Follow the Silk Road

Stretching some 4,000 miles, the “Silk Road” was a trade network connecting the continent of Asia. From around 200 B.C., the route, running from China to India, to the Mediterranean Sea, the horn of Africa, and beyond, is largely credited for opening up trade in much of the world, leading to the development and exchange of everything from spices and cloth, to religions and political philosophies.

In 2011, a new Silk Road sought to once again bridge the gap between buyers and sellers. Instead of exchanging cloth, however, this Silk Road was best known for allowing individuals to buy and sell illegal drugs.

Known as part of the “dark web,” the Silk Road website allowed users to anonymously buy and sell goods and services without government intrusion. Using the anonymizing software, TOR, the site effectively obscured the online identities of both buyers and sellers, meaning that even the authorities would be unable to identify Silk Road users. The site accepted no electronic forms of payment other than Bitcoin, meaning users could not be traced via their credit card information. By March 2013, the site had some 10,000 products available for purchase and oversaw more than $1.7 million in transactions a month. Approximately 70 percent of these sales were for illicit drugs.

In October 2013, the founder of the site, Ross William Ulbricht, was arrested in San Francisco on a variety of charges, including money laundering, computer hacking, and conspiracy to traffic narcotics. In February 2015, Ulbricht was convicted on seven charges and was sentenced to two life terms without the possibility of parole.

Well, congrats are in order to the government for putting Ulbricht in jail, assuming they’re interested in increasing instances of overdose, illness, and even deaths related to drugs.

How so? Wouldn’t shutting down a website dedicated to assisting people in acquiring hard drugs make people safer?

Simply put, no. The reason why lies in basic economics.

Consider the market for something you probably buy regularly, like milk. If you go to the grocery store to buy a gallon of 2% only to come home and find out the milk is sour, you have some recourse. You can return it, complain to the store manager, and even take legal action if the milk makes you ill. If others experience similar bad purchases, it won’t be long before others find out about the bad milk. People start to complain to their family and friends and social media about the store selling subpar products. Local media outlets may even do a story on the evening news if the issue is widespread. As a result, the store owners will do one of two things: They could fix the issue and pull the bad product from the shelves, or they could do nothing. If they select the first option, the store may preserve its business. If a store selects the second option, they will lose customers, and possibly go out of business. The information about products in the market for milk flows freely, giving buyers access to a wealth of information about the products they consume.

But the market for drugs isn’t like the market for milk. Because it’s currently illegal in the U.S. to buy and sell a variety of drugs, transactions for such goods take place in an underground or “black” market. This is particularly important to consider when discussing issues like overdose and drug-related illnesses. Suppose instead of buying milk you’re buying meth. If the drugs you buy are of poor quality or make you ill, what are you going to do? Nothing. You aren’t going to go back to your dealer and complain. You won’t file a complaint with the Better Business Bureau or other authorities, and you probably aren’t going to mention to your friend over coffee about how you “just can’t believe Joe on the corner sold me bad meth!”

In essence, those channels which spread information about the problems in the milk market are absent in the market for drugs—not because drugs are inherently bad for you, but because of the black market created by government policy and the incentives that come with it. With a lack of information, impure drugs are more likely to enter the market and, importantly, stay on the market. This means that overdoses and other illnesses are more likely. In fact, this is exactly what we’ve observed statistically over the course of the War on Drugs. Overdoses, deaths, and drug-related illnesses have skyrocketed despite continuously expanding efforts to eradicate drug use.

The Silk Road website likely prevented deaths and illness. Unsurprisingly, statistics regarding the death and overdose of Silk Road clients don’t exist, but the economic logic presented above illustrates why we would expect deaths, overdoses, and illness to decrease. Simply stated, the site allowed some of the information channels stomped out by government intervention to be reopened. The site allowed for buyers and sellers to leave feedback on one another. If a seller shortchanged his clients, failed to deliver product, or produced bad products, other buyers would soon know about it and be able to avoid him. Impure drugs would be weeded out from the marketplace.

I have written elsewhere about the economics of prohibition and the perpetual War on Drugs. If we are truly serious about decreasing things like violence, poisonings, and overdoses, it’s time to consider a new policy other than prohibition. The elimination of Silk Road and other such mediums of exchange will continue to perpetuate what we’ve observed since the 1970s, more violence, more criminals, and more drug-related deaths.

Abigail R. Hall is a Research Fellow at the Independent Institute and an Associate Professor of Economics at Sykes College of Business at the University of Tampa.
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