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How Bad Was Crack Cocaine?

The Economics of an Illicit Drug Market

Research by
Steven D. Levitt and
Kevin M. Murphy

Steven D. Levitt is Alvin H. Baum Professor in the Department of Economics at the University of Chicago and Director of the Initiative on Chicago Price Theory at the University of Chicago Graduate School of Business.
Kevin M. Murphy is George J. Stigler Distinguished Service Professor of Economics at the University of Chicago Graduate School of Business and the University of Chicago.
 
 

While crack cocaine seems to account for the rise in the murder rate of black youths in the 1980s, as well as more moderate increases in a wide range of adverse birth outcomes, the damaging social impact of crack fades a decade later. New research suggests that changes in behavior, crack markets, and the crack-using population offset the destructive impact of the drug over time. Rather than the drug use itself, the greatest social costs of crack are associated with prohibition-related violence.

A number of ominous trends emerged in the black community in the mid-1980s. Between 1984 and 1994, the homicide rate for black males aged 14 to 17 more than doubled, and the homicide rate for black males aged 18 to 24 increased nearly as much. During this period, the black community also experienced an increase in fetal death rates, low birth-weight babies, weapons arrests, and the number of children in foster care.

However, not all of the social indicators were negative for the black community in this time period. For instance, the homicide rate for black males 25 and older remained essentially unchanged over the period. Moreover, by the year 2000, homicide rates of young black males had fallen below their early 1980s levels.

"What's puzzling about this picture is a very striking pattern mostly affecting young black men and women, rather than the population in general," says Levitt. "What was it that made these things happen?"

In the study "Measuring the Impact of Crack Cocaine," University of Chicago professor Steven D. Levitt and University of Chicago Graduate School of Business professor Kevin M. Murphy, along with University of Chicago doctoral student Paul Heaton and Roland G. Fryer of Harvard University examine the extent to which one single underlying factor – crack cocaine – can account for the rise and fall of social ills within black and Hispanic communities over a 20-year period from 1980 to 2000.

The Difficulties of Measuring Crack Cocaine
Though there are many quantitative studies of social patterns in the black and Hispanic communities, few studies have considered crack cocaine because of the difficulty of measuring its impact, despite the fact that many researchers have argued that crack played a central role in adverse trends of the 1980s and 1990s.

In the past, researchers used a variety of single indicators to measure the timing and intensity of crack's presence in local areas. Cocaine-related arrests have been used as a proxy for crack, as have cocaine-related emergency room visits.

In this study, the authors take a different approach. Rather than relying on a single measure, they assemble a range of indicators likely to suggest crack use. These include cocaine arrests and cocaine-related emergency room visits (indicators used in previous research), as well as the frequency of crack cocaine mentions in newspapers, cocaine-related deaths, and the number of drug seizures and undercover drug buys by the Drug Enforcement Administration.

While there are shortcomings for each of these indicators, together these data present a compelling method for tracking fluctuations in crack use. The single crack cocaine index developed by the authors is not particularly sensitive to any one of the individual measures and corresponds well to the sociological and media accounts of the spread of crack cocaine. The measure depicts the intensity of crack's presence at a particular time and place and can be constructed for a wide variety of geographic areas.

"Unlike other research which relied on one noisy measure, our combined measures produce consistent results whether we use national aggregates, city-level data, or state-level data," notes Levitt.

Geography
The authors found that although crack arrived earlier on the West Coast, the drug's strongest impacts were ultimately felt in the Northeast and the Middle Atlantic states.

The Midwest experienced a relatively low impact from crack consumption. Not surprisingly, the authors also found crack to be a much worse problem in big cities than in smaller cities. The authors estimate about 70 percent of the adverse impact of crack was felt in large cities, implying that the rates per capita were at least 10 times higher in large cities than in the rest of the country.

During the time period studied, the set of cities with the greatest crack problem includes Newark, Philadelphia, New York, Oakland, Boston, San Francisco, and Seattle. Other cities that rank high include New Orleans, Baltimore, Washington, D.C., and Los Angeles. Among states, Maryland and New York top the list.

Aging Addicts
As the authors had conjectured, their measure of crack consumption is very highly correlated with black youth homicide spikes.

The rise in crack use from 1984 to 1989 is associated with a doubling of the number of murdered black males aged 14 to 17, a 30 percent increase for those aged 18 to 24, and a 10 percent increase for those 25 and over. Thus, crack accounts for much of the observed variation in homicide rates over this time period.

In addition, the proportion of black children in foster care more than doubled, fetal death rates and weapons arrests of blacks rose by more than 25 percent, and black babies with low birth weights increased five percent.

However, after 1995 the link between the crack index and adverse social outcomes for blacks disappears with the exception of the homicide rate for black males aged 18 to 24. Surprisingly, this general decline in the homicide rate is not the result of less crack use.

"The first startling result of our study is how crack use increases and stays high," says Levitt. "Even at the end of our sample, crack use remains at 60 to 75 percent of the peak. That's surprising given that the attention paid to the crack epidemic has all but disappeared."

How is it possible that crack use has remained high, but many of the social ills that go with crack use have apparently waned? This seeming contradiction is made possible by the fact crack is now much cheaper to buy.

"Over time, as the suppliers figured out how to make crack more easily, the price of crack fell dramatically," says Levitt. "Therefore, an addict could consume much more crack with the same amount of income. The number of people using crack has fallen, but the total amount of crack consumed hasn't fallen nearly as much because each addict is consuming much more."

Levitt also points to the impact of what he calls "social learning." In the late 1980s, the first generation of crack users were teenagers and young adults. The next generation saw how that first generation was hard hit and thus used crack at much lower rates. The first generation that became addicted to crack has stayed addicted, but, 15 years later, simply has aged.

"Instead of being 20, crack addicts are now 35 to 40 years old, and they're not having very many babies anymore," says Levitt. "That's partially why a lot of the birth outcomes have improved. In addition, people have learned that it's a bad idea to mix crack and babies. This has resulted in reducing many social ills."

Another reason adverse social outcomes associated with crack cocaine have fallen is the establishment of property rights. Drug-related violence has declined because now gangs have established their turf.

As profitability declined, so did crack-related violence. Even though the quantity of crack sold is almost as high as ever, the price is much lower, and therefore the total pool of profits and revenue that suppliers compete for is much smaller.

"Now it's just not worth as much to kill for crack as it used to be," says Levitt.

The authors argue that most of the destructive effects of crack cocaine were because of the prohibition itself, rather than the usage. If crack were legal, the authors argue, there would not have been as much violence.

"All the evidence suggests that the violence is closely tied to the fact that the suppliers of crack – the gangs – were killing each other because they could make huge profits," says Levitt. "Suppliers were competing. It seems that the consumption effects of crack weren't that bad in comparison to the violence, and therefore, while the effect of crack is not negligible, it is not as large as some of the doomsayers have claimed."

View the study: Measuring the Impact of Crack Cocaine