The production of cocaine and heroin, the two most important drugs economically, has been concentrated in a small number of poor nations for 25 years. A slightly larger number of developing nations have been affected by large-scale trafficking in these two drugs. This paper reviews what is known...

The standard model of markets for illicit drugs predicts that tougher enforcement against sellers will raise prices; yet cocaine and heroin prices have fallen substantially during a period of massive increases in enforcement. We present a model in which the basic mechanisms at work in the...