NOT YOUR TYPICAL ESSAY CONTEST: 3 PAGES ON CASH, DRUGS, CRIME

Some may see a drug deal and think crime and punishment.

The Minneapolis Fed is hoping that high school students will think
cost-benefit ratio, black markets and marginal analysis.

For its 18th annual essay contest, the Federal Reserve Bank of
Minneapolis is getting a little more provocative than such past topics
as the floating exchange rate system and targeted incentives to
businesses. Now it wants three pages from students residing in its
district on the economics of illegal drugs.

Its website bears a photo -- purchased from an image bank -- of a
protypical drug exchange of goods for cash.

The idea actually bubbled up from high school economics teachers,
according to Joe Mahon, a writer-analyst at the bank. "This is
something teachers at the high school level have often used to
generate discussion," he said, adding that a leading college
introductory economics text also contains a sidebar on the topic.

Other Fed districts are getting creative in their essay topics. St.
Louis this year is asking students to write about the economic
principles in a novel of their choice. Cleveland has taken the same
approach with a favorite movie, song or fable.

The Minneapolis bank's website contains a primer on the drug trade and
some economic principles for students to keep in mind. These tips
touch on such topics as the effect of the drug trade on families and
innocent bystanders (negative externalities) and turf wars among gangs
(property rights). Students are encouraged to consider whether supply
interdiction or demand reduction is more rational economic behavior.

The bank hopes this year's topic will draw more entries than the
several dozen received one year, when the bank asked students to
comment on the Fed's role in moving funds, payments and money among
the nation's financial institutions. Last year's topic on why some
nations are rich and others poor drew a record of about 300 entries.

The contest is open to juniors and seniors in the Minneapolis Federal
Reserve district, which stretches from Montana to the Upper Peninsula
of Michigan. Top essayists win savings bonds. For contest rules, go to
www.startribune.com/462.