Data in the Streets

November 2, 2014
Posted by Jay Livingston

I confess, I have little memory for books or articles on methods. I may have learned their content, but the specific documents and authors faded rapidly to gray.  And then there’s Unobtrusive Measures. It must have been Robert Rosenthal who assigned it. He was, after all, the man who forced social scientists to realize that they were unwittingly affecting the responses of their subjects and respondents, whether those subjects were people or lab rats.  The beauty of unobtrusive measures is that they eliminate that possibility. 

Now that states have started to legalize marijuana, one of the questions they must deal with is how to tax it. Untaxed, weed would be incredibly cheap. “A legal joint would cost (before tax) about what a tea-bag costs” (Mark Kleiman, here). Presumably, states want to tax weed so that the price is high enough to discourage abuse and raise money but not so high that it creates a black market in untaxed weed.

The same problem already occurs with cigarettes.

The above graph, from a study commissioned by the Tax Foundation, shows that as taxes increase, so does smuggling. (The Tax Foundation does not show the correlation coefficient, but it looks like it might be as high as 0.6, though without that dot in the upper right, surely New York, it might be more like 0.5.)

In a high-tax area like New York City, many of the cigarettes sold are smuggled in from other states. But how much is “many cigarettes,” and how can you find out? Most studies of smuggled and counterfeit cigarettes get their estimates by comparing sales figures with smoking rates. The trouble with that method is that rates of smoking come from surveys, and people may not accurately report how much they smoke.

That’s why I liked this study by Klaus von Lampe and colleagues.* They selected a sample of South Bronx census tracts and walked around, eyes down, scanning the sidewalks for discarded cigarette packs to see whether the pack had the proper tax stamps.

 All in all, they picked up 497; of those, 329 still had the cellophane wrapper that the stamp would be on.  If there was a tax stamp, they sent it the state to determine if it was counterfeit.

In the end, they estimate that only 20% of the cigarettes were fully legit with state and city taxes paid. About two-fifths had no tax stamp, another 15% had counterfeit stamps, and 18% had out-of-state stamps.

Unobtrusive measures solve one methodological problem, but they are not perfect. The trouble  here, and in many other cases, is the limited range.  Extending this research to the entire city let alone the fifty states would be a huge and costly undertaking.

----------------
* Hat tip to Peter Moskos, who mentioned it on his Cop in the Hood blog.