Afghanistan's opium output: what problem?

The great and good are worried by a big rise in Afghanistan's opium production. But is this really a bad thing? Three things suggest not:
1. Afghanistan clearly has a comparative advantage in the production of opium; given its meagre land, labour and capital endowments, it can do little else. Opium production is, then, it's best hope of developing the economy.
2. At the margin, if young men can earn a decent living producing opium, they might be less likely to join the Taleban.
3. A flood of cheap heroin into western markets should reduce its price, and so cut crime as addicts need to commit fewer robberies to get their fix.
On the other hand, there are reasons to worry.
1. This might be a rare example of immiserizing growth (pdf). If Afghanistan increases the supply of opium enough, its price might collapse so much as to leave the economy worse off. (This and point 3 above are two sides of the same coin.)
2. Opium production can increase corruption - as government officials demand bribes to ignore it - and corruption depresses economic growth. This is not, however, a problem confined to opium. It's part ot the general natural resource curse; look how (say) Nigeria's oil resources have led to immiserizing corruption.
3. Opium production might be a way of funding the Taleban, rather than a way of reducing the supply of workers to it.
On balance, then, it's far from clear whether we should welcome Afghanistan's increased opium output. It's an issue requiring analysis, not a kneejerk "yuk" response.

Comments

[dearieme]

I find the whole drugs thing baffling. I've read a million diatribes against coke, heroin, etc, but have never seen, that I can remember, anything approaching a scientific account of what harm they do and how they do it. Nor have I seen anyone attempt to balance the advantage of attempting to suppress then versus the social cost of doing so, including corruption of police, judiciary and so on. I wouldn't touch drugs with the proverbial barge-pole, but then I think that whisky is dangerously seductive. I end up thinking that if we can't keep the drugs out of jails, how can we ever keep them out of the country? Surely some economists could illuminate all this a bit.

[Sunny]

Chris,

Are there any ways to get around the whole natural-resources corruption curse? And why does it exist? Anything worth reading you can point me towards? Thanks

[chris]

One earlyish overview of the resource curse is this paper by Jeff Sachs and Andrew Warner:
http://www.earthinstitute.columbia.edu/about/director/documents/NaturalResourceAbundanceandEconomicDevelopmentwithWarner-1997.pdf
It's been criticized for underplaying the role of institutions in determining whether nations can escape the curse:
http://ideas.repec.org/p/wpa/wuwpge/0210004.html
One country that has escaped the curse is Botswana. This paper explains:
http://ideas.repec.org/p/imf/imfwpa/06-138.html

[Rob]

Presumably another problem which Afghanistan faces in increasing its opium crop is that other states, which do not look kindly upon an increased supply of heroin, will not be particularly well disposed to it. It's not like quite like oil, where other states are prepared, to some extent, to cosy up to you to get hold of it.

[Sunny]

Thanks!