1.
Economics of
DRUG DEALING

2.
SUDHIR
VENTAKESH

3.
STEVEN
LEVITT

4.
PENETRATING THE GANG
Q. How do you feel being poor and Black in America?
A) Very Good
B) Good
C)Bad
D) Very Bad

5.
MCDONALDS VS DRUG
Board of Directors
VPs VPs VPs
Franchise Franchise Franchise
Sales
Man
Sales
Man
Sales
Man

6.
WAGE RATES
Local Leader: $100,000 PerYear
Regional Leader: $200,000 PerYear
Board of Directors: $400,000 PerYear
Foot Soldiers: $3.5 Per Hour

7.
RISKY JOB
Annual Death Rates Per Person
Foot Soldiers in the gang: 7%
Inmates on death row: 2%
Inner city Black teens
During crack peak: 1%
U.S Military force in IRAQ: 0.5%

8.
THEORY Vs PRACTICE
Economic principles in the Real World
“Would you stand around here when all this shit is going on?
No,right? So if I gonna be asked to put my life on the line,
then front me the cash man”
A “compensating differential” is the increment to wages that
A worker requires to leave him indifferent between performing
Two tasks, one which is more unpleasant than the other

9.
THEORY Vs PRACTICE
Game Theory
“If we start shooting around there [the other gang’s territory],
nobody, and I mean you dig it,nobody gonna step on their turf.
But we gotta be careful,‘cause they can shoot around here too
And then we all fu**ed.”
Every Two-person game has a Nash Equilibrium

10.
THEORY Vs PRACTICE
Economic principles in the Real World
“You got all these niggers below you who want your job,
You dig? If you start taking losses, they see you [as]
Weak and shit”
Cash flow constraints dictate that the local leader cannot
Make large losses in any month