A fungus is damaging opium poppies in Afghanistan.  The price of dry opium has gone up dramatically.  This is good for the Taliban in the short run as they have stockpiles of dry opium they can sell off at  higher price.  But in the medium term the price charged by farmers will go up as there is less crop to go around.  As input prices go up, profits go down.  Ceteris paribus, Taliban profits will go down in the medium term.  Drawn by higher profits, if entry of new farmers into opium production occurs in the long run, we will head back to the status quo.  Intermediate micro is kind of fun!

Seeing this logic at work, government intervention is possible: U.S. forces can discourage entry to keep input prices high and Taliban profits low.  I’m sure the Law of Unintended Consequences will be at work too.  What form it will take, by definition I cannot predict.

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