The Economics of Breaking Bad

Breaking Bad is the story of Walter White, a cash-strapped, suburban 50-year old high school chemistry teacher, who following a life-changing cancer diagnosis hooks up with his drug-dealing former student, Jesse Pinkman, to cook and sell crystal methamphetamine. Immediately thrown in at the deep end, White undergoes a vast personality change; from mild-mannered Father into the lying, murderous gangland drug lord Heisenberg;  first cooking methamphetamine wearing an apron in a winnebago, then working in a high-tech underground laboratory for the Chilean gangland kingpin Gustavo Fring — who White eventually kills — and finally amassing a multi-hundred-million-dollar pile of cash.

A key dynamic in the show is White’s relationship with his brother-in-law, DEA agent Hank Schrader. It is Schrader who first introduces White to the idea that selling methamphetamine can pay — boasting of multi-hundred-thousand-dollar drug hauls, and even taking White out on a DEA raid of meth lab, where White first encounters his former student Pinkman. As White’s famously pure blue methamphetamine grows in popularity, Schrader becomes increasingly obsessed with its influx, yet spends the course of almost the entire series unaware that its source is his own brother-in-law.

There is another layer of irony, though. For it is not just that Schrader drew White into the drug trade through informing him of its lucrativeness, and then taking him out on a drug raid. In economic terms, Walter White’s illicit drug empire — and all the killing and carnage that spews from it — is utterly dependent upon the protection of Federal agents like Schrader. Breaking Bad is very much a parable of the failed drug war.

As Milton Friedman famously noted:

If you look at the drug war from a purely economic point of view, the role of the government is to protect the drug cartel. That’s literally true.

There is no logical basis for the prohibition of marijuana. Our failure to successfully enforce these laws is responsible for the deaths of thousands of people in Colombia. I haven’t even included the harm to young people. It’s absolutely disgraceful to think of picking up a 22-year-old for smoking pot. More disgraceful is the denial of marijuana for medical purposes.

Why are drugs so lucrative? Why are users forced to pay such a premium over the cost of production? Because of drug prohibition. The more Federal money spent on drug prohibition, the more drugs seized, the higher the markup. Could criminal elements charging a one-thousand percent markup compete with a legal and free market? Of course not; nobody would buy drugs from a wild-eyed gun-wielding dealer when a pure product is available openly for a fraction of the cost.

So it is the Federal drug prohibitionists enforcing drug prohibition — both in the universe of Breaking Bad, as well as the real world — who are empowering the drug cartels, and criminal elements like Walter White who simply get around the law. Supply and demand rule this world. If society demands narcotics, they will be supplied; the only question is how.

As Abraham Lincoln noted:

Prohibition goes beyond the bounds of reason in that it attempts to control a man’s appetite by legislation and make crime out of things that are not crimes.

The economic costs have been massive:

According to DEA estimates we capture less than 10 percent of all illicit drugs. Does $30 billion a year for a 90% failure rate seem like a good investment? And how much would it cost to stop the other 90%? $100 billion? $500 billion?$1 trillion?

And the resultant swollen prison population is not only a huge cost to the taxpayer, it also takes people out of the economy who could instead be working and producing. 59% of federal prisoners are incarcerated for drug chargers, compared to only 2.5% incarcerated for violent crimes.

The war on drugs also stretches scant police resources. 717, 720 Americans were arrested in 1997 for murder, rape, robbery, and aggravated assault (combined), while 695, 200 were arrested for marijuana offences alone. The time and resources spent on investigating, prosecuting and incarcerating nonviolent drug users is time and resources that has not been spent investigating, prosecuting and incarcerating violent criminals.

Walter White exemplifies the failure of the drug war. Without the folly of prohibitionism White could have profited legally from his obvious talent for supplying a popular recreational pharmaceutical product without having to become part of a vicious and brutal criminal underworld. Under prohibitionism, White was again-and-again forced to either kill or be killed, unleashing his previously-dormant psychopathic potential. The real story of Walter White is that only something as absurd as prohibitionism — and the lucrative criminal underworld that prohibitionism breeds — could provide the catalyst for a mild-mannered chemist to become a wild, murderous psychopath.