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March/ April/ May 2014 How Not to Make a Hash Out of Cannabis Legalization

Leaving it to the states is a recipe for disaster.

By Mark Kleiman

We also spend about $1 billion annually in public money keeping roughly 40,000 growers and dealers behind bars at any one time. That’s a small chunk of the incarceration problem, but it represents a lot of money and a lot of suffering. The enforcement effort, including the use of “dynamic entry” raids, imposes additional costs in money, liberty, police-community conflict, and, occasionally, lives. Cannabis dealing and enforcement don’t contribute much to drug-related violence in the United States, but they make up a noticeable part of Mexico’s problems.

Another gain from legalization would be to move the millions of Americans whose crimes begin and end with using illegal cannabis from the wrong side of the law to the right one, bringing an array of benefits to them and their communities in the form of a healthier relationship with the legal and political systems. Current cannabis users, and the millions of others who might choose to start using cannabis if the drug became legal, would also enjoy an increase in personal liberty and be able to pursue, without the fear of legal consequences, what is for most of them a harmless source of pleasure, comfort, relaxation, sociability, healing, creativity, or inspiration. For those people, legalization would also bring with it all the ordinary gains consumers derive from open competition: lower prices, easier access, and a wider range of available products and means of administration, held to quality standards the illicit market can’t enforce.

To those real gains must be added the political lure of public revenue that comes without raising taxes on currently legal products or incomes. The revenue take could be substantial: legal production and distribution of the amount of cannabis now sold in the U.S. wouldn’t cost more than 20 percent of the $35 billion now being paid for it. If prices were kept high and virtually all of the surplus were captured by taxation, it’s possible that cannabis taxation could yield as much as $20 billion per year—around 1 percent of the revenues of all the state governments. Those are, of course, two big ifs. The current pricing and tax systems in Colorado and Washington, which between them account for about 5 percent of national cannabis use, won’t give taxpayers there anything resembling the $1 billion a year that would be their prorated share of that hypothetical $20 billion.

So much for the upside. What about the downside?

The losses from legalization would mainly accrue to the minority of consumers who lose control of their cannabis use. About a quarter of the sixteen million Americans who report having used cannabis in the past month say they used it every day or almost every day. Those frequent users also use more cannabis per day of use than do less frequent users. About half of the daily- and near-daily-use population meets diagnostic criteria for substance abuse or dependence—that is, they find that their cannabis habit is interfering with other activities and bringing negative consequences, and that their attempts to cut back on the frequency or quantity of their cannabis use have failed. (Those estimates are based on users’ own responses to surveys, so they probably underestimate the actual risks.)

And then, of course, there are the extreme cases. A substantial number of these daily users spend virtually every waking hour under the influence. Legal availability is likely to add both to their numbers and to the intensity of their problems. Jonathan Caulkins has done a calculation suggesting that legalization at low prices might increase the amount of time spent stoned by about fifteen billion person-hours per year, concentrated among frequent heavy users rather than among the more numerous Saturday-night partiers. Every year, hundreds of thousands of cannabis users visit emergency departments having unintentionally overdosed, experiencing anxiety, dysphoria, and sometimes panic. Presumably many others suffer very unpleasant experiences without seeking professional attention.

While a bad cannabis habit usually isn’t nearly as destructive as a bad alcohol habit, it’s plenty bad enough if it happens to you, or to your child or your sibling or your spouse or your parent.

Maybe you think the gains of legalizing marijuana will outweigh the costs; maybe you don’t. But that’s quickly becoming a moot point. Like it or not, legalization is on its way, unless something occurs to reverse the current trend in public opinion. In any case, it shouldn’t be controversial to say that, if we are to legalize cannabis, the policy aim going forward should be to maximize the gains and minimize the disadvantages. But the systems being put in place in Colorado and Washington aren’t well designed for that purpose, because they create a cannabis industry whose commercial interest is precisely opposite to the public interest.

Cannabis consumption, like alcohol consumption, follows the so-called 80/20 rule (sometimes called “Pareto’s Law”): 20 percent of the users account for 80 percent of the volume. So from the perspective of cannabis vendors, drug abuse isn’t the problem; it’s the target demographic. Since we can expect the legal cannabis industry to be financially dependent on dependent consumers, we can also expect that the industry’s marketing practices and lobbying agenda will be dedicated to creating and sustaining problem drug use patterns.

The trick to legalizing marijuana, then, is to keep at bay the logic of the market—its tendency to create and exploit people with substance abuse disorders. So far, the state-by-state, initiative-driven process doesn’t seem up to that challenge. Neither the taxes nor the regulations will prevent substantial decreases in retail prices, which matter much more to very heavy users and to cash-constrained teenagers than they do to casual users. The industry’s marketing efforts will be constrained only by rules against appealing explicitly to minors (rules that haven’t kept the beer companies from sponsoring Extreme Fighting on television). And there’s no guarantee that other states won’t create even looser systems. In Oregon, a proposition on the 2012 ballot that was narrowly defeated (53 percent to 47 percent) would have mandated that five of the seven members of the commission to regulate the cannabis industry be chosen by the growers—industry capture, in other words, was written into the proposed law. It remains to be seen whether even the modest taxes and restrictions passed by the voters survive the inevitable industry pressure to weaken them legislatively.


Reefer madness: On January 1, 2014, customers crowded into marijuana outlets in Colorado hoping to legally purchase the drug for recreational use for the first time. Credit: AP

Mark Kleiman is a professor of public policy at the University of California Los Angeles.

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