How the value of illegal goods or substances such as cocaine is determined by the government when they confiscate it

Question

I sort of assumed that if something is illegal to buy or sell the goverment would deem it to have no value within their economy

In: Economics

Answer 1

It’s of value to buyers and sellers, even if the activity is illegal. The government just needs to find out how much people are paying for a particular substance and can then evaluate how much it was worth. The government can find this out either by posing as buyers/sellers or by asking people who were caught with the substance. Not everyone will talk, but some will.