Underground Gun Markets

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Two weeks ago San Francisco passed a ban on guns within city limits, the strictest such ban in the country: not only are all sales banned, but everyone must turn in his or her handgun by next April Fool’s Day. The betting line, it seems, is that the new law won’t survive a court challenge. From a practical standpoint, though, many opponents of the law have argued that at any rate these sorts of bans won’t affect gun ownership, or gun violence, in the city, since criminals will still be able to buy guns from either the underground market or outside city limits. Only law-abiding citizens will be affected, etc.

That sort of logic usually makes sense—after all, bans on narcotics don’t seem to have any appreciable effect on the drug market—but it’s probably not quite right. Four economists—Philip Cook, Jens Ludwig, Sudhir Venkatesh, and Anthony Braga—have just put out a study looking at Chicago’s underground gun market, and found that a ban on handguns in that city seriously increased the amount of “friction” in the gun market, making it much harder for the average person to get access to guns.

Unlike with drugs, the relatively small number of buyers, sellers and transactions in an underground gun market creates “thinness” in the market, which leads to serious transaction costs. Repeat business in the gun market is rare, since generally you just need one gun, so most buyers generally don’t know where to go, or who to trust. It’s hard to advertise, after all. Plus, many buyers in the underground markets don’t know the first thing about guns, and will often buy guns that may not even work, just for show. (Ammo is even harder to find; for obvious reasons you’re generally not allowed to load a gun and “test it” during a sale, and many youths don’t even know what sort of ammo they need.) And friction creates more friction—a lack of sellers reduces the number of buyers, which in turn discourages sellers. (Moreover, many people who want a gun, especially for “unlawful purposes,” don’t ever end up leaving the city, so buying a gun legally from the suburbs isn’t usually an option.)

Now here’s the caveat: gangs, obviously, have readier access to gun markets, but for a variety of reasons gangs don’t just start giving guns to anyone who wants one, and that includes low-level gang members. Not only are gangs wary of hostile takeovers, but gun violence is often bad for business—it scares customers and attracts the police. So regulation is very tight, especially within gangs, where only about 25 percent of all members even have a gun. But that’s still a lot of people with access, which probably explains why Chicago doesn’t have much lower levels of gun violence than other cities, even if it is harder for the average person to get a gun.

In that case, it’s reasonable to think that increasing the friction in gun and ammo markets, coupled with some sort of collective-deterrence strategy against gangs—as happened in Boston’s Operation Ceasefire—would reduce gun violence. It’s hard to tell. But either way, it’s an interesting study, and a useful corrective to the view that it’s “impossible” to regulate the gun market.


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