I first read Freakonomics about three years ago in a freshman economics class and was very impressed with how Levitt and Dubner go about answering such interesting questions in an economic-based way. Chapter 3 of the book focuses on the percieved notion that drug dealers make a lot of money and Levitt and Dubner flip the notion by asking, “If this is true, why do most drug dealers still live at home with their moms.”
The chapter starts out with the story of an economist from the University of Chicago named Sid that started going around asking black prople how they felt about being black. In the proces, Sid stumbled upon an abandoned building where he ran into the street gang called the Black Disciples. After holding im hostage for a day, Sid noticed the sophistication of the crack business they were operating and decided he wanted to confront the leader J.T. about studying the gang.
Six years, numerous shootings, thousands of dollars, and hundreds of deaths and drug deals later, Sid was given, as a form of personal cleansing from a member who was going to be killed, the financial records from the gang’s business from the past four years. Upon reading the records, Sid noticed that the gang was run much more professionally than just a drug ring. J.T., a college graduate with a degree in business, had kept track of every financial transaction the gang had made over the previous four years.
In the records, Sid saw that 20% of the gang’s finances went to the “board of directors,” a group of 20 gang members that were in charge of all the different sets. J.T. was in charge of one set, and only a 12 block selling market. While J.T. made about $100,000 tax-free, the rest of the gang made very little money. The people just below J.T. did decently well, but the people working the streets ,”foot soldiers,” only made about $7 an hour. Below them were about 200 people that were associated with the gang, but only made about $3.30 an hour.
The point of the chapter is to show that yes, while drug rings are profitable, unless you are one of the people at the top of the pyramid, you will not make enough money to live comfortably. It may seem to a young teen in Chicago that it is profitable, but getting to the top is extremely competitive, much like it is in corporate America. Therefore, because of the elite competition to get to the top of the drug ring, most drug dealers still live at home with their moms.