CHAPTER 3 - WHY DO DRUG DEALERS STILL LIVE WITH THEIR MOMS?

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  •  Levitt begins this chapter by explaining conventional wisdom - which economic theorist John Kenneth Galbraith defines as information that reinforces a person's interest and well-being.
  • Conventional wisdom, according to some, is simple, convenient, comfortable, and comforting—though it may not necessarily be true.
  • In 1989 while surveying Chicago Housing Projects, University of Chicago Ph.D. Student Sudhir Venkatesh befriended members of the Black Gangster Disciples Nation. One gang member in particular - J.T., a college graduate who excelled at business and had assumed the role of head- came to intrigue Venkatesh greatly over time. Over six years he spent with them, witnessing firsthand their operation which included illegal activity - drugs, weapons dealing, robbery, etc.
  • During his inspection, he found that the gang followed the same guidelines and procedures as a franchised company. Sudhir learned that this gang was just one branch of an even larger criminal organization and the leader pays 20 percent of what they earn to the Board of Directors for the right to sell drugs in their territory while also having responsibility for paying his employees.

 

  • During the peak drug seasons, J.T.'s branch of the gang would bring in $32,000 each month; with an estimated monthly cost for all the items at $14,000. Out of this profit alone, he earns $8,500 per month - putting him on an annual income that would total up to roughly $100K per year before taxes are taken out. The big bosses sitting on the board who oversee operations take anywhere from half a million dollars to two million dollars per year. When he pays his three officers and around fifty-foot soldiers only $9,500 per month - it leaves each officer taking home about 700 dollars every 30 days without paying taxes, and his foot soldier's wages come out to 3.30 bucks an hour before taxes.
  • The conventional wisdom that all drug dealers make a lot of money is dispelled by this example, which also explains why they still live with their mothers. Just like any other successful venture, one must be near the top of the hierarchy if one wants to receive a large paycheck.
  • As J.T. explained, he kept his foot soldiers' wages low to demonstrate his authority. Foot soldiers, however, risked arrest and violence every day, with a 1-in-4 chance of death. Although the job came with a high risk, dealers still took it because they hoped to move up in the ranks and make it big, particularly since most grew up below the poverty line.
  • As a rule, when there are a lot of people willing to do a job, the job doesn't pay very well the same goes for crack dealing. It was common for foot soldiers to quit their dangerous profession when they realized they were not advancing as they were hoping to move up. Also, several factors determine wages: first, the number of people available to do a job; second, the specialized skills required; third, the unpleasantness of the job and the demand for the services it provides.
  • As nylon stockings were marketed in 1939 as an alternative to silk, crack cocaine was marketed as an alternative to cocaine.
  • The government's enforcement of drug laws and imprisonment of drug dealers exacerbated the problem since they made new contacts in prison and released offenders gained knowledge of sales and distribution methods.
  • Although black neighborhoods improved economically by 1980, the crack cocaine epidemic ravaged black neighborhoods harder than others, causing the homicide rate to quadruple among young urban blacks.
  • A widening achievement gap between blacks and whites is likely a result of the crack cocaine epidemic.
  • This was when everyone expected the youth crime rate to skyrocket, but instead, it fell—this paves the way for the in-depth discussion on the abortion topic proposed in the introduction that will happen in the next chapter.







Economics is a fascinating subject because it touches on almost every aspect of life. This makes it a very broad field, but also a very challenging one. If you want to get a good understanding of economics, then you'll need to spend some time reading about it. You can start by looking at these book summaries and recommendations.

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