If inflation/cost of living is such a complex difficult problem, then why has the price of drugs been absoultly perfectly stable my whole life?

Question

The prices of all the different drugs that I use have not changed at all, in the 46 years I have been alive. (Which means, that the price has consistently gone down, if adjusted).

Please explain how Cartels manage to avoid inflation problems but governments can not.

Remember. Absolutely perfectly stable, for example. In my city, the price of a gram of weed has been $20 for as long as I've been alive.

If cartels can manage it, why can't governments?

To me, the answer is that: printing money = Stealing money, and governments are more corrupt than cartels

Answer 1

Inflation is macroeconomic phenomenon, it is a positive change in price level which looks at average prices in the economy.

You cannot simply compare average to prices for all sorts of categories to prices for one category. For example, average prices of computers and other smart devices are not just stagnate but are even declining as FRED data show;

Drugs you are mentioning might be one of such items that becomes cheaper despite overall inflation.

If cartels can manage it, why can't governments? To me, the answer is that: printing money = Stealing money, and governments are more corrupt than cartels

This is not correct conclusion;

It is generally accepted by economists that increase in money supply leads to higher inflation (e.g. see Mankiw Macroeconomics). However, this increase in money supply affects all businesses legal or illegal. Cartels are not somehow specially immune to inflation compared to your local baker.

However, not price of every item is affected by inflation equally. For example, computers or other electronics generally get cheaper over time once you adjust for quality because the electronics industry is highly innovative, and hence despite overall inflation they manage to produce things more efficiently so that their prices still decrease.

Furthermore, most experts agree small stable inflation helps economy to operate more smoothly. This is reflected in mandates of major central banks such as Fed or ECB which imply inflation of about 2%. As long as you do not have some evidence that central banks deviate from this, in order to enrich some specific politicians I do not think you can talk about any corruption. For example, you might be ideologically opposed to government building a bridge, but if it builds bridge based on broad mandate, and the spending on bridge is transparent and there are no misuses of funds, you can't really talk about corruption, even if you believe private sector could have build the bridge more efficiently thanks to better incentives.

Answer 2

Wright's law explains this

To quote a section of the Wiki article on experience curve effects:

The learning curve model posits that for each doubling of the total quantity of items produced, costs decrease by a fixed proportion. Generally, the production of any good or service shows the learning curve or experience curve effect. Each time cumulative volume doubles, value-added costs (including administration, marketing, distribution, and manufacturing) fall by a constant percentage.

Over the past decades the amount of marijuana grown has been constantly increasing, with manufacturers perfecting the technology over time. There's been a particularly strong increase in sales when Canada and several US states legalized the drug, significantly reducing the legal risks involved and allowing for weed farms to operate in the open. Statista provides this handy chart:

At some point we'll likely hit an inflection point and marijuana will start costing more in absolute dollars I won't be surprised if a gram continues costing $20 for a few more years.

Answer 3

Industries with higher standard markups are often less responsive to inflation due to Game Theory

Imagine you sell a perfectly legal and normal product called widgets. Let's assume that this is a Capitolist society where supply, demand, opportunity costs, and competition force you to operate at a low profit margin; so, you mark up your product by maybe 10% of production cost. Then when 5% inflation happens, you have to make a choice: respond by increasing your prices by 5% or start selling 100% as many widgets to maintain your previous profits. In general, it will be a lot harder to suddenly increase the demand for your widgets by 100%; so, the preferred strategy will be the increased cost.

Recreational drugs are a bit different. The illegal nature and addictive qualities of drugs mean that there tends to be a huge supply/demand gap which drives up the cost well above the production cost such that many drugs may be marked up by several thousand percent. So, if 5% inflation happens, a drug dealer may only need to increase sales by 6% maintain his previous profit margin, not 100% like the honest businessman above.

So, knowingly or not, your drug dealer is playing at Game Theory here. Is it easier to sell 6% more drugs or risk losing clients by increasing his prices by 5%? Although the drug dealer has the same need for 5% more profits as the widget manufacturer, raising his prices are not necessarily going to be as good of a strategy for increasing his revenue to keep up with inflation.

Answer 4

This is because the price of grown products and close substitutes to weed (from the producer viewpoint) are rather stable over the last 60 years. See for instance https://tradingeconomics.com/commodity/

and click on the commodity of your choice: coffee or cotton (or wheat?) for instance to see their price over the last 50 years.

Although there are cyclical changes in the price over periods of 5 tp 10 years, there is no trend over 60 years.

Farmers/growers arbitrate between the different crops they can plant, based on the relative prices for future harvests. If these prices are expected to remain constant, the areas allocated to each crop remain constant (ceteris paribus), which reinforce the price stability.