One very glaring example of this phenomenon is how entrenched power (mostly those getting rich from prisons, law enforcement, alcohol and tobacco, etc.) have managed to create drug laws so at odds with the free market forces that the entire country of Mexico is profoundly unstable... and it may come crashing down.
Umm, Mexico's border city stability has such more more to do with our illegal immigration policies than our war on drugs. Sure these thugs are funded by our addictions, but should we legalize drugs tomorrow, they'll just find a new revenue stream.
I find it interesting to model gang violence as a market. If drugs are made legal, the demand for thugs will go down. If the supply of thuggery is elastic, then former gang members will leave gangs and find other work. If it's inelastic, they'll find other revenue streams.
I've heard that simply decriminalizing weed in many states has had a material, and in some cases profound negative effect on revenue for mexican drug cartels. Furthermore, many consumers of narcotics are "moving upstream" to prescription drugs. But with less revenue, comes more violence initially as the factions squabble fiercely over a bigger slice of a smaller pie. Eventually this will reach an equilibrium and enough producers will drop out or realize it's not worth it and we'll end up with a few kingpins for the CIA to take out (a la Noreaga, Escobar, et al.).
