logic based on assumptions about the source of violence in the drug world.”

Basically, this isn’t a “study”, it’s a “speculation”. One that is interesting and not entirely implausible, but entirely devoid of evidence for the mechanism it asserts.

3 ViolentEntrepreneurs June 4, 2014 at 3:11 pm

Very interesting… I examined the relationship between violence and the drug trade in Mexico a few years back.

In my examination, violence was correlated to enforcement. The more violent the enforcement, the more violent the Drug Trafficking Organizations (DTOs).

As stated above, Silk Road revenue was small potatoes. I imagine if DTOs were to take the trade to the web, the economics would blow out anything we have seen related to the black web markets.

If the main revenue source for DTOs became the web, I believe the enforcement response would be much greater. There would also likely be a large amount of competition for this new market. As competition and enforcement escalate, I would expect to see violence increase. Because one is already engaged in crime, there are few methods left to dispute transactions or regulations.

My belief, is that the level of economics/enforcement lead to violence associated with DTOs. I do not believe that the virtual space has any relevance. It is worth noting that most of the violence in Mexico is intra-Cartel or Cartel vs. Enforcement. Of course innocents are involved, and these organizations thrive by keeping the citizens submissive (This can accomplished via violence or through providing wealth/benefits).

tl;dr: I do not believe that anything definitive can be said about black web markets reducing violence until economic activity by DTOs reaches parity in the virtual realm.

4 NPW June 4, 2014 at 3:31 pm

Did you examine if:

1. The drug trade was internally less violent due to less external law enforcement;
2. The lack of external law enforcement meant that the internal drug violence was not uncovered;
3. The change in violence was == to the change in law enforcement vs cartel violence;
4. The violence other than murder, e.g. protection payments, went up or down.

It seems likely to me that #2 would explain much of the delta.

5 ViolentEntrepreneurs June 4, 2014 at 4:07 pm

1. Yes. The Mexican state was largely complicit in the drug trade up to the 1970s. Interdiction in Turkey and South America brought the Heroin and Cocaine trades through Mexico. Every Cartel that existed through 2010 was started by one of the few drug traffickers that survived the Mexican/United States crackdowns in the 1970s. Complicity became political graft. The violence of the 1970s as well as the movement of Colombian Cartels into Mexico due to US interdiction helped cement the Mexican Cartels. The United States also policed the cocaine trade in the Caribbean in the early 1980s. This led to Cocaine being shuttled through Central America to Mexico.

2. While there was some violence between DTOs, I found little evidence to support the notion that a rise in violence was due to a lack of documentation of violence. Again, the enforcers and lawmakers were complicit in the trade through the 1970s. I would also point to the report from University of San Diego, which shows the recent rise in violence. The qualifications to be included as drug-related homicide are very strict. http://justiceinmexico.files.wordpress.com/2014/04/140415-dvm-2014-releasered1.pdf

3. I would not give a direct equivalence “==”. As enforcement grew, Cartels grew more violent. Case in point is Los Zetas. Allegedly ex-counter-narcotic agents trained by the US, they were bought as a protection arm by the Gulf Cartel. They split. The result was a bloody war that left the Gulf Cartel decimated (It appears that Los Zetas is finally suffering as well). The Cartels are now equipped like small armies. This was not the case in the 1980s.

4. It is very difficult to answer this with empirical data. I can relate El Chapo Guzman and the Sinaloa Cartel (Former Forbes 1000 member, recently arrested). He treated his entire state, Sinaloa, very well. If there was suspicion that the government was hunting him, he could hop into almost anyone’s house and hide. He was very popular. It was estimated that through political contacts and payments, he had created a private intelligence agency. It is reported that most citizens can identify cartel members, but are much too afraid to say this to anyone. No one likes to be burned alive in an oil barrel. There are still politicians and generals that get found receiving payments from Cartels.

6 NPW June 4, 2014 at 5:59 pm

Is the correct summary then:

when the government helps the cartels the conflict decrease;
when the government doesn’t help the cartels the conflict increases.

If this is true, I don’t understand the interest. If an actor is cooperative with others, we expect there to be less conflict.

When the government is willing to cede control of the state to the cartels, the cartels are not in conflict with the government; when the cartels and the government are both competing for control of the state, there is conflict.

When a single actor, frequently the government, can operate as a neutral party, (reality is not relevant) then multiple actors can coexist with less conflict.

This appears to be no different than any other civil war. That drugs, rather than religion, slavery, or rights, are the issue doesn’t really matter. The conflict exists because the state is enforcing a law that the rebels/cartels/insurgents/freedom fighters find in their best interest to oppose.

Am I missing something?

7 William Wright June 4, 2014 at 3:18 pm

Sales on Silk Road increased from an estimate of $14.4 million in mid 2012 to $89.7 million by our calculations. This is a more than 600% increase in just over a year….

You mean, “more than a 500% increase”, 523% to be exact.

8 Willitts June 4, 2014 at 4:45 pm

Not likely. Most of the violence occurs between distributors. As long as the sources of internet sales can be identified by competitors, there will be violence.

Internet may reduce violence associated with retail or local wholesale distribution, but only as much as those people have access to internet sources.

Nice idea in theory, but not really practical for that purpose.

9 Thor June 4, 2014 at 5:58 pm

A friend of mine who has done (legal) business in Mexico for years: “Re: drugs, politicians either look the other way, or are on the take. Oh, or are dead.”

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11 Benjamin Cole June 4, 2014 at 11:15 pm

Fascinating.

There was a day when pimps or certain hookers “owned’ certain street corners. Indeed, a hooker might “need” a pimp to stay in business, or get beat up etc. Then, with Craigslist and Backpages, hookers could run their own trade. The pimps lost control of the business. Been a long time since I saw a well-dressed pimp.

Yes, the drug cartels might try to eliminate Internet drug trade. But with competition, we would probably see a profusion of buyers and sellers, and a lot of small wholesalers and retailers. The drug lords would face thousands upon thousands of buyers and sellers. Killing of a few would make no difference. Like trying to stop the tide.

Ergo, legalized online drug transactions strike me as a great idea. If a minor trisection fee would be levied, then a source of tax revenue, Pigou style.

12 XVO June 5, 2014 at 12:46 am

If stopping violence is the main goal than outright legalization and regulation appears to be the best option. The whole drug war seems insane and useless. They have a lobby though…We’d need a lot less law enforcement officials without it. While we’re at it we can break the medical monopoly on all drugs and let nature take its course when it comes to drug addicts. Simultaneously increase the penalties for property crime and violent crime.

13 My Favorite Nightmare Scenario Follows June 5, 2014 at 1:27 am

The War on Drugs ends, but in order to keep the jobs in the LEO and Prison industry, is immediately substituted by some other senseless war.

Hello War on Hate Speech Online! Hello War on Copyright Infringement! Hello War on Sugary Drinks!

SWAT teams kicking down doors of people who haven’t read the Terms of Service and did not comply with some absurd clause therein (“You can only access this website while barefoot.”)

14 Axa June 5, 2014 at 7:08 am

Well, people believed Silk Road was used for retail. Researcher does some measurements and discovers Silk Road is used by neighborhood retailers to get stock from bigger suppliers. From there, it’s only an educated guess.

The question is if the Silk Road somehow makes transactions more secure. Just speculation from here……..dealing drugs now means using cash, the risk of your money/drugs robbed with violence and having no idea about quality. Using cash involves two risks: counterfeit cash and armed people stealing your cash. The only way to make people use real cash, avoid getting robbed and securing drug quality is violence. People uses virtual currencies in Silk Road. I’m not 100% sure but I think you can not counterfeit Bitcoin, you don’t need the support of violence to get real currency, volatile but real. Since you’re not carrying lots of cash in dangerous neighborhoods you don’t need violence to protect your assets. Seller rating may be a proxy of drug quality, you don’t need to intimidate or punish with violence to get good quality.

I wonder if the inner mechanisms of an online market make violence less useful to secure transactions =)

15 ThomasH June 5, 2014 at 7:24 am

Surely the easier path to reduce violence is decriminalization of drug distribution and sale.

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