South-Western College Publishing - Economics  
Drug Debate
Subject Opportunity cost and comparative statics
Topic Production Possibility Frontiers
Key Words Military, drug trafficking, interdiction, suppliers, aid package
News Story

The U.S. Senate has passed a bill giving $934 million to the Colombian military for equipment, such as helicopters, and for training three battalions in combating drug trafficking. This is important because Colombia is the source of 90 percent of the cocaine and 65 percent of the heroin found in the U.S. Drug interdiction is difficult because the Colombian suppliers are supported by guerillas.

The aid package was not without its critics. Senator Paul Wellstone, Democrat of Minnesota, proposed that $225 million be transferred to drug treatment and prevention programs in the U.S. Senator Slade Gorton, Republican of Washington, wanted the package trimmed by $200 million out of fear that the U.S. had not thought through the long-term consequences of becoming embroiled in the war in Colombia. However, both amendments were soundly defeated.

(Updated August 1, 2000)

Questions
1. Draw a production possibility frontier representing possible combinations of domestic prevention and treatment programs on the one hand and equipment and training for the Colombian military on the other given the resources allocated by the Senate.
  a) Show the positions of the Senate majority and Senator Wellstone.
  b) What would have been the opportunity cost of Senator Wellstone's proposal?
  c) As progressively more prevention and treatment programs would have been set up, what would have happened to the opportunity cost? Illustrate on your diagram.
2. Suppose that Senator Gorton's proposal to reduce the resources allocated by the Senate had been approved.
  a) What would have happened to the production possibility frontier? Illustrate in a new diagram.
  b) What effect would the scarcer resources have had on the Senate debate?
Source Eric Schmitt, "Senate Approves $1 Billion to Aid Colombia Military," The New York Times, June 22, 2000.

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