Evidence that the supply of methamphetamine is increasing

Consider the market for methamphetamine. If you are targeting police resources at the suppliers of methamphetamine, you would expect to see an increase in the street price of methamphetamine. This is because the costs of supplying have increased (once you factor in the higher costs associated with the greater risk of being caught, higher penalties, or more effort spent by sellers to try and avoid detection by the police). This is illustrated in the diagram below. The market is initially in equilibrium with the price P0, and Q0 methamphetamine is traded (and consumed). The supply decreases from S0 to S1, and so the equilibrium price increases from P0 to P1, and the quantity of methamphetamine is traded (and consumed) falls from Q0 to Q1.

An increase in policing causes a decrease in the supply of methamphetamine, and an increase in the street price. So, if we observed an increase in the street price of methamphetamine, could we safely conclude that enforcement efforts are successful, as was claimed in 2011? No, because a decrease in supply is not the only possible cause for an increase in price. Consider the market diagram below. The market is initially in equilibrium with the price P0, and Q0 methamphetamine is traded (and consumed). The demand increases from D0 to D2, and so the equilibrium price increases from P0 to P2, and the quantity of methamphetamine is traded (and consumed) increases from Q0 to Q2.

So, you can see that we would observe an increase in the street price if supply decreases, or if demand increases (or indeed if both of those things happened at the same time). However, in only one of those situations does the consumption of methamphetamine decrease, and that is what you probably wanted to know. Unfortunately, back in 2011 the data on consumption wasn't so good. As the article linked above notes, the number of border seizures increased. However, that doesn't by itself suggest that quantity consumed has decreased, because perhaps there was more getting through without being detected as well.

Fortunately, now we can start to get at an answer to what is going on in the market for methamphetamine. As the New Zealand Herald reported a couple of weeks ago, there are new data available:

New Zealanders spend nearly $1.4 million cash on methamphetamine every single day, according to police analysis of three months of drug testing of wastewater.

Described by scientists as "one large urine test", the wastewater testing started with three sites in 2016 - Whangarei, Auckland's North Shore and Christchurch - but was rolled out nationwide last November.

The ESR testing at 38 sites now captures 80 per cent of the population and officials hope it will paint a clearer picture of New Zealand's drug habits.

An average of 16kg of methamphetamine has been consumed each week in November, December and January according to the preliminary results released today.

Yes, you read that right. Toilet water is being tested for drugs, and has to be more accurate than survey-based data (since people may not answer truthfully). What does this new data say about consumption changes over time? The article notes that:

Wastewater testing shows methamphetamine consumption has increased since 2016, said Detective Sergeant Daniel Lyons from the National Drug Intelligence Bureau, a joint team with Customs and the Ministry of Health.

So, the quantity of methamphetamine consumed (and traded) has increased over time. As Eric Crampton notes, the price of methamphetamine has decreased slightly since 2008 (and is lower than the price quoted in the Voxy article as well). If we extrapolate and say that the increase in quantity dates back to 2010, then an increase in quantity and a decrease in price is consistent with an increase in supply, not a decrease in supply (or at least, an increase in supply that is larger than any change in demand). Essentially, this is the opposite of the first diagram from earlier in this post.

Is that realistic? In a different post, Eric Crampton notes:

...imagine that the police just kinda gave up on meth. They stopped reporting on progress on meth back in 2015, when it was looking pretty obvious that the drugs had won the drug war. If they gave up, then it would be cheaper to cook meth from pseudoephedrine now than it was in 2008, so that product could be delivered at a lower price point. Alternatively, if there have been tech developments in small-batch cooking that have radically lowered the cost of production in that sector since 2008, then 2008 prices may not be the best guide.

Both of those situations (less policing, and lower costs of production) are consistent with an increase in supply.