The Price of Illicit Drugs: 1981 through the - The White House

without the inclusion of extreme residuals. Also, there was a tendency for and to offset each
other in the sense that increased when decreased, and conversely.
The alternative method of estimating cocaine and heroin retail prices (described in section 4)
yields far fewer outliers partly because outcomes (pure grams) are not divided by purities that are
sometimes implausibly small. In addition, the outliers that are flagged are more easily assessed by
experts because the market is better understood in terms of the amount obtained for a nominal
dollar amount. These are important advantages of the alternative method, the results for which are
as follows. Firstly, gross outliers (cocaine: nominal prices $1, bulk grams 0.05 grams or bulk
grams 5 grams; heroin: nominal prices $1, bulk grams 0.04 grams or more than 5 grams for
heroin) excluded 2.7% of the cocaine data and 2.4% of the heroin data. Secondly, model-based
outliers exclude an additional 0.2% of the remaining cocaine data and 0.4% of the remaining
heroin data. Consultation with Dr. Dana Hunt opinion confirms that these additional purchases
were unreasonable given the market for these drugs.
2. Variables
To model the purchase price as a function of amount purchased, we standardized both price and
amount. Except for marijuana, amount was expressed in pure grams and price was expressed in
2000 dollars per pure gram (Table 14 gives the Consumer Price Index using the first half of 2000
as a reference point). In the case of marijuana, the purity (THC content) was absent from the
STRIDE database, so we expressed amount and price in terms of bulk grams and current dollars
per bulk gram.
Other variables thought to affect purchase price were purity (0 to 1), time (78 quarters from Q1
1981 to Q2 2000), city (29 large U.S. cities and the Rest of U.S.), and distribution level (several
levels defined in terms of standardized amount). The 29 cities were: Atlanta, Baltimore, Boston,
Buffalo, Chicago, Cleveland, Dallas, Denver, Detroit, Houston, Kansas City, Los Angeles, Miami,
Milwaukee, Minneapolis, New Orleans, New York, Newark, Philadelphia, Phoenix, Pittsburgh,
Portland, San Antonio, San Diego, San Francisco, Seattle, St. Louis, Tampa and Washington DC.
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