A few days ago, the Office of the U.S. Attorney for the Eastern District of Pennsylvania put out a Twitter press release with a typical law enforcement estimate of “street value”:
— U.S. Attorney EDPA (@USAO_EDPA) June 18, 2019
I heard about this because my local neighborhood criminal defense blogger, Matt Haiduk, had a few things to say about the “street value” estimate, using an analogy to ketchup:
If I cut out the middleman I can actually get 60 gallons- or 7680 ounces of ketchup! At a price of of only $457.20 it comes out to a street value of…
…how would I even know? What am I going to do with 60 gallons of ketchup? I couldn’t eat it all before it went bad- that’s nasty. I couldn’t repackage and sell it to my friends- I don’t have anywhere to store it, I can’t ship it, and I definitely don’t have “60 gallons of ketchup” worth of friends.
There is no street value to 60 gallons of ketchup. There’s only wholesale value. And that wholesale value is A LOT lower per-ounce than the personal use bottles I buy.
Matt’s ketchup analogy gets at the problem, but I’m going with a different analogy. Let’s talk about fine handmade wood furniture, like this beautiful Shaker Style desk from Vermont Woods Studios:
As depicted, made out of Cherry wood, putting this desk in your office will cost $5,274.
Now suppose the cops stop and confiscate a truck hauling a container full of milled Cherry lumber. The maximum load limit for standard 40-foot shipping container is 57,759 pounds (just under 29 tons). The standard unit of measure for rough wood is the board-foot, which is a 1ft by 1ft piece of wood that is 1 inch thick. Since Cherry wood weighs about 50 pounds per cubic foot, we can calculate that the container holds 13,862 board-feet of Cherry wood.
Given the dimensions of the desk above, I think a woodworker could make the whole thing — top, back and side panels, drawers and legs — from about 80 board-feet of lumber. Thus the truck is carrying enough wood to make 173 executive disks selling for $5,274 each, for a total of $912,402. In other words, by the logic of drug “street value,” the cops just confiscated a truck carrying Cherry wood with a “street value” of almost a million dollars.
But really, they didn’t. What the cops got was a raw material that could eventually be converted into an end consumer good worth a lot more, through the application of rather a lot of labor. But until that labor is applied and paid for, the value of what they got is a lot less — about $95,000 by my estimate. (And even that is assuming small lots at retail prices. A wholesaler would probably offer less.)
It’s the same with the cocaine. Raw cocaine on the truck is of comparatively little value. It doesn’t become valuable until it’s actually in the noses of the people who will be using it, and it takes a lot of work to get it there. That 16.5 tons of cocaine would have to be diluted with filler, broken down into smaller packets, and transported to stash houses around the country, where it would be cut and broken down further into 1 kilo bricks and then eventually into ounces and grams and even individual lines of cocaine for sale to end users. This requires couriers, drivers, packers, and chemists, along with security and lookouts and people to supervise them.
The cocaine intercepted by the government, like the Cherry wood in my example, is just a raw material that has yet to go through a production and distribution process that will add a lot to its value. Trying to calculate its “street price” is like finding a pile of clay and pricing it as pottery, or finding $50 worth of canvas and paint and pricing it as a $500 finished painting.
Drug warriors might object that I am missing the point: They could accept that much of their billion dollar valuation depends on labor that is yet to be done, and then they could argue that by stopping the cocaine in its raw bulk form, they are preventing it from fueling all that future criminal labor that would be involved in getting it out onto the streets. By stopping the cocaine now, they are stopping a bunch of criminals from earning a billion dollars distributing it.
That’s probably a pretty fair argument. But let’s examine why it’s so profitable to distribute cocaine: All of the steps in the distribution process have to take place while the cops are actively trying to stop them. It costs money to secure the operation against law enforcement interference, and even then, getting arrested is still a huge risk for everyone involved, so the price of cocaine has to include both the cost of avoiding arrest and a premium paid to people to accept the substantial risk of arrest that remains.
Just how large are the costs of risking or avoiding getting arrested? Well, it turns out that cocaine has a legitimate medical use as a topical anesthetic during sinus surgery. Last I heard, medical grade cocaine sold for this purpose at a cost of about $30 per ounce, or a little less than $1 million per ton. I can’t find current pricing, but if that still holds, then the 16.5 tons of cocaine seized by the cops would be worth about $15.8 million dollars if it were legal. In other words, if we accept the U.S. Attorney’s office’s claim that the cocaine has a street value of $1 billion, we can estimate that police attempts to suppress the cocaine trade have driven up cocaine prices by 6200 percent!
And all of it goes into the hands of criminals, thanks to the war on drugs.