essay

A Rogue Economist

Explores the Hidden

Side of Everything

Steven D. Levitt and

Stephen J. Dubner

William Morrow

An Imprint of HarperCollinsPublishers

FREAKONOMICS. Copyright© 2005 by Sceven D. Levi cc and Stephen J. Dubner. All rights reserved. Primed in che United Scates of America. No pare of chis book may be used

or reproduced in any manner whatsoever wichouc wriccen permission except in che case of brief quocacions embodied in critical articles and reviews. For information address HarperCollins Publishers Inc., 10 Ease 53rd Street, New York, NY 10022.

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FIRST EDITION

Designed by Katy Riegel

Primed on acid-free paper

Library of Congress Cataloging-in-Publication Daca

Levi cc, Steven D. Freakonomics : a rogue economist explores che hidden side of everything I Steven D. Levicc

and Stephen J. Dubner.-lst ed.

p. cm. Includes bibliographical references and index. ISBN 0-06-073132-X 1. Economics-Psychological aspects. 2. Economics-Sociological aspects. I. Dubner,

Stephen J. II. Tide.

HB74.P8L479 2005 330-dc22 2004065478

05 06 07 08 09 DJX/RRD 30 29 28 27 26 25 24

AN EXPLANATORY NOTE

In which the origins of

TRODUCTION: The Hidde

In which the book's cemr.

sents how people would

how it actually does wo.ck..

Why the conventi.orud 1

from criminologists to

facts . . . Why knowing

to understanding modem

What Do Schoolteac

in Common?

In which we explore die

side-cheating.

Levitt fits·-everywhere and nowhere. He is a noetic butterfly that no one has

pinned down (he was once offered a job on the Clinton economic team, and the

2000 Bush campaign asked him about being a crime advisor) but who is

daimed by all. He has come to be acknowledged as a master of the simple,

dever solution. He is the guy who, in the slapstick scenario, sees all the engi-

ers futzing with_ a broken machine-and then realizes that no one has thought

oplug it in.

-THE: NEW YORK TIMES MAGAZINE:, AUGUST 3, 2003

Why Do Drug Dealers Still

Live with Their Moms?

The two previous chapters were built around a pair of admittedly

freakish questions: What do schoolteachers and sumo wrestlers have in common? and How is the Ku Klux Klan like a group of real-estate agents? But if you ask enough questions, strange as they seem at the time, you

may eventually learn something worthwhile.

The first trick of asking questions is to determine if your question

is a good one. Just because a question has never been asked does not

make it good. Smart people have been asking questions for quite a few

centuries now, so many of the questions that haven't been asked are bound to yield uninteresting answers.

But if you can question something that people really care about

and find an answer that may surprise them-that is, if you can over­

rurn the conventional wisdom-then you may have some luck.

It was John Kenneth Galbraith, the hyperliterate economic sage,

ho coined the phrase "conventional wisdom." He did not consider

ic a compliment. "We associate truth with convenience," he wrote,

FREAKONOMICS

"with what most closely accords with self-interest and personal. well-being or promises best to avoid awkward effort or unwelcome

dislocation of life. We also find highly acceptable what contributes most to self-esteem." Economic and social behavior, Galbraith con­ tinued, "are complex, and to comprehend their character is mentall tiring. Therefore we adhere� as though to a raft, to those ideas which represent our understanding."

So the conventional wisdom in Galbraith's view must be simple, convenient, comfortable, and comforting-though not necessaril true. It would be silly to argue that the conventional wisdom is never true. But noticing where the conventional wisdom may be false­ noticing, perhaps, the contrails of sloppy or self-interested thinking­ is a nice place to start asking questions.

Consider the recent history of homelessness in the United States. In the early 1980s, an advocate for the homeless named Mitch Snyder took to saying that there were about 3 million homeless Americans. The public duly sat up and took notice. More than 1 of every 100 people were homeless? That sure seemed high, but ... well, the ex­ pert said it. A heretofore quiescent problem was suddenly catapulted into the national consciousness. Snyder even testified before Congress about the magnitude of the problem. He also reportedly told a college audience that 45 homeless people die each second-which would mean a whopping 1.4 billion dead homeless every year. (The U.S. population at the time was about 225 million.) Assuming that Snyder misspoke or was misquoted and meant to say that one homeless per­ son died every forty-five seconds, that's still 701,000 dead homeless

people every year-roughly one-third of all deaths in the United States. Hmm. U ltimately, when Snyder was pressed on his figure of3

million homeless, he admitted that it was a fabrication. Journalists had been hounding him for a specific number, he said, and he hadn't wanted them to walk away empty-handed.

90

le may be sad but nor surp - - be self-inreresred ro t:he poim

cheir own. Journafuts nero eqi . Every day there are newspg

be filled, and an expert v.�o can ys welcome. Working c� ·reets of much convemional

Advertising too is a brillianc . Listerine, for instance, J

a powerful surgical antiseptic.. It oor cleaner and a cure for goJ)(J

until the 1920s, when it: · rosis"-a then obscure medic

ads featured forlorn young r turned off by their mare m

in spite of that?" one maiden th was not conventionallyoo11

· e changed that. As the -1es, "Listerine did not make

· ."In just seven years, the more than $8 million. However created, the convemi

Krugman, the New York Ji George W Bush, bemoaned dii

paign got under way in earl ut Mr. Bush is that he's a bl otes that fit that story get rqi

m were instead that he's a p o , be a cowboy, journalists

with."

In the months leading up ro · ·

Self-interest and personal

d effort or unwelcome

FPtable what contributes

I behavior, Galbraith con-

·dis view must be simple,

, ough not necessarily

IVentional wisdom is never

wisdom may be false- self-interested thinking-

ess in the United States.

ieless named Mitch Snyder

"on homeless Americans.

ore than 1 of every 100

, but ... well, the ex­

n was suddenly catapulted

testified before Congress

reportedly told a college

second-which would

every year. (The U.S.

on.) Assuming that Snyder

say-that one homeless per­

il 701,000 dead homeless

pressed on his figure of 3

s: a fabrication. Journalists

r, he said, and he hadn't

Drug Dealers Living with Their Moms

It may be sad but not surprising to lear� that experts like Snyder can be self-interested to the point of deceit. But they cannot deceive on their own. Journalists need experts as badly as experts need jour­ nalists. Every day there are newspaper pages and television newscasts to be filled, and an expert who can deliver a jarring piece of wisdom is always welcome. Working together, journalists and experts are the architects of much conventional wisdom.

Advertising too is a brilliant tool for creating conventional wis­ dom. Listerine, for instance, was invented in the nineteenth century as a powerful surgical antiseptic. It was later sold, in distilled form, as a floor cleaner and a cure for gonorrhea. But it wasn't a runaway suc­ cess until the 1920s, when it was pitched as a solution for "chronic halitosis "-a then obscure medical term for bad breath. Listerine's new ads featured forlorn young women and men, eager for marriage but turned off by their mate's rotten breath. "Can I be happy with him in spite of that?" one maiden asked herself. Until that time, bad breath was not conventionally considered such a catastrophe. But Lis­ terine changed that. As the advertising scholar James B. Twitchell writes, "Listerine did not make mouthwash as much as it made hali­ cosis." In just seven years, the company's revenues rose from $115,000 co more than $8 million.

However created, the conventional wisdom can be hard to budge. Paul Krugman, the New York Times columnist and devout critic of George W Bush, bemoaned this fact as the President's reelection campaign got under way in early 2004: "The approved story line about Mr. Bush is that he's a bluff, honest, plainspoken guy, and an­ a:dotes that fit that story get reported. But if the conventional wis-

m were instead that he's a phony, a silver-spoon baby who pretends be a cowboy, journalists would have plenty of material to work

"th." In the months leading up to U.S. invasion oflraq in 2003, dueling

91

FREAKONOMICS

experts floated diametrically opposite forecasts about Iraq's weapons

of mass destruction. But more often, as with Mitch Snyder's homeless

"statistics," one side wins the war of conventional wisdom. Women's

rights advocates, for instance, have hyped the incidence of sexual as­

sault, claiming that one in three American women will in their life­

time be a victim of rape or attempted rape. (The actual figure is more

like one in eight-but the advocates know it would take a callous

person to publicly dispute their claims.) Advocates working for the

cures of various tragic diseases regularly do the same. Why not? A lit­

tle creative lying can draw attention, indignation, and-perhaps most

important-the money and political capital to address the actual

problem.

Of course an expert, whether a women's health advocate or a polit­

ical advisor or an advertising executive, tends to have different incen­

tives than the rest of us. And an expert's incentives may shift 180

degrees, depending on the situation.

Consider the police. A recent audit discovered that the police in

Atlanta were radically underreporting crime since the early 1990s.

The practice apparently began when Atlanta was working to land the

1996 Olympics. The city needed to shed its violent image, and fast.

So each year thousands of crime reports were either downgraded from

violent to nonviolent or simply thrown away. (Despite these continu­

ing efforts-there were more than 22,000 missing police reports in

2002 alone-Atlanta regularly ranh among the most violent Ameri­

can cities.)

Police in other cities, meanwhile, were spinning a different story

during the 1990s. The sudden, violent appearance of crack cocaine

had police departments across the country scrapping for resources.

They made it known that it wasn't a fair fight: the drug dealers were

armed with state-of-the-art weapons and a bottomless supply of

cash. This emphasis on illicit cash proved to be a winning effort, for

92

nothing infuriated the law-:: the millionaire crack dealer story, portraying crack deal America.

But if you were to ha e51 ects where crack was so ofra strange: not only did mosull but most of them still lived: may have scratched your he

The answer lies in 6.ncliDJ the right data usually mean said than done. Drug deak economists rarely hang om 1 question begins with findiDJ dealers and managed to waDi

Sudhir Venkatesh-· his boyJ since reverted to Sudhir- • upstate New York and soudl University of California ar In 1989 he began to pursue ] Chicago. He was interested it their identities; to that end Ii me Grateful Dead around was the grueling fieldwork th

But his graduate advisor. Julius Wilson, promptly sen

ent: to visit Chicago's poore d a seventy-question, mnl estion on the survey:

about Iraq's weapons

fcb Snyder's homeless

lat wisdom. Women's

tcidence of sexual as­

ne.n will in their life­

[ actual figure is more

would take a callous

• and-perhaps most

o address the actual

. advocate or a polit­

have different incen­

ntives may shift 180

Ced that the police in

ince the early 1990s.

working to land the

1>lent image, and fast.

b.er downgraded from

l>espite these continu-

· g a different story

ance of crack cocaine

ping for resources.

e drug dealers were

�ttomless supply of

a winning effort, for

Drug Dealers Living with Their Moms

nothing infuriated the l<J.w-abiding populace more than the image of

the millionaire crack dealer. The media eagerly glommed on to this

story, portraying crack dealing as one of the most profitable jobs in

America.

But if you were to have spent a little time around the housing proj­

ects where crack was so often sold, you might have noticed something

strange: not only did most of the crack dealers still live in the projects,

but most of them still lived at home with their moms. And then you

may have scratched your head and said, "Why is that?"

The answer lies in finding the right data, and the secret to finding

the right data usually means finding the right person-more easily

said than done. Drug dealers are rarely trained in economics, and

economists rarely hang out with crack dealers. So the answer to this

question begins with finding someone who did live among the drug

dealers and managed to walk away with the secrets of their trade.

Sudhir Venkatesh-' his boyhood friends called him Sid, but he has

since reverted to Sudhir-was born in India, raised in the suburbs of

upstate New York and southern California, and graduated from the

University of California at San Diego with a degree in mathematics.

In 1989 he began t() pursue his PhD in sociology at the University of

Chicago. He was interested in understanding how young people form

their identities; to that end, he had just spent three months following

the Grateful Dead around the country. What he was not interested in

was the grueling fieldwork that typifies sociology.

But his graduate advisor, the eminent poverty scholar William

Julius Wilson, promptly sent Venkatesh into the field. His assign­

ment: to visit Chicago's poorest black neighborhoods with a clipboard

and a seventy-question, multiple-choice survey. This was the first

question on the survey:

93

FREAKONOMICS

How do you feel about being black and poor?

a. Very bad b. Bad c. Neither bad nor good d. Somewhat good e. Very good

One day Venkatesh walked twenty blocks from the university to a housing project on the shore of Lake Michigan to administer his survey. The project comprised three sixteen-story buildings made of yellow-gray brick. Venkatesh soon discovered that the names and ad­ dresses he had been given were badly outdated. These buildings were condemned, practically ab;ndoned. Some families lived on the lower floors, pirating water and electricity, but the elevators didn't work. Neither did the lights in the stairwell. It was late afternoon in early winter, nearly dark outside.

Venkatesh, who is a thoughtful, handsome, and well built but not aberrationally brave person, had made his way up to the sixth floor, trying to find someone willing to take his survey. Suddenly, on the stairwell landing, he startleµ a group of teenagers shooting dice. They turned out to be a gang of junior-level crackdealers who operated out of the building, and they were not happy to see him.

'Tm a student at the University of Chicago," Venkatesh sputtered, sticking to his survey script, "and I am administering-"

"Fuck you, nigger, what are you doing in our stairwell?" There was an ongoing gang war in Chicago. Things had been vio­

lent lately, with shootings nearly every day. This gang, a branch of the Black Gangster Disciple Nation, was plainly on edge. They didn't know what to make of Venkatesh. He didn't seem to be a member of a rival gang. But maybe he was some kind of spy? He certainly wasn't a

94

cop. He wasn't black, wasnr• was armed only with his dij less either. Thanks to his drn still looked, as he would la.tr down to my ass."

The gang members starrec Venkatesh. Let him go? Bur stairwell hangout, they<i be: jittery kid kept wagging som the dimming light, Venkaresl muttering, "Let me have him very scared.

The crowd grew, bigger 31 appeared. He snatched the c when he saw that it was a wrii

"I , d can t rea any of this shit "That's because you canr

everyone laughed at the older 1 He told Venkatesh to go al

survey. Venkatesh led wich poor question. It was met "Wirh others. As Venkatesh would latJ ized that the multiple-choice a In reality, he now knew, the an

a. Very bad b. Bad c. Neither bad nor good d. Somewhat good e. Very good f. Fuck you

; from the university to Jiigan to administer his ;rory buildings made of chat the names and ad­

These buildings were Dilies lived on the lower � elevators didn't work. ;. late afternoon in early

• and well built but not 1.y up to the sixth floor,

ey. Suddenly, on the �shooting dice. They

ers who operated out eehim.

Drug Dealers Living with Their Moms

cop. He wasn't black, wasn't white. He wasn't exactly threatening-he was a.rmed only with his clipboard-but he didn't seem quite harm­ less either. Thanks to his three months trailing the Grateful Dead, he still looked, as he would later put it, "like a genuine freak, with hair down to my ass."

The gang members started arguing over what should be done with Venkatesh. Let him go? But if he did tell the rival gang about this stairwell hangout, they 'd be susceptible to a surprise attack. One jittery kid kept wagging something back and forth in his hands-in the dimming light, Venkatesh eventually realized it was a gun-and muttering, "Let me have him, let me have him." Venkatesh was very, very scared.

The crowd grew, bigger and louder. Then an older gang member appeared. He snatched the clipboard from Venkatesh's hands and, when he saw that it was a written questionnaire, looked puzzled.

"I can't read any of this shit," he said. "That's because y ou can't read," said one of the teenagers, and

every one laughed at the older-gangster. He told Venkatesh to go ahead and ask him a question from the

survey. Venkatesh led with the how-does-it-feel-to-be-black-and­ poor question. It was met with a round of guffaws, some angrier than others. As Venkatesh would later tell his university colleagues, he real­ ized that the multiple-choice answers A through E were insufficient. In reality, he now knew, the answers should have looked like this:

a. Very bad b. Bad c. Neither bad nor good d. Somewhat good e. Very good f. Fuck y ou

95

FREAKONOMICS

Just as things were looking their bleakest for Venkatesh, another

man appeared. This was J. T., the gang's leader. J. T. wanted to know

what was going on. Then he told Venkatesh to read him the survey

question. He listened but then said he couldn't answer the question

because he wasn't black.

"Well then," Venkatesh said, "how does it feel to be African Amer­

ican and poor?"

"I ain't no African American either, you idiot. I 'm a nigger." J. T.

then administered a lively though not unfriendly taxonomical lesson

"Afi · Am · " "bl k " W h h as in "nigger" versus ncan encan versus ac . en e w

through, there was an awkward silence. Still nobody seemed to know

what to do with Venkatesh. J. T., who was in his late twenties, had

cooled down his subordinates, but he didn't seem to want to interfere

directly with their catch. Darkness fell and J. T. left. "People don't

come out of here alive," the jittery teenager with the gun told

Venkatesh. "You know that, don't you?"

As night deepened, his captors eased up. They gave Venkatesh one

of their beers, and then another and another. W hen he had to pee, he

went where they went-on the stairwell landing one Boor up. J. T.

stopped by a few times during the night but didn't have much to say.

Daybreakcame and then noon. Venkatesh would occasionally try to

discuss his survey, but the young crack dealers just laughed and told

him how stupid his questions were. Finally, nearly twenty-four hours

after Venkatesh stumbled upon them, they set him free.

He went home and took a shower. He was relieved but he was also

curious. It struck Venkatesh that most people, including himself, had

never given much thought to the daily life of ghetto criminals. He

was now eager to learn how the Black Disciples worked, from top to

bottom.

After a few hours, he decided to walk back to the housing projea.

By now he had thought of some better questions to ask.

96

Having seen fusti gathering was in this tionnaire and embed and sketched out his literally-a universi1)1 But he also admired ll was a college graduate taken a job in the Loe: company that sold o there-like a white ma to say-that he quit. the importance of colic ways on the lookout fu1 cidence, in other wonls was bred to be a boss.

After some wranglir to the gang's operation: information that, if pld

When the yellow:.gi ished, shortly after er other housing projecr c next six years, Venkar.es ·on he watched the ga,o;

ed endless questions · curiosity; more ofia:i

"It's a war out here people struggling n We ain't got no choi

- what niggers do aroUJ

enkatesh would mm er dishes and sleep.

;r for Venkatesh, another �- J. T. wanted to know h to read him the survey dn't answer the question

it feel to be African Amer-

idiot. I 'm a nigger." J. T. iendly taxonomical lesson us "black." W hen he was I nobody seemed to know • in his late twenties, had

seem to want to interfere J. T. left. "People don't

r with the gun told

They gave Venkatesh one ::r. When he had to pee, he anding one floor up. J. T. n didn't have much to say. would occasionally try to

ilers just laughed and told nearly twenty-four hours

set him free. relieved but he was also

le, including himself, had fe of ghetto criminals. He ciples worked, from top to

!ack to the housing project. "ons to ask.

Drug Dealers Living with Their Moms

Having seen firsthand that· the conventional method of data gathering was in this case absurd, Venkatesh vowed to scrap his ques­ tionnaire �d embed himself with the gang. He tracked down J. T. and sketched out his proposal. J. T. thought Venkatesh was crazy, literally-a university student wanting to cozy up to a crack gang? But he also admired what Venkatesh was after. AB it happened, J. T. was a college graduate himself, a business major. After college, he had taken a job in the Loop, working in the marketing department of a company that sold office equipment. But he felt so out of place there-like a white man working at Afro Sheen headquarters, he liked to say-that he quit. Still, he never forgot what he learned. He knew the importance of collecting data and finding new markets; he was al­ ways on the lookout for better management strategies. It was no coin­ cidence, in other words, that J. T. was the leader of this crack gang. He was bred to be a boss.

After some wrangling, J. T. promised Venkatesh unfettered access to the gang's operations as long as J. T. retained veto power over any information that, if published, might prove harmful.

When the yellow-gray buildings on the lakefront were demol­ ished, shortly after Venkatesh's first visit, the gang relocated to an­ other housing project even deeper in Chicago's south side. For the next six years, Venkatesh practically lived there. Under J. T.'s protec­ tion he watched the gang members up close, at work and at home. He asked endless questions. Sometimes the gangsters were annoyed by his curiosity; more often they took advantage of his willingness to lis­ ten. "It's a war out here, man," one dealer told him. "I mean, every day people struggling to survive, so you know, we just do what we can. We ain't got no choice, and if that means getting killed, well shit, it's what niggers do around here to feed their family."

Venkatesh would move from one family to the next, washing their dinner dishes and sleeping on the floor. He bought toys for their

97

FREAKONOMICS

children; he once watched a woman use her baby's bib to sop up the blood of a teenaged drug dealer who was shot to death in front of Venkatesh. William Julius Wilson, back at the U. of C., was having regular nightmares on Venkatesh's behalf.

Over the years the gang endured bloody turf wars and, eventually, a federal indictment. A member named Booty, who was one rank be­ neath J. T., came to Venkatesh with a story. Booty was being blamed by the rest of the gang for bringing about the indictment, he told Venkatesh, and therefore suspected that he would soon be killed. (He was right.) But first Booty wanted to do a little atoning. For all the gang's talk about how crack dealing didn't do any harm-they even liked to brag that it kept black money in the black community­ Booty was feeling guilty. He wanted to leave behind something that might somehowbenefit the next generation. He handed Venkatesh a stack of well-worn spiral no.tebooks-blue and black, the gang's col­ ors. They represented a complete record of four years' worth of the gang's financial transactions. At J. T.'s direction, the ledgers had been rigorously compiled: sales, wages, dues, even the death benefits paid out to the families of murdered members.

At first Ve�katesh didn't even want the notebooks. What if the Feds found out he had them-perhaps he'd be indicted too? Besides, what was he supposed to do with the data? Despite his math back­ ground, he had long ago stopped thinking in numbers.

Upon completing his graduate work at the University of Chicago, Venkatesh was awarded a three-year stay at Harvard's Society of Fel­ lows. Its environment of sharp thinking and bonhomie-the walnut paneling, the sherry cart once owned by Oliver Wendell Holmes­ delighted Venkatesh. He went so far as to become the society 's wine steward. And yet he regularly left Cambridge, returning again and again to the crack gang in Chicago. This street-level research made

98

Venkatesh something a were dyed-in-the-tweal

One of the societys: ous fields who mighc nc soon encountered anm failed the society stereo who, instead of thinkiq of offbeat micro curiosii so, within ten minuceso Levitt about the spiral ll collaborate on a paper. Ii nancial data had fallen j] sis of a heretofore unch.a

So how did the gang nesses, actually, though fact, if you were to ho Black Disciples org chan ence.

The gang that Venh hundred branches-furn ganization. J. T., the colle to a central leadership o irony, the board of direa ires were studiously mm ghetto criminals were m corp-think.) J. T. paid ch revenues for the righr to Sil area. The rest of the monc

Three officers reporte( die gang members' s�

baby's bib to sop up the

Shot to death in fr ont of

the u. of C., was ha ving

rurf wars and, eventu ally,

ty, who was one ran k be-

. Booty was being blamed

t che indictment, he told

�would soon be kille d. (He

little atoning. For all the

t do any harm-th ey even

che black communi ty­

iave behind somethi ng that

on. He handed Venk atesh a

e and black, the g ang's col-

of four years' worth of the

·on, the ledgers had been

even the death ben efits paid

e notebooks. W h at if the

e'd be indicted too? Besides,

lata? Despite his ma th back­

[lg in numbers.

the University of C hicago,

at Harvard's Society of Fel­

ir and bonhomie-the waln ut

., f Oliver Wendell Holm es-

• to become the so ciety's wine

jnl>ridge, returning a gain and

fhis street-level rese arch made

Drug Dealers Living with Their Moms

Venkatesh something of an anomaly. Most of the other young Fellows

were dyed-in-the-tweed intellectuals who liked to pun in Greek.

One of the society's aims was to bring together scholars from vari­

ous fields who might not otherwise have occasion to meet. Venkatesh

soon encountered another anomalous young Fellow, one who also

failed the society stereotype. This one happened to be an economist

who, instead of thinking grand macro thoughts, favored his own list

of offbeat micro curiosities. At the very top of his list was crime. And

so, within ten minutes of their meeting, Sudhir Venkatesh told Steven

Levitt about the spiral notebooks from Chicago and they decided to

collaborate on a paper. It would be the first time that such priceless fi­

nancial data had fallen into an economist's hands, affording an analy­

sis of a heretofore uncharted criminal enterprise.

So how did the gang work? An awful lot like most American busi­

nesses, actually, though perhaps none more so than McDonald's. In

fact, if you were to· hold a McDonald's organizational chart and a

Black Disciples org chart side by side, you could hardly tell the differ­

ence.

The gang that Venkatesh had fallen in with was one of about a

hundred branches-franchises, really-of a larger Black Disciples or­

ganization. J. T., the college-educated leader of his franchise, reported

to a central leadership of about twenty men that was called, without

irony, the board of directors. (At the same time that white suburban­

ites were studiously mimicking black rappers' ghetto culture, black

ghetto criminals were studiously mimicking the suburbanites' dads'

corp-think.) J. T. paid the board of directors nearly 20 percent of his

revenues for the right to sell crack in a designated twelve-square-block

area. The rest of the money was his to distribute as he saw fit.

Three officers reported directly to J. T.: an enforcer (who ensured

rhe gang members' safety), a treasurer (who watched over the gang's

99

I

� /.

i

I

FREAKONOMICS

liquid assets), and a runner (who transported large quantities of drugs

and money to and froin the supplier). Beneath the officers were the

street-level salesmen known as foot soldiers. The goal of a foot soldier

was to someday become an officer. J. T. might have had anywhere

from twenry-five to sevenry-five foot soldiers on his payroll at any

given time, depending on the time of year (autumn was the best crack­

selling season; summer and Christmastime were slow) and the size of

the gang's territory (which doubled at one point when the Black Dis­

ciples engineered a hostile takeover of a rival gang's turf ). At the very

bottom ofJ. T.'s organization were as many as two hundred members

known as the rank and file. They were not employees at all. They did,

however, pay dues to the gang-some for protection from rival gangs,

others for the chance to eventually earn a job as a foot soldier.

The four years recorded in the gang's notebooks coincided with

the peak years of the crack boom, and business was excellent. J. T.'s

franchise quadrupled its revenues during this period. In the first year,

it took in ati average of $18,500 each month; by the final year, it was

collecting $68,400 a month. Here's a look at the monthly revenues in

the third year:

Drug sales

Dues

Extortionary taxes

Total monthly revenues

$24,800

5,100

2,100

$32,000

"Drug sales" represents only the money from dealing crack co­

caine. The gang did allow some rank-and-file members to sell heroin

on its turf but accepted a fixed licensing fee in lieu of a share of prof­

its. (This was off-the-books money and went straight into J. T.

pocket; he probably skimmed from other sources as well.) The $5, 1 ·

in dues came from rank-and-file members only, since full gang mem-

100

Dr

hers didn't pay dues. The exrortio nesses that operated on the gang OJ cabs, pimps, and people selling street.

Now, here's what it cost]. T. ie $32,000 per month:

Wholesale cost o Board of directors ee

Mercenary fighters

Weapons

Miscellaneous

Total monthly nonwage

Mercenary fighters were nonmo tracts to help the gang fight turf wa here because the Black Disciples 1131 ners, helping them navigate the neigl steeply discounted guns. The misa fees, parties, bribes, and gang-spons Black Disciples worked hard to be scourge of the housing-project com penses also include the costs associao: The gang not only paid for the Funai m three years' wages to the victims Ea

hy the gang was so generous in chis question," he was told, " ' cause as lo on't understand that their families - em out. We been knowing these fol

·eve when they grieve. You got co re er reason for the death benefits: ·rb

e quantities of drugs ith the officers were the rhe goal of a foot soldier

t have had anywhere on his payroll at any

was the best crack­ slow) and the size of

· t when the Black Dis-

oks coincided with was excellent. J. T's

period. In the first year, by the final year, it was

the monthly revenues in

$24,800

5,100

2,100

$32,000

members to sell heroin it lieu of a share of prof­

t straight into J. T's as well.) The $5,100

, since full gang mem-

Drug Dealers Living with Their Moms

hers didn't pay dues. The extortionary taxes were paid by other busi­ nesses that operated on the gang's turf, including grocery stores, gypsy cabs, pimps, and people selling stolen goods or repairing cars on the street.

Now, here's what it cost J. T, excluding wages, to bring in that $32,000 per month:

Wholesale cost of drugs

Board of directors fee

Mercenary fighters

Weapons

Miscellaneous

Total monthly nonwage costs

$ 5,000

5,000

1,300

300

2,400

$14,000

Mercenary fighters were nonmembers hired on short-term con­ tracts to, help the gang fight turf wars. The cost of weapons is small here because the Black Disciples had a side deal with local gunrun­ ners, helping them navigate the neighborhood in exchange for free or steeply discounted guns. The miscellaneous expenses include legal fees, parties, bribes, and gang-sponsored "community events." (The Black Disciples worked hard to be seen as a pillar rather than a scourge of the housing-project community.) The miscellaneous ex­ penses-also include the costs associated with a gang member's murder. The gang not only paid for the funeral but often gave a stipend of up to three years' wages to the victim's family. Venkatesh had once asked why the gang was so generous in this regard. "That's a fucking stupid question,'' he was told, " ' cause as long as you been with us, you still don't understand that their families is our families. We can't just leave ' em out. We been knowing these folks our whole lives, man, so we grieve when they grieve. You got to respect the family." There was an­ other reason for the death benefits: the gang feared community back-

101

FREAKONOMICS

lash (its enterprise was plainly a destructive one) and figured it could buy some goodwill for a few hundred dollars here and there.

The rest of the money the gang took in went to its members, start­ ing with J. T. Here is the single line item in the gang's budget that made J. T. the happiest:

Net monthly profit accruing to leader $8,500

At $8,500 per month, J. T.'s annual salary was about $100,000-

tax-free, of course, and not including the various off-the-books

money he pocketed. This was a lot more than he earned at his short­

lived office job in the Loop. And J. T. was just one of roughly 100

leaders at this level within the Black Disciples network. So there were

indeed some drug dealers who could afford to live large, or-in the

case of the gang's board of directors-extremely large. Each of those

top 20 bosses stood to .earn about $500,000 a year. (A third of them,

however, were typically imprisoned at any time, a significant down­

side of an up position in an illicit industry.) So the top 120 men on the Black Disciples' pyramid were paid

very well. But the pyramid they sat atop was gigantic. Using J. T.'s

franchise as a yardstick-3 officers and roughly 50 foot soldiers­

there were so�e 5,300 other men working for those 120 bosses. Then

there were another 20,000 unpaid rank-and-file members, many

of whom wanted nothing more than an opportunity to become a

foot soldier. They were even willing to pay gang dues to have their

chance. And how well did that dream job pay? Here are the monthly totals

for the wages that J. T. paid his gang members:

102

Combined wages paid to all three officers

Combined wages paid to all foot soldiers

Total monthly gang wages (excluding leader)

$2,100

7,400

$9,500

So J. T. paid his employees l was only $1,000 more chan hi was $66. His three offic:as.. month, which works om ro earned just $3.30 an hou.r: e swer to the original quesrion­ why are they still living "th top cats, they don't make m with their mothers. For a� just scraping along. The rop 1 resented just 2.2 percenr o took home well more rban

In other words, a crack g;i capitalist enterprise: ou kN make a big wage. Norwichsta family nature of the busineS'!l wages in corporate America with a McDonald's burger most of J. T.'s foot soldiers al imate sector to supplemenr 1 another crack gang once mL pay his foot soldiers more, these niggers below you you know, you try to take c to show them you the boss. you really ain't no leader. 1 weak and shit."

Along with the bad � rions. For starters, they had business with crackheads. ( against using the produa: beatings if necessary.) F-oo

Le one) and figured it could liars here and there.

in went to its members, start­

in the gang's budget that

$8,500

than he earned at his short­

:: was just one of roughly 100 · · les network. So there were afford to live large, or-in the

-emely large. Each of those

.000 a year. (A third of them, any time, a significant down­

�-) Disciples' pyramid were paid

was gigantic. Using J. T.'s -roughly 50 foot soldiers­

ting for those 120 bosses. Then -and-file members, many

an opportunity to become a ,

o pay gang dues to have their

. Here are the monthly totals

ers:

$2,100

7,400

$9,500

Drug Dealers Living with Their Moms

So J. T. paid his employees $9,500, a combined monthly salary that was only $1,000 more than his own official salary. J. T.'s hourly wage was $66. His three officers, meanwhile, each took home $700 a month, which works out to about $7 an hour. And the foot soldiers earned just $3.30 an hour, less than the minimum wage. So the an­ swer to the original question-if drug dealers make so much money,

why are they still living with their mothers?-is that, except for the

top cats, they don't make much money. They had no choice but to live

with their mothers. For every big earner, there were hundreds more

just scraping along. The top 120 men in the Black Disciples gang rep­ resented just 2.2 percent of the full-fledged gang membership but took home well more than half the money.

In other words, a crack gang works pretty much like the standard

capitalist enterprise: you have to be near the top of the pyramid to

make a big wage. Notwithstanding the leadership's rhetoric about the

family nature ' of the business, the gang's wages are about as skewed as

wages in corporate America. A foot soldier had plenty in common with a McDonald's burger flipper or a Wal-Mart shelf stocker. In fact,

most of]. T.'s foot soldiers also held minimum-wage jobs in the legit-

- imate sector to supplement their skimpy illicit earnings. The leader of

another crack gang once told Venkatesh that he could easily afford to

pay his foot soldiers more, but it wouldn't be prudent. "You got all

chese niggers below you who want your job, you dig?" he said. "So,

you know, you try to take care of them, bur you know, you also have

· ro show them you the boss. You always have to get yours first, or else

you really ain't no leader. If you start taking losses, they see you as

weak and shit ."

Along with the bad pay, the foot soldiers faced terrible job condi­

tions. For starters, they had to stand on a street corner all day and do

business with crackheads. (The gang members were strongly advised

against using the product themselves, advice that was enforced by

beatings if necessary.) Foot soldiers also risked arrest and, more worri-

103

FREAKONOMICS

some, violence. Using the gang's financial documents and the rest of

Venkatesh's research, it- is possible to construct an adverse-events

index of J. T.'s gang during the four years in question. T he results are

astonishingly bleak. If you were a member of J. T.'s gang for all four

years, here is the rypical fate you would have faced during that period:

Number of times arrested 5.9

Number of nonfatal wounds or injuries 2.4

(not including injuries meted

out by the gang itself for rules

violations) Chance of being killed 1 in 4

A 1-in-4 chance of being killed! Compare these odds to being a

timber cutter, which the Bureau of Labor Statistics calls the most dan­

gerous job in the United States. Over four years' time, a timber cutter

would stand only a l-in-200 chance of being killed. Or compare the

crack dealer's odds to those of a death row inmate in Texas, which ex­

ecutes more prisoners than any other state. In 2003, Texas put to

death twenry-four inmates-or just 5 percent of the nearly 500 in­

mates on its death row during that time. Which means that you stand

a greater chance of \lying while dealing crack in a Chicago housing

project than you do while sitting on death row in Texas.

So if crack dealing is the most dangerous job in America, and if

the salary is only $3.30 an hour, why on earth would anyone take

such a job?

Well, for the same reason that a pretry Wisconsin farm girl moves

to Hollywood. For the same reason that a high-school quarterback

wakes up at 5 a.m. to lift weights. T hey all want to succeed in an ex­

tremely competitive field in which, if you reach the top, you are paid

a fortune (to say nothing of the attendant glory and power).

104

On

To the kids growing up in a

side, crack dealing was a glam0t

job of gang boss-highly visible

best job they thought they had.

different circumstances, they m

economists or writers. But in chc

erated, the path to a decent leg

Fifty-six percent of the neighl

poverry line (compared to a nm

eight percent came from single-i

of the neighborhood's adults hacl

adult men worked at all. The 1

about $15,000 a year, well less di

years that Venkatesh lived wich J

his help in landing what they call

at the Universiry of Chicago.

T he problem with crack deafu

our profession: a lot of people 2

Earning big money in the crack

the Wisconsin farm girl becomi

quarterback playing in the NFL

spond to incentives. So if the pm

down the block just hoping for�

cago, people wanting to sell ax

street corners.

T hese budding drug lords hw

of labor: when there are a loc ofi

that job generally doesn't pay

tors that determine a wage. The 4'

requires, the unpleasantness of a·

the job fulfills.

ems and the rest of

an adverse-events

·on. The results are

. T's gang for all four

Ced during that period:

5.9

Les 2.4

1in4

these odds to being a

·cs calls the most dan­

• rime, a timber cutter

tilled. Or compare the

ue in Texas, which ex­

o 2003, Texas put to

of the nearly 500 in-

means that you stand

in a Chicago housing

in Texas.

r>b in America, and if

h would anyone take

onsin farm girl moves

, -school quarterback

t to succeed in an ex-

the top, you are paid

and power).

Drug Dealers Living with Their Moms

To the kids growing up in a housing project on Chicago's south

side, Gack dealing was a glamour profession: For many of them, the

job of gang boss-highly visible and highly lucrative-was easily the

best job they thought they had access to. Had they grown up under

different circumstances, they might have thought about becoming

economists or writers. But in the neighborhood where J. T.'s gang op­

erated, the path to a decent legitimate job was practically invisible.

Fifty-six percent of the neighborhood's children lived below the

poverty line (compared to a national average of 18 percent). Seventy­

eight percent came from single-parent homes. Fewer than 5 percent

of the neighborhood's adults had a college degree; barely one in three

adult men worked at all. The neighborhood's median income was

about $15,000 a year, well less than half the U.S. average. During the

years that Venkatesh lived with J. T.'s gang, foot soldiers often asked

his help in landing what they called "a good job": working as a janitor

at the University of Chicago.

The problem with crack dealing is the same as in every other glam­

our profession: a lot of people are competing for a very few prizes.

Earning big money in the crack gang wasn't much more likely than

the Wisconsin farm girl becoming a movie star or the high-school

quarterback playing in the NFL. But criminals, like everyone else, re­

spond to incentives. So if the prize is big enough, they will form a line

down the block just hoping for a chance. On the south side of Chi­

cago, people wanting to sell crack vastly outnumbered the available

street cotners.

These budding drug lords bumped up against an immutable law

of labor: when there are a lot of people willing and able to do a job,

that job generally doesn't pay well. This is one of four meaningful fac­

cors that determine a wage. The others are the specialized skills a job

requires, the unpleasantness of a job, and the demand for services that

the job fulfills.

105

� I:

, I 1,

I

rr ,f

FREAKONOMICS

The delicate balance between these factors helps explain why, for instance, the typical prostitute earns more than the typical architect. It may not seem as though she should. The architect would appear to be more skilled (as the word is usually defined) and better educated (again, as usually defined). But little girls don't grow up dreaming of becoming prostitutes, so the supply of potential prostitutes is relatively small. Their skills, while not necessarily "specialized," are practiced in a very specialized context. The job is unpleasant and for­ bidding in at least two significant ways: the likelihood of violence and the lost opportunity of having a stable family life. & for demand? Let's just say that an architect is more likely to hire a prostitute than VlCe versa.

In the glamour professions-movies, sports, music, fashion­ there is a different dynamic at play. Even in second-tier glamour in­ dustries like publishing, advertising, and media, swarms of bright young people throw themselves at grunt jobs that pay poorly and de­ mand unstinting devotion. An editorial assistant earning $22,000 at a Manhattan publishing house, an unpaid high-school quarterback, and a teenage crack dealer earning $3.30 an hour are all playing the same game, a game that is best viewed as a tournament.

The rules of a tournament are straightforward. You must start at the bottom to have' a shot at the top. (Just as a Major League short­ stop probably played Little League and just as a Grand Dragon of the Ku Klux Klan probably started out as a lowly spear-carrier, a drug lord typically began by selling drugs on a street corner.) You must be will­ ing to work long and hard at substandard wages. In order to advance in the tournament, you must prove yourself not merely above average but spectacular. (The way to distinguish yourself differs from profes­ sion to profession, of course; while J. T. certainly monitored his foot soldiers' sales performance, it was their force of personality that really counted-more than it would for, say, a shortstop.) And finally, once

106

Drug I

you come to the sad realizarion d top, you will quit the tournamenL, � others-witness the graying aao but people generally get the messag

Most of J. T.'s foot soldiers were long after they realized they wera shooting started. After several rdari involved in a turf war with a neigl became a daily event. For a fooc street-this development was pani the business demanded that cusroa quickly; if he hid from the other ga

Until the gang war, J. T.'s foocSl the risky, low-paying job with che foot soldier told Venkatesh, he now added risk: "Would you stand arou on? No, right? So if I gonna be front me the cash, man. Pay me ID(! be here when they're warring .

J. T. hadn't wanted this war. Fem foot soldiers higher wages beeat.15': ' warfare was bad for business. If Bw a price war to gain market share, they lose in price. (Nor is anyone g sales plummet because customei:s: they won't come out in the open mi was expensive for J. T.

So why did he start the war. a foot soldiers who started it. It rums much control over his subordinares cause they had different incenriYes.

elps explain why, for

the typical architect.

rect would appear to

and better educated

c grow up dreaming

cential prostitutes is

:ily "specialized," are

s unpleasant and for­

hood of violence and

life. As for demand?

lire a prostitute than

ts, music, fashion­

ond-tier glamour in­

ia, swarms of bright

:u pay poorly and de­

: earning $22,000 at a

.-school quarterback,

m are all playing the

iament.

trd. You must start at

Major League short­

Grand Dragon of the

ar-carrier, a drug lord

er.) You must be will­

>. In order to advance

merely above average

If differs from profes­

ly monitored his foot

personality that really

op.) And finally, once

Drug Dealers Living with Their Moms

you come to the sad realization that you will never make it to the

top, you will quit the tournament. (Some people hang on longer than

others-witness the graying "actors" who wait tables in New York­

but people generally get the message quite early.)

Most of J. T.'s foot soldiers were unwilling to stay foot soldiers for

long after they realized they weren't advancing. Especially once the

shooting started. After several relatively peaceful years, J. T.'s gang got

involved in a turf war with a neighboring gang. Drive-by shootings

became a daily event. For a foot soldier-the gang's man on the

street-this development was particularly dangerous. The nature of

the business demanded that customers be able to find him easily and

quickly; if he hid from the other gang, he couldn't sell his crack.

Until the gang war, J. T.'s foot soldiers had been willing to balance

the risky, low-paying job with the reward of advancement. But as one

foot soldier told Venkatesh, he now wanted to be compensated for the

added risk: "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. Pay me more ' cause it ain't worth my time to

be here when they're warring."

J. T. hadn't wanted this war. For one thing, he was forced to pay his

foot soldiers higher wages because of the added risk. Far worse, gang

warfare was bad for business. If Burger King and McDonald's launch

a price war to gain market share, they partly make up in volume what

they lose in price. (Nor is anyone getting shot.) But with a gang war,

sales plummet because customers are so scared of the violence that

they won't come out in the open to buy their crack. In every way, war

was expensive for J. T.

So why did he start the war? As a matter of fact, he didn't. It was his

foot soldiers who started it. It turns out that a crack boss didn't have as

much control over his subordinates as he would have liked. That's be­

cause they had different incentives.

107

FREAKONOMICS

For J. T., violence was a distraction from the business at hand; he

would have preferred that his members never fired a single gunshot.

For a foot soldier, however, violence served a purpose. One of the few

ways that a foot soldier could distinguish himself-and advance in

the tournament-was by proving his mettle for violence. A killer was

respected, feared, talked about. A foot soldier's incentive was to make

a name for himself; J. T.'s incentive was, in effect, to keep the foot sol­

diers from doing so. "We try to tell these shorties that they belong to

a serious organization," he once told Venkatesh. "It ain't all about

killing. T hey see these movies and shit, they think it's all about run­

ning around tearing shit up. But it's not. You've got to learn to be part

of an organization; you can't be fighting all the time. It's bad for busi- ,,

ness.

In the end, J. T. prevailed. He oversaw the gang's expansion and

ushered in a new era of prosperity and relative peace. J. T. was a win­

ner. He was paid well because so few people could do what he did. He

was a tall, good-looking, smart, tough man who knew how to moti­

vate people. He was shrewd too, never tempting arrest by carrying

guns or cash. While the rest of his gang lived in poverty with their

mothers, J. T. had several homes, several women, several cars. He also

had his business education, of course. He constantly worked to ex­

tend this advantage. T hat was why he ordered the corporate-style

bookkeeping that eventually found its way into Sudhir Venkatesh's

hands. No other franchise leader had ever done such a thing. J. T.

once showed his ledgers to the board of directors to prove, as if proof

were needed, the extent of his business acumen.

And it worked. After six years running his local gang, J. T. was pro­

moted to the board of directors. He was now thirty-four years old. He

had won the tournament. But this tournament had a catch that pub­

lishing and pro sports and even Hollywood don't have. Selling drugs,

after all, is illegal. Not long after he made the board of directors, the

108

Black Disciples were essen�

the same indictment that led

his notebooks to Venkatesh-.i

Now for another unlikel que

common with nylon stoc�

In 1939, when DuPont· women felt as if a miracle had then, stockings were made o

and in ever shorter supply. B nylon stockings had been sold-­ women in the United States. T appealing, practically addia:m:

DuPont had pulled off che

brought class to the mas.ses. L

stockings was markedly similar

In the 1970s, if you were di was no classier drug than OOCil stars, ballplayers and even die: drug of power and panache. Ir Heroin was droopy and pot ful high.

Alas, it was also very ex:pensi cocaine users to try jacking up marily by freebasing-addingai drochloride, or powdered cocaii cocaine. But this could be da: proved-he nearly killed himsie left to chemists.

Meanwhile, cocaine dealers

isiness at hand; he

I a single gunshot.

. One of the few

and advance in

ence. A killer was

\Iltive was to make

keep the foot sol­

hat they belong to

"It ain't all about

it's all about run­

to learn to be part

e. It's bad for busi-

lg's expansion and

re. J. T. was a win­

lo what he did. He

new how to moti­

arrest by carrying

poverty with their

!Veral cars. He also

nly worked to ex­

he corporate-sty le

;udhir Venkatesh's

ruch a thing. J. T.

I> prove, as if proof

�g, J. T. was pro­ -four years old. He

� a catch that pub-

ve. Selling drugs,

rd of directors, the

Drug Dealers Living with Their Moms

Black Disciples were essentially shut down by a federal indictment­ the same indictment that led the gangster named Booty to turn over his notebooks to Venkatesh-and J. T. was sent to prison.

Now for another unlikely question: what did crack cocaine have in common with nylon stockings?

In 1939, when DuPont introduced nylons, countless American women felt as if a miracle had been performed in their honor. Until then, stockings were made of silk, and silk was delicate, expensive, and in ever shorter supply. By 1941, some sixty-four million pairs of nylon stockings had been sold-more stockings than there were adult women in the United States. They were easily affordable, immensely appealing, practically addictive.

DuPont had pulled off the feat that every marketer dreams of: it brought class to the masses. In this regard, the invention of nylon stockings was markedly similar to the invention of crack cocaine.

In the 1970s, if you were the sort of person who did drugs, there was no classier drug than cocaine. Beloved by rock stars and movie stars, ballplayers and even the occasional politician, cocaine was a drug of power and panache. It was clean, it was white, it was pretty. Heroin was droopy and pot was foggy but cocaine provided a beauti­ ful high.

Alas, it was also very expensive. Nor did the high last long. This led cocaine users to try jacking up the drug's potency. They did this pri­ marily by freebasing-adding ammonia and ethyl ether to cocaine hy­ drochloride, or powdered cocaine, and burning it to free up the "base" cocaine. But this could be dangerous. As Richard Pryor famously proved-· he nearly killed himself while freebasing-chemistry is best left to chemists.

Meanwhile, cocaine dealers and aficionados across the country,

109

FREAKONOMICS

and perhaps also in the Caribbean and South America, were working

on a safer version of distilled cocaine. They found that mixing pow­

dered cocaine in a saucepan with baking soda and water, and then

cooking off the liquid, produced tiny rocks of smokeable cocaine. It

came to be called crack for the crackling sound the baking soda made

when it was burned. More affectionate nicknames would soon follow:

Rock, Kry ptonite, Kibbles 'n Bits, Scrabble, and Love. By the early

1980s, the class drug was ready for the masses. Now only two things

were needed to turn crack into a phenomenon: an abundant supply of

raw cocaine and a way to get the new product to a mass market.

The cocaine was easy to come by, for the invention of crack coin­

cided with a Colombian cocaine glut. During the late 1970s, the

wholesale price of cocaine in the United States fell dramatically, even

as its purity was rising. One man, a Nicaraguan emigre named Oscar

Danilo Blandon, was suspected of importing far more Colombian

cocaine than anyone else. Blandon did so much business with the

budding crack dealers of South Central Los Angeles that he came to

be known as the Johnny Appleseed of Crack. Blandon would later

claim that he was selling the cocaine to raise money for the CIA­

sponsored Contras back home in Nicaragua. He liked to say that the

CIA was in turn watching his back in the United States, allowing him

to sell cocainewith impunity. This claim would spark a belief that still

seethes to this day, especially among urban blacks, that the CIA itself

was the chief sponsor of the American crack trade.

Verifying that claim is beyond the purview of this book. What

is demonstrably true is that Oscar Danilo Blandon helped establish

a link-between Colombian cocaine cartels and inner-city crack

merchants-that would alter American history. By putting massive

amounts of cocaine into the hands of street gangs, Blandon and oth­

ers like him gave rise to a devastating crack boom. And gangs like the

Black Gangster Disciple Nation were given new reason to exist.

110

As long as there have I or another. In the Uniro: of halfway house for rece had more than 1,300 Sll cal, and criminal leani:a:.11

...

much better at making J selves commercial emerp actually did make monc gangsters were, as the did

Black street gangs in p bership in the tens of cho sort of criminals, peuy a urban areas. Part of ch.e seemed to get locked up .. . great time to be a street .a hood of punishment was tice sy stem and the crimio; cost very much to comm.it

By the 1980s, however; that trend. Criminals, rig! guidelines put in place. were getting sent to fedo:a their fellow inmates wen: · Colombian drug dealers. Ii their drugs from a middle was then being pummdec racketeering laws. But b ti gangsters had made the o from Colombian dealers.

Cocaine had never been . sive. But that was before che

eworking

g pow­

' and then

e cocaine. It

soda made

soon follow:

By the early

ly two things

ant supply of

market.

f crack coin­

e 1970s, the

tically, even

il.aIIled Oscar

: Colombian

ess with the

lt he came to

would later

ur the CIA­

• say that the

lllowing him

¢lief that still

he CIA itself

ook. What

ocd establish

!r-city crack

Pug massive

Ion and oth­

flllgs like the

o exist.

Drug Dealers Living with Their Moms

As long as there have been cities, there have been gangs of one sort

or another. In the United States, gangs have traditionally been a sort

of halfway house for recent immigrants. In the 1920s, Chicago alone

had more than 1,300 street gangs, catering to every ethnic, politi­

cal, and criminal leaning imaginable. As a rule, gangs would prove

much better at making mayhem than money. Some fancied them­

selves commercial enterprises, and a few-the Mafia, most notably­

actually did rµake money (at least for the higher-ups). But most

gangsters were, as the cliche assures us, two-bit gangsters.

Black street gangs in particular flourished in Chicago, with mem­

bership in the tens of thousands by the 1970s. They constituted the

sort of criminals, petty and otherwise, who sucked the life out of

urban areas. Part of the problem was that these criminals never

seemed to get locked up. The 1960s and 1970s were, in retrospect, a

great time to be a street criminal in most American cities. The likeli­

hood of punishment was so low-this was the heyday of a liberal jus­

tice system and the criminals' rights movement-that it simply didn't

cost very much to commit a crime.

By the 1980s, however, the courts had begun to radically reverse

that trend. Criminals' rights were curtailed and stricter sentencing

guidelines put in place. More and more of Chicago's black gangsters

were getting sent to federal prisons. By happy coincidence, some of

their fellow inmates were Mexican gang members with close ties to

Colombian drug dealers. In the past, the black gangsters had bought

their drugs from a middleman, the Mafia-which, as it happened,

was then being pummeled by the federal government's new anti­

racketeering laws. But by the time crack came to Chicago, the black

gangsters had made the connections to buy their cocaine directly

from Colombian dealers.

Cocaine had never been a big seller in the ghetto: it was too expen­

sive. But that was before the invention of crack. This new product was

111

FREAKONOMICS

ideal for a low-income, street-level customer. Because it required such a tiny amount of pure cocaine, one hit of crack cost only a few dollars. Its powerful high reached the brain in just a few seconds-and then faded fast, sending the user back for more. From the outset, crack was bound to be a huge success.

And who better to sell it than the thousands of junior members of all those sµ-eet gangs like the Black Gangster Disciple Nation? The gangs already owned the territory-real estate was, in essence, their

core business-and they were suitably menacing to keep customers

from even thinking about ripping them off. Suddenly the urban street

gang evolved from a club for wayward teenagers into a true commer­

cial enterprise. The gang also presented an opportunity for longtime employ­

ment. Before crack, it was just about impossible to earn a living in a street gang. When it was time for a gangster to start supporting a fam­ ily, he would have to quit. There was no such thing as a thirty-year-old gangster: he was either working a legitimate job, dead, or in prison. But with crack, there was real money to be made. Instead of moving on and making way for the younger gangsters to ascend, the veterans stayed put. This was happening just as the old-fashioned sort of life­ time jobs-factory jobs especially-were disappearing. In the past, a semi-skilled black man in Chicago could earn a decent wage working in a factory. Wi�h that option narrowing, crack dealing looked even better. How hard could it be? The stuff was so addictive that a fool could sell it.

Who cared if the crack game was a tournament that only a few of them could possibly win? Who cared if it was so dangerous­ standing out there on a corner, selling it as fast and anonymously as McDonald's sells hamburgers, not knowing any of your customers. wondering who might be coming to arrest or rob or kill you? Who cared if your product· got twelve-year-olds and grandmothers and

112

preachers so addicted cbaJ cept their next hit? Who c

For black Americans, cl the crack boom had been provement. Particular! 1960s, the telltale signs (J among black Americans. 1' So was the gap between bll children. Perhaps the most tality. As late as 1964. 31 b white infant, often of a cm segregated hospitals, man Third World care. But char dered the hospitals to be ( black infant mortality rare J ally every facet of life was progress showed no sign of.

Then came crack. While crack use was hanl

neighborhoods much hanlei measuring the same indican

cades of decline, black inf did the rate of low-birdn

The gap between black and of blacks sent to prison

muctive that if its effect is ai k users and their familie

ess was not only stoppec years backward. BlackAn

by any other single cause And then there was the a::iJ

Because it required such

cost only a few dollars.

few seconds-and then

of junior members of

� Disciple Nation? The

te was, in essence, their

acing to keep customers

denly the urban street

. for longtime employ­

ible to earn a living in a

start supporting a fam­

. g as a thirty-year-old

; co ascend, the veterans

ti-fashioned sort of life­

pearing. In the past, a

a decent wage working

dealing looked even

so addictive that a fool

It was so dangerous­

and anonymously as

y of your customers,

r rob or kill you? Who

tnd grandmothers and

Drug Dealers Living with Their Moms

preachers so addicted that they stopped thinking about anything ex­

cept their next hit? Who cared if crack killed the neighborhood?

For black Americans, the four decades between World War II and

the crack boom had been marked by steady and often dramatic im­ provement. Particularly since the civil rights legislation of the mid-

1960s, the telltale signs of societal progress had finally taken root

among bla�k Americans. The black-white income gap was shrinking.

So was thf gap between black children's test scores and those of white

children. Perhaps the most heartening gain had been in infant mor­

tality. As late as 1964, a black infant was twice as likely to die as a

white infant, often of a cause as basic as diarrhea or pneumonia. W ith

segregated hospitals, many black patients received what amounted to

Third World care. But that changed when the federal government or­

dered the hospitals to be desegregated: within just seven years, the

black infant mortality rate had been cut in half. By the 1980s, virtu­

ally every facet of life was improving for black Americans, and the

progress showed no sign of stopping.

Then caine crack.

While crack use was hardly a black-only phenomenon, it hit black

neighborhoods much harder than most. The evidence can be seen by

measuring, the same indicators of societal progress cited above. After

decades of decline, black infant mortality began to soar in the 1980s,

as did the rate of low-birthweight babies and parent abandonment.

The gap between black and white schoolchildren widened. The num­

ber of blacks sent to prison tripled. Crack was so dramatically de­

structive that if its effect is averaged for all black Americans, not just

crack users and their families, you will see that the group's postwar

progress was not only stopped cold but was often knocked as much as

ten years back}Vard. Black Americans were hurt more by crack cocaine

than by any other single cause since Jim Crow.

And then there was the crime. W ithin a five-year period, the homi-

113

FREAKONOMICS

cide rate among young urban blacks quadrupled. Suddenly it was just

as dangerous to live in parts of Chicago or St. Louis or Los Angeles as

it was to live in Bogota.

The violence associated with the crack boom was various and re­

lentless. It coincided with an even broader American crime wave that

had beeri building for two decades. Although the rise of this crime

wave long predated crack, the trend was so exacerbated by crack that criminologists got downright apocalyptic in their predictions. James

Alan Fox, perhaps the most widely quoted crime expert in the popu­

lar press, warned of a coming "bloodbath" of youth violence.

But Fox and the other purveyors of conventional wisdom were

wrong. The bloodbath did not materialize. The crime rate in fact

began to fall-so unexpectedly and dramatically and thoroughly that

now, from the distance of several years, it is almost hard to recall the

crushing grip of that crime wave.

Why did'it fall?

For a few reasons, but one of them more surprising than the rest.

Oscar Danilo Blandon, the so-called Johnny Appleseed of Crack,

may have been the instigator of one ripple effect, in which by his

actions a single person inadvertently causes an ocean of despair. But

unbeknownst to just about everybody, another remarkably powerful

ripple effect---this one moving in the opposite direction-had just

come into play.

114

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dorsement of abortion

decisions of women." n

curbed by "providing bE

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