An Economic Analysis of a Drug-Selling Gang's Finances

We analyze a unique data set detailing the financial activities of a drug-selling street gang on a monthly basis over a four-year period in the recent past. The data, originally compiled by the gang leader to aid in managing the organization, contain detailed information on both the sources of revenues (e.g. drug sales, extortion) and expenditrues (e.g. costs of drugs sold, weapons, tribute to the central gang organization, wages paid to various levels of the gang). Street-level drug dealing appears to be less lucrative than is generally though. We estimate the average wage in the organization to rise from roughly $6 per hour to$11 per hour over the time period studied. The distribution of wages, however, is extremely skewed. Gang leaders earn far more than they could in the legitimate sector, but the actual street-level dealers appear to earn less than the minimum wage throughout most of our sample, in spite of the substantial risks associated with such activities (the annual violent death rate in our sample is 0.07), There is some evidence consistent both with compensating differentials and efficiency wages. The markup on drugs suggests that the gang has substantial local market power. Gang wars appear to have an important strategic component: violence on another gang's turf shifts demand away from that area. The gang we observe responds to such attacks by pricing below marginal cost, suggesting either economic punishment for the rival gang or the presence of switching for users that makes market share maintenance valuable. We investigate a range of alternative methods for estimating the willingness of gang members to accept risks of death, all of which suggest that the implicit value that gang members place on their own lives is very low.

Getting Ahead: Social Mobility among the Urban Poor

One of the most dramatic findings of the contemporary scholarship on the urban poor has been the extent to which this population has been affected by the departure of manufacturing, and industrial, employment from inner city areas. The effects of this have included the sharp rise in unemployment and the increase in the number of individuals on welfare rolls. Although writers such as Charles Murray and Lawrence Mead have argued that with the growth, and entrenchment, of welfare an attitude of “dependency” has arisen, more recent empirical research does not substantiate these claims of dependency and “shiftlessness” among the urban poor; these latter studies have raised more general questions concerning individual employment histories including attempts to reenter positions of stable and meaningful employment. The article addresses such questions by examining the responses of 27 black males, the majority of whom were out of work and/or receiving public assistance, to open-ended questions concerning their experiences in the labor force and their assesments of the contemporary structure of social mobility. In brief, the conclusions reached in the examination of these interviews point to the numerous forces—racial, spatial, and political as well as strictly economic—which have come into play in shaping their past and present. </jats:p