Friday, March 1, 2013

George Akerlof ain't got nothing on the Silk Road

There was this great piece on Hacker News a little while ago on the Silk Road. Apparently it's possible to buy drugs over the internet using BitCoins, and get them shipped to you in the mail.

No, really.

There are so many great aspects to this story.

It's hysterical that this guy is so confident in the completely shambolic level of drug enforcement that he's willing to post them to his own address in his own name. The standard defence is that you might be able to claim that the drugs were sent to you by some enemy or nasty ex-girlfriend.

I dunno. This strikes me as one of those cases where people confuse the statement 'I won't be able to be proved guilty beyond a reasonable doubt' with 'I can come up with some bizarre cock and bull story about how my enemy wanted to punish me by sending me a hundred ecstasy tablets'. Yeah, that'll teach him! Eat ecstasy, loser!

The forgotten part in all this is that you've got to stand up in front of a jury of 12 ordinary men and women and convince them that this is actually a serious possibility. You got sent a pound of marijuana by an enemy, you say? Which one? Which girlfriend? Let's get her on the stand! What's that? She's now testifying that you guys broke up because she got tired of the fact that you were always smoking marijuana? And she decided to punish you by shipping you some marijuana, not tipping off the police or the post office, and just waiting for a random drug screening dog to sniff out the package?

Yeeeaah. If I were your lawyer, I'd advise you to take the plea bargain.

In addition, the guy is willing to buy adderall online, under the assumption that they don't bother screening for this stuff anyway, and then write about his experiences and post it on the internet. That takes some stones. Given they lock up doctors for prescribing too many painkillers, I can't say I'd share the author's insouciance about the reasonableness of drug enforcement policies.

More importantly, what a remarkable market has sprung up that despite all the enormous potential market for lemons problems, the guy actually reliably got the drugs shipped to his house multiple times. By anonymous strangers. Say what you will, that's some impressive market design right there. Read the whole thing and find out how it works.

Remember this next time someone tells you that the information asymmetry problems in a market are so severe that we absolutely must have yet more government regulation.

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