<p>I didn't go through all that thinking and analysis as I see in this post, but while watching Narcos (both seasons so far), listening to the narration it seems the drug business is really just a logistics business, the value lies in insuring that the end user gets the product all cost even in human casualties.Every possible cost is factored into that value, so if you the manufacturer control every aspect of the supply chain, including insurance on the product. You can have a mark up as high as you want 1000%, 5000% if you want. Target a market that has the cash to burn, literally like the US or some specific areas of it, it really is that simple to be extraordinarily wealthy.</p>

CC BY-SA 3.0
2017-07-30T09:33:39.650Z
You may want to reread that chapter on monopoly price setting. Being a monopolist does not mean you can make arbitrarily high profits.
Tobias
CC BY-SA 3.0
2017-07-30T07:26:16.950Z
2017-07-30T07:26:16.950Z
user14053
<p>Not sure an economist can answer this particular question about Escobar's wealth and not only because all the given estimates are uncertain. A more interesting question for an economist (or at least for me) would be: What is Escobar's (a drug firm) mark-up? Or what is the economic size of the international market for cocaine?</p>

<p>The most serious source of information I was able to find is the <a href="http://www.unodc.org/documents/data-and-analysis/WDR2012/WDR_2012_web_small.pdf" rel="nofollow noreferrer">2012 World Drug Report</a> of the United Nations Office on Drugs and Crime (UNDOC). UNODC estimates suggest that</p>

<ol>
<li>The total retail market for cocaine amounts to some US $85 billion in 2009 (p.70). </li>
<li>Columbian production proxied in terms of hectares is around 89% (based on 2009's estimates (68,000+73,000)/158,800 - Table 12).</li>
</ol>

<p>So, if you assume that all Columbian production is produced by Escobar's cartel his total benefit is about USD $75 billion for the year 2009. </p>

<p><strong>Edit</strong>: However, we cannot assume that Escobar's cartel got 89% of the retail value (thanks to @Alecos Papadopoulos for this point). The USD 75 billion is the equivalent of the "box office" for a movie - but the producers of the movie (i.e. Escobar's cartel) do not get all the box office. </p>

<p>Then, the question is what is the proportion retained by the Escobar's cartel? I have no clue! However, <a href="http://pricetheory.uchicago.edu/levitt/Papers/LevittVenkateshAnEconomicAnalysis2000.pdf" rel="nofollow noreferrer">Levitt and Vetakesh QJE paper</a> document that "earnings within the (drug) gang are enormously skewed (..) with high-level gang members earning far more than their legitimate market alternative." So, by extrapolating from this result and assuming that the drug market is vertically integrated and controlled by the Escobar's cartel, we may speculate that the latter (and Escobar himself) may get a big part of the box office.</p>

<p>In this report, you may also find more reliable estimates about </p>

<ol>
<li>The total number of cocaine users: 16 million (Table 7)</li>
<li>and the estimates per region.</li>
<li>Purity-adjusted prices per gram in those regions</li>
</ol>

<p>So if you find some data on consumer's average consumption and Escobar's production you may get a better estimate of his wealth.</p>

CC BY-SA 3.0
2016-11-25T17:07:54.423Z
At least according to Wikipedia quoted sources, "[Escobar's] cartel, at the height of his career, supplied an estimated 80% of the cocaine smuggled into the United States, turning over US $21.9 billion a year in personal income." So your 89% figure is probably not too far off.
Ubiquitous
CC BY-SA 3.0
2016-11-25T17:58:28.957Z
Good to know! Thanks. I am curious about how did they estimate his personal income.
emeryville
CC BY-SA 3.0
2016-11-25T22:56:17.640Z
My numbers make more sense if I span them over 10 years. Thanks.
ronenfe
CC BY-SA 3.0
2016-11-25T23:52:47.153Z
You are assuming that Escobar's cartel got 89% _of the retail value_. This is not the case. The USD 75 bil is the equivalent of the "box office" for a movie - but the producers of the movie (i.e. Escobar's cartel) do not get the box office. The theaters (i.e. middle-men) get a piece of the action, and it is not small.
Alecos Papadopoulos
CC BY-SA 3.0
2016-11-26T07:58:52.107Z
@AlecosPapadopoulos you are right and I will add this point. However, [Levitt and Vetakesh QJE paper](http://pricetheory.uchicago.edu/levitt/Papers/LevittVenkateshAnEconomicAnalysis2000.pdf) document that "earnings within the (drug) gang are enormously skewed (..) with high-level gang members earning far more than their legitimate market alternative." So, by extrapolating from this result and assuming that the drug market is vertically integrated and controlled by the Escobar's cartel, the latter may get a big part of the box office!
emeryville
CC BY-SA 3.0
2016-11-25T13:07:51.073Z
2016-11-26T08:06:23.123Z
2016-11-26T08:06:23.123Z
emeryville
<p>I read it's about 30 billion. But I read there were 6 million users in 1985. Let's say he gets 10 percent of the sales price, it means each person paid 50000 dollars for cocaine. It sounds way too much. Any calculations how they reached this amount?</p>

<money><accounting>
How could Pablo Escobar earn so much money?
ronenfe
# How could Pablo Escobar earn so much money?

(Asked by: username_0 on 2016-11-25)

I read it's about 30 billion. But I read there were 6 million users in 1985. Let's say he gets 10 percent of the sales price, it means each person paid 50000 dollars for cocaine. It sounds way too much. Any calculations how they reached this amount?

**Tags:** money, accounting


---

## 2 answers

### Answer by username_3 on 2016-11-25. Score: 5 | Accepted answer

Not sure an economist can answer this particular question about Escobar's wealth and not only because all the given estimates are uncertain. A more interesting question for an economist (or at least for me) would be: What is Escobar's (a drug firm) mark-up? Or what is the economic size of the international market for cocaine?

The most serious source of information I was able to find is the [2012 World Drug Report](http://www.unodc.org/documents/data-and-analysis/WDR2012/WDR_2012_web_small.pdf) of the United Nations Office on Drugs and Crime (UNDOC). UNODC estimates suggest that

1. The total retail market for cocaine amounts to some US $85 billion in 2009 (p.70).
2. Columbian production proxied in terms of hectares is around 89% (based on 2009's estimates (68,000+73,000)/158,800 - Table 12).

So, if you assume that all Columbian production is produced by Escobar's cartel his total benefit is about USD $75 billion for the year 2009.

**Edit**: However, we cannot assume that Escobar's cartel got 89% of the retail value (thanks to @username_5 for this point). The USD 75 billion is the equivalent of the "box office" for a movie - but the producers of the movie (i.e. Escobar's cartel) do not get all the box office.

Then, the question is what is the proportion retained by the Escobar's cartel? I have no clue! However, [Levitt and Vetakesh QJE paper](http://pricetheory.uchicago.edu/levitt/Papers/LevittVenkateshAnEconomicAnalysis2000.pdf) document that "earnings within the (drug) gang are enormously skewed (..) with high-level gang members earning far more than their legitimate market alternative." So, by extrapolating from this result and assuming that the drug market is vertically integrated and controlled by the Escobar's cartel, we may speculate that the latter (and Escobar himself) may get a big part of the box office.

In this report, you may also find more reliable estimates about

1. The total number of cocaine users: 16 million (Table 7)
2. and the estimates per region.
3. Purity-adjusted prices per gram in those regions

So if you find some data on consumer's average consumption and Escobar's production you may get a better estimate of his wealth.

> **Comments:**
> **username_4**: At least according to Wikipedia quoted sources, "[Escobar's] cartel, at the height of his career, supplied an estimated 80% of the cocaine smuggled into the United States, turning over US $21.9 billion a year in personal income." So your 89% figure is probably not too far off.  
> **username_3**: Good to know! Thanks. I am curious about how did they estimate his personal income.  
> **username_0**: My numbers make more sense if I span them over 10 years. Thanks.  
> **username_5**: You are assuming that Escobar's cartel got 89% _of the retail value_. This is not the case. The USD 75 bil is the equivalent of the "box office" for a movie - but the producers of the movie (i.e. Escobar's cartel) do not get the box office. The theaters (i.e. middle-men) get a piece of the action, and it is not small.  
> **username_3**: @AlecosPapadopoulos you are right and I will add this point. However, [Levitt and Vetakesh QJE paper](http://pricetheory.uchicago.edu/levitt/Papers/LevittVenkateshAnEconomicAnalysis2000.pdf) document that "earnings within the (drug) gang are enormously skewed (..) with high-level gang members earning far more than their legitimate market alternative." So, by extrapolating from this result and assuming that the drug market is vertically integrated and controlled by the Escobar's cartel, the latter may get a big part of the box office!  

---

### Answer by username_1 on 2017-07-30. Score: -1

I didn't go through all that thinking and analysis as I see in this post, but while watching Narcos (both seasons so far), listening to the narration it seems the drug business is really just a logistics business, the value lies in insuring that the end user gets the product all cost even in human casualties.Every possible cost is factored into that value, so if you the manufacturer control every aspect of the supply chain, including insurance on the product. You can have a mark up as high as you want 1000%, 5000% if you want. Target a market that has the cash to burn, literally like the US or some specific areas of it, it really is that simple to be extraordinarily wealthy.

> **Comments:**
> **username_2**: You may want to reread that chapter on monopoly price setting. Being a monopolist does not mean you can make arbitrarily high profits.  

---

