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Breaking Bad

Reason.com recently did a very short piece about the AMC show Breaking Bad of which I am a fan. One commenter said he (or she) was expecting something longer and as it turns out this is a subject I have put a lot of thought into so I figured I would step into the gap.

Part of what I liked about Breaking Bad was that it was secretly (perhaps unintentionally) a lesson about property rights.  When you really get down to it, on a fundamental level there is only one thing we need government to do.  All governments do this thing in some way and any entity that does this can be considered a government.  This is the establishment and enforcement of property rights. 

An official government determines through a set of laws and legal precedents what each person legally owns and it erects institutions such as courts, police and military to protect those rights.  Of course property rights exist in some sense independently of what the law says.  We can call the real functional ability one has to control property “economic property rights.” In the absence of formal legal property rights people will do what they can to protect some degree of economic property rights but such a state of nature would be characterized by constant conflict.

The institution of legal property rights has two main benefits.  One is that it pacifies much of the violence and mayhem that would arise from people competing over property.  For instance, you may be capable of killing me and taking my car and you may have no moral scruples about this but the law says that I own my life and my car and if you try to take them, you will be punished.  As long as you believe this is true, it will most likely be enough to prevent you from killing me and taking my car.

The second benefit, which is often overlooked, is that they allow a far greater degree of economic development than would be possible in their absence.  This is partly because economic development requires the accumulation of more wealth than one could defend by himself but more importantly it requires specialization and trade.  Some trade can be carried out in the absence of legal property rights but the parties must be able to do it in a way that leaves no incentive for either side to cheat the other one.  If I want to get a loan from the bank, I have to promise to pay it back.  But my word is not likely to be enough assurance for the bank.  I have to sign a piece of paper promising to pay it back.  That paper essentially authorizes the government to force me to pay it back.  If the government were not there (or not willing to enforce the contract) no such arrangement would be possible.  This problem is not limited to loans, most complex economic endeavors require some form of commitment which would be difficult or impossible without some enforcement mechanism.

This is where Breaking Bad comes in.  When the government declares a certain product illegal and the demand is high enough that this does not actually get people to stop doing it, what they are essentially doing is refusing to enforce contracts or protect property rights in that industry.  But because demand is so high relative to the cost of producing the good, there is a lot of profit to be had if people can figure out a way to organize production and distribution without the aid of the government.  The first two seasons of Breaking Bad are essentially about Walter figuring out how to do this.

When he first starts cooking, he thinks it is simple.  He figures he just has to produce a valuable product and he will get what it’s worth for it somehow.  But he has to sell it to somebody.  The first people they try to sell to immediately try to kill them.  Walter agrees to give them the secret to cooking great meth in return for his life but this contract turns out to be unenforceable as Walter quickly tries to kill them instead.  He succeeds with one but ends up capturing the other.  Then he is faced with a problem.  He doesn’t want to kill the second guy but he can’t let him go despite the man’s promises not to seek revenge because he knows that those promises will be immediately abandoned once he is free.  This contract too is unenforceable.  Walter ends up killing him.

Then Jesse tries to sell the meth directly to consumers but can’t sell enough of it so they find another distributor named Tuco.  Tuco likes their product so he steals it and beats up Jesse, telling him “nobody moves crystal in the South Valley but me”.  Then Walter figures out how you have to do business in that environment.  He tries the same thing again except when Tuco tries to beat him up and steal his meth Walter blows up his headquarters.  After this they work out a mutually beneficial exchange that works out briefly but only until Tuco, who turns out to be crazy, murders his own henchman in front of them.  Since this makes them loose ends, they find themselves in another kill-or-be-killed situation which they narrowly survive.

They then try to create their own distribution network to avoid dealing with insane murderers.  They hire some of Jesse’s friends to sell for them.  Eventually a user steals from one of them.  It is immediately clear to Walter what must be done.  Jesse has to punish the thief or else everyone will start robbing them knowing that there are no consequences.  Jesse is reluctant to follow through with this mission but the attempt ends in the thief being killed by his wife.  However, this is not known on the street and Jesse briefly enjoys a reputation as a competent enforcer.  This keeps his dealers safe until people find out that it is not true, at which point they start getting murdered over territory and the whole thing falls apart.

Eventually, they end up getting involved with a drug “kingpin” who runs a large network of distribution involving a fast food chain for cover, professional enforcers, and connections to Mexican cartels.  This provides them with protection and a state-of-the-art facility in which to cook.  Naturally though, they end up on the wrong side of the head of that organization as well and end up killing him and taking over themselves.  And in the process of this, not surprisingly, Walt transforms from a cancer-stricken family man into a heartless maniac.

This transformation is not only natural, it is necessary.  Producing a product and getting it to the end consumer requires cooperation of many different people with many different interests.  All of the institutions involved from firms to courts, police and lawyers, emerge in order to facilitate this cooperation.  But this cooperation requires contracts which are enforceable and enforcement requires force.  If you don’t hold up your end of a contract, the police will come and forcefully drag you to court, take your possessions, and/or imprison you.

But when there is no court or police to enforce contracts, people must come up with other institutions.  Street gangs and drug cartels are examples of these institutions.  They use violence to enforce agreements.  You can steal from a drug dealer without much fear from the law.  But chances are, you will have someone else to fear.  This threat of violence makes all of the interactions which are necessary to produce and distribute drugs possible.

Walter White discovers that it isn’t possible to be a friendly, non-violent person who just happens to cook meth on the side.  You have to be willing to murder people to survive in that world.  But this is not due to the particular character of meth.  It is due to the fact that the legitimate government refuses to enforce the contracts involved.

Meth and other hard drugs surely ruin a lot of people’s lives.  I wouldn’t recommend using these drugs.  But a lot of other things ruin people’s’ lives.  Liquor, for one, is a very dangerous drug that many people fall victim to.  But the people who produce and distribute liquor are presumably, perfectly nice law-abiding people.  This is because they have no need to murder people to keep their business alive.  And you don’t have to take my word for it, we have a perfectly good natural experiment regarding liquor since it was made illegal in the twenties and we saw exactly what the theory predicts happen.  The production and distribution of liquor was taken over by “organized crime,” an illegal institution which developed for the purpose of enforcing contracts in an industry which was abandoned by the legitimate authorities.  This, unsurprisingly led to a lot of violence.  Then when prohibition was repealed, this phenomenon was reversed.

Drugs are bad for you.  But “drug-related-violence,” for the most part does not exist because of the nature of drugs, it exists because drugs are illegal.  If you want to reduce drug-related crime, the best thing you could do is legalize drugs and bring enforcement over that industry under the legitimate authorities.


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