essay on black marketing

Does Legalization Reduce Black Market Activity? Evidence from a Global Ivory Experiment and Elephant Poaching Data

Black markets are estimated to represent a fifth of global economic activity, but their response to policy is poorly understood because participants systematically hide their actions. It is widely hypothesized that relaxing trade bans in illegal goods allows legal supplies to competitively displace illegal supplies, but a richer economic theory provides more ambiguous predictions. Here we evaluate the first major global legalization experiment in an internationally banned market, where a monitoring system established before the experiment enables us to observe the behavior of illegal suppliers before and after. International trade of ivory was banned in 1989, with global elephant poaching data collected by field researchers since 2003. A one-time legal sale of ivory stocks to China and Japan in 2008 was designed as an experiment, but its global impact has not been evaluated. We find that international announcement of the legal ivory sale corresponds with an abrupt ~66% increase in illegal ivory production across two continents, and a possible ten-fold increase in its trend. An estimated ~71% increase in ivory smuggling out of Africa corroborates this finding, while corresponding patterns are absent from natural elephant mortality, Chinese purchases of other precious materials, poaching of other species, and alternative explanatory variables. These data suggest the widely documented recent increase in elephant poaching likely originated with the legal sale. More generally, these results suggest that changes to producer costs and/or consumer demand induced by legal sales can have larger effects than displacement of illegal production in some global black markets, implying that partial legalization of banned goods does not necessarily reduce black market activity.

We thank Scott Barrett, Julian Blanc, Ahimsa Campos-Arceiz, Christopher Costello, Jeremy Darrington, Andy Dobson, Ray Fisman, Martin Heijdra, Kelsey Jack, Amir Jina, Steven Levitt, Molly Lipscomb, Tom Milliken, Dinsha Mistree, Katarzyna Nowak, Michael Oppenheimer, Andrew Plantinga, Steven Raphael, Mary Rice, Shruti Suresh, Reed Walker, David Wilcove, Tom Vogl, and seminar participants at Columbia University, UC Berkeley, the UC Santa Barbara Occasional Conference, the NBER EEE meeting, and the Triangle Resources and Environmental Economics Seminar, for important comments and suggestions. N.S. was funded by a National Science Foundation Graduate Research Fellowship. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.

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• June 8, 2016

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• Did a Legal Ivory Sale Increase Smuggling and Poaching? Author(s): Solomon M. Hsiang Nitin Sekar After the experimental 2008 sale, there was a discontinuous jump in the proportion of wild elephants poached and in seizures of...

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Introduction

Black markets reflect human needs, wants, and values. Unmet demand drives black market activity – fulfilling needs for some and pleasure for others. There is a strong intersection between vices and black-market activity as social pressure fuels markets. Through the lens of our class readings, discussions, and coursework, we find that our papers in this book examine how individual values, group needs, and societal wants drive black markets globally in a wide variety of contexts. We also find that the risks and stakes associated with black markets vary according to context as the markets adapt and improvise in response to their surroundings, taking advantage of opportunities provided by both regulation and lack of regulation in licit markets. A result is that black market activity blurs and challenges our conventional notions of order. Fueled by incessant demand, the parameters of legality are challenged, with licit institutions cozying up to illicit ones who are happy to return the favor. These black markets permeate our lives in an endless Catch-22, refusing to die out as they do whatever they must to survive.

Group Needs 

People’s lives are surrounded by needs. People need shelter, clothing, sleep and nutrition so they can survive. They need money to satisfy these needs. Most people turn to a 9 to 5 job to make money, but others turn to illicit forms of business. The following papers will dive deeper into the need to make money through different forms of illicit businesses.

Mahi Patel’s “Bollywood? Brothel.” delves deeply into the world of notorious pimp Gangubai Kathiawadi and the larger Mumbai underworld by analyzing a book chapter, “The Matriarch of Kamathipura,” and the subsequent movie made about her life, Gangubai Kathiawadi . The essay describes and analyzes Gangubai’s journey from being a victim of sex trafficking to becoming the President of Kamathipura (the red-light district of Mumbai). Hers is a story of immense pain but also an absolute desire to do whatever it takes to survive. Gangubai’s need for survival was the precipice on which her actions were based, but eventually, when she had secured survival for herself, she was able to transform and address the need to make money to ensure the survival of other victims of sex trafficking.

Grace Tibshrany’s essay “Secret Little Facilitators of Black Markets” connects the cosmetics black market in her life to the rest of the world, illuminating her analysis of children’s roles as black market bosses. Carly, a college friend, has operated a nail business since middleschool, and she performs manicures for Grace with illicit materials purchased as a minor. Grace uses this personal scenario to segue into consideration of thriving black markets that are actually child operated. The basic human instinct to make money and need to feel satisfied for doing a job well done pushes children to run businesses. However, these businesses are in fact illicit and go under the radar. Grace explores the specifics of the greater cosmetics black market that perpetuates her friend’s black-market business, as well as why child-owned businesses constitute as black markets, and the advantages these businesses have through being illicit. Without the need to generate income and feel fulfilled, these black markets would not exist.

Bradley Kelley’s “Organized Crime in the Modern Age” examines how organized crime has prospered in the last century. During the Prohibition Era members of the mafia supplied alcohol to make money. In the 1980s Russian and Italian mobs worked to pocket taxes on gas that people needed. Colombian and Mexican cartels sold drugs all over the United States as their sole source of income. In each of these scenarios each group needed to make money. While government pursued criminal organizations for breaking the law and taking money that the government deserved, these organizations created businesses that met people’s needs, including the needs of members of the criminal organizations. However, sometimes the businesses paid the price for breaking the law.

Societal Wants Drive the Demand for Black Markets

While each human possesses various individualized wants, different wants emanate within societal culture. While  individual wants are subjective in nature to a specific person, place, or group, they are  built upon a pre-existing foundation. Societal desires compound individual values and group needs to ensure the longevity of black-market systems. These wants are often not fulfilled through legal means, offering a golden opportunity for black markets to begin operating in the respective market. Societal wants ensure the longevity and continuity of various black markets that the following writings expand upon.

Katie Bernfeld’s “University of the Underground” explores black market operations on college campuses. From ticket scalping, “plugs,” fake IDs and selling homework, to drugs ranging from coke to adderall to caffeine – this microclimate is charged by societal desires which ultimately promote the longevity of this vast ecosystem.

Valerie Antenucci’s “The Black Gold of the Sea” explores caviar’s role in high society and its impacts on the  environment. Luxury goods are unnecessarily expensive and cause more damage than many would except. This chapter describes the black-market context that creates the perfect environment for damages to ecosystems and the caviar trade’s dramatic economic and social consequences.

Steven Kozakiewicz’ “Underage College Students Desire to Consume Alcohol Fuels the Fake ID Black Market” provides insight on one of the premier black markets in America, the fake ID market amongst underage college students. The writing explores the college age students’ deeply-rooted societal desire to consume alcohol. While simultaneously exploring various views on underage consumption, current governmental interventions, and the overall structure of the fake ID black market, the flow and continuity of the fake ID black market is spotlighted and explained to the reader.

Individual Values

Entry into the black market is driven by decisions made as individuals follow their personal value systems. These values are made due to priorities pushing individuals away from the conventional markets, whether due to legal constraints, social pressures, or other situational factors. The following papers detail stories of people worldwide who fall into the black market due to their personal beliefs and values.

Patrick Lee’s “The Plate Pilgrimage” follows several characters in Chinese society who attempt to acquire or sell license plates, a commodity made scarce due to extreme regulation. Motivated by the importance they place on marriage, familial reputation, or money, these individuals enter this illicit market as vendor or buyer to help achieve their goal. While success is limited, their journeys spent navigating the system reveal just how important the license can be to alignment of their value system.

What drives someone to do something? In a deep character analysis of the famous AMC show Breaking Bad, Jay Zheng dissects the profound truth behind Walter White’s fall to the black market. At the show’s beginning, Walter White was tempted into the black market to help his family financially. As the show develops, viewers see how the family value slowly decays, and something evil grows anew in its place. Or were the decayed values always there waiting for the right moment to fester and grow?

“Flower of the Golden Triangle” by Mercy Cuai reflects her encounter with recovered heroin addicts in church and how their change in values defines their changed lives, from drug addicts to full devoted Christians. Many young ethnic minorites in Burma choose to move away to cities or rural northern Burma in pursuit of work opportunities. Their days mining for jade in Kachin state comes with temptations of drugs. Many men fall into addiction, and later, some manage to turn their life around with the help of rehabilitation centers or religious groups. The drugs come from the Golden Triangle, a nearby region well known for illicit drug trade. The Golden Triangle borders Thailand, Burma and Laos. The rise of opium production and heroin distribution from the region has a history involving the Koumintang (KMT), a former socialist Chinese party, and the CIA. The heroin trade emanating from the Golden Triangle became the second largest in the world. Its impact on heroin users is felt from the opium smokers in the region, to heroin addicts near the region, and to addicts, those recovering from addiction, and families globally.

Perspectives on Black Markets V.6 Copyright © by Michael Morrone et. al. is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License , except where otherwise noted.

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