The New Zealand Herald reported last month:
Prime Minister Christopher Luxon has asked his justice and police ministers to look at what more can be done to tackle methamphetamine use in New Zealand, which has nearly doubled in two years.
Police data shows an “unprecedented 96% increase in meth consumption when compared to 2023, with consumption increasing across all sites”...
The police report said the spike in methamphetamine use likely resulted from an increase in both supply and demand, along with a decrease in street-level pricing.
The changes in the market for methamphetamine described in the Police report are illustrated in the diagram below. In 2023, the market operated in equilibrium where the demand curve D0 intersects the supply curve S0. The equilibrium price (the street price of methamphetamine) was P0 and the equilibrium quantity of methamphetamine traded (and consumed) was Q0. Between 2023 and 2025, there was an increase in supply of methamphetamine (from S0 to S1) and an increase in demand for methamphetamine (from D0 to D1). The equilibrium quantity of methamphetamine consumed increased from Q0 to Q1 (an "unprecedented 96% increase" according to the article). The equilibrium price of methamphetamine decreased from P0 to P1 (a "decrease in street-level pricing: according to the article).
Ordinarily, when we see an increase in both supply and demand in a market, the increase in the equilibrium quantity is certain, but the change in equilibrium price is ambiguous. That's because an increase in demand causes an increase in the equilibrium price (ceteris paribus), while an increase in supply causes a decrease in the equilibrium price (ceteris paribus). In this case, the decrease in the street-level (equilibrium) price of methamphetamine tells us that the increase in supply of methamphetamine must have been larger than the increase in the demand for methamphetamine. So, the increase in methamphetamine use has been caused by both increases, but the supply side of the market is having a larger effect than the demand side.
Now, that doesn't mean that police should be targeting the supply side of the market. As I noted in this 2016 post, in the long run it is likely to be more effective to focus on the demand side, rather than the supply side, to reduce drug use. And that's what we should see now.
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