Conn (1965) attributes “most of the blame for the skyrocketing prices [of quinine from $5 per tablet in June to $11 per tablet in November]… to the shortage of bark” (italics added).

Quantity

 

 

SJune65

SNov65

DNov65DJune65 =

Price($ per 100 tablets)

Figure 1. The Market for Quinine, 1965

In the fall of 1965, American troops were sent into the jungles of Vietnam to fight the Vietcong (VC) because, according to an army officer, that’s “where the VC are” (quoted in Apple, 1965). The jungles were also home to mosquitoes carrying malaria parasites, leading the officer to say, “If you catch VC, you’ll catch malaria.” He was right—pursuing the Vietcong into the jungles cause a “flood” of malaria cases, filling hospitals with soldiers suffering high fevers and “agonizing chills.”

Many of them were given quinine, a drug that kills many types of malaria parasites. Quinine is extracted from the bark of cinchona trees, which at the time of the Vietnam War was principally supplied by Indonesia. Just as Americans were entering Vietnam’s jungles, Indonesia stopped exporting cinchona bark, which increased the price of an essential input in the production of quinine.

Figure 2 illustrates the effect of these events on the market for quinine. The spike in malaria cases caused an increase in demand, while the increase in the price of cinchona bark caused an even larger decrease in supply. As a result, the price of quinine doubled, increasing from $5 per hundred tablets in June of 1965 to $11 in November. The decrease in supply was drawn to be larger than the increase in demand because Conn (1965) attributes “most of the blame for the skyrocketing prices… to the shortage of bark” (italics added).

These events initially caused a shortage of quinine, represented by the distance AB, leading to an increase in the price of quinine. As the price increased, drug companies reduced their use of quinine in producing heart medications and smugglers found ways around Indonesia’s export ban. These sorts of responses would have continued until the market reached its new equilibrium price and quantity. (299 words)

Writing (Economics) Papers from the Inside Out

What are the characteristics of an outstanding paper?

1. The paper has something interesting to say.

Economists say interesting stuff using:

• economic reasoning (e.g., models)

• empirical evidence

• institutional facts

work on the inside

first