Comparative intoxicant prices

Illegal pot is cheaper than beer.

Kevin Drum picks up on John Ingold’s article posing the question whether cannabis is, net, a substitute for alcohol or a complement to it. His post raises two somewhat technical but important (and policy-relevant) issues.

1. Kevin considers the substitution case and the non-substitution case (zero cross-elasticity of demand). But complementarity is a real possiblity, either because the two drugs go together – as alcohol does with cocaine, for example – or because people develop a taste for intoxication by heavily using one drug that they gets carried over to the other.

2. Kevin correctly identifies price as a key variable: we simply don’t have experience with pot as cheap as it would be (on a potency-adjusted, inflation-adjusted basis) if it were a free-market product. (Regulation and taxation could change that, so it’s not really meaningful to talk about a post-legalization price without specifying the legalization regime.)

But it’s not right to say that “marijuana isn’t cheap enough to be a genuine substitute for alcohol.” On what seems to me the right basis of comparison – cost per unit intoxication – illegal cannabis is actually cheaper. Assume $15/gm. as the price of moderate-potency (15%-20% THC) pot. Assume that a joint of that material weighing 0.4/gm. is enough to get two (non-tolerant) users stoned, to the level they desire, for three hours each. Then $6 worth of pot produces roughly 6 person-hours of intoxication, for a cost of about $1/hr.

Now consider a non-tolerant user of alcohol. A beer costs about a dollar, and for an average-sized person about four beers in a row are needed to get to the .08 level that legally counts as impaired. Maintaining that BAC – which might not actually maintain the initial subjective intoxication level – requires roughly another drink an hour. So three hours intoxicated would cost about $6, or $2/hr.

Of course this is all very approximate; I know of no standard measure of intoxicated pleasure, so I can’t say whether .2 gram of 15%-20%-THC pot is really equivalent to six beers over three hours. And of course tolerance complicates the problem, along with the issue of people who want to alter their mood short of full intoxication.

Still, at first blush marijuana, even under illegality, seems like a bargain in mood-alteration. Which is a good reason to design legal regimes that don’t let those prices fall very much.

Footnote I’m grateful to Kevin for mentioning our book. But note: our book, not my book. The authors are Caulkins, Hawken, Kilmer, and Kleiman.

Author: Mark Kleiman

Professor of Public Policy at the NYU Marron Institute for Urban Management and editor of the Journal of Drug Policy Analysis. Teaches about the methods of policy analysis about drug abuse control and crime control policy, working out the implications of two principles: that swift and certain sanctions don't have to be severe to be effective, and that well-designed threats usually don't have to be carried out. Books: Drugs and Drug Policy: What Everyone Needs to Know (with Jonathan Caulkins and Angela Hawken) When Brute Force Fails: How to Have Less Crime and Less Punishment (Princeton, 2009; named one of the "books of the year" by The Economist Against Excess: Drug Policy for Results (Basic, 1993) Marijuana: Costs of Abuse, Costs of Control (Greenwood, 1989) UCLA Homepage Curriculum Vitae Contact: Markarkleiman-at-gmail.com

14 thoughts on “Comparative intoxicant prices”

  1. It seems like there’s a fair amount of room for individual variation here – legal intoxication seems rather a step beyond the state of pleasant bonhomie I generally if quite rarely use alcohol to achieve, and even at my bulk such only takes a couple of beers – but then I really only drink in social situations and the beer is more than $1 (retail; I’m ignorant regarding the taxes) even bought in moderate bulk. The main point seems to be that according to the numbers you present the price comparison is going to wind up with results for either option that are of the same order of magnitude, and likely slightly favoring pot for cost-efficiency. Basically, the price difference is going to be small enough that for the casual or social seeker of intoxication the choice becomes a matter of preference and of the desired effect and milieu, much as they might choose between beer, wine, and liquor. My suspicion is that it’s only for those assiduously seeking the most cost-efficient oblivion on a regular basis that price differences of the scale you describe will weigh heavily, and such aren’t the non-tolerant users you describe.

  2. Still, at first blush marijuana, even under illegality, seems like a bargain in mood-alteration. Which is a good reason to design legal regimes that don’t let those prices fall very much.

    Unless, of course, it can be shown that marijuana use effectively substitutes for alcohol use and has far less negative externalities. In that case, wouldn’t we want the less-harmful substitute to cost significantly less than the more-harmful drug?

    1. Correct. If that were shown to be true, it would have major policy implications. Right now, even the sign of the cross-elasticity is undetermined.

      1. Alcohol is an accepted, established, legal and readily available intoxicant for over-21s. Cannabis is not. Prima facie, this suggests that alcohol usage levels, in the absence of alcohol policy changes, are stable and mature. The changes in Colorado and Washington have to do with cannabis and should modulate cannabis usage levels once implemented. Now there are many counterfactual scenarios to consider. The two logical ones are:

        (1)Cannabis and alcohol are substitutes. So people who abstained from or moderated their cannabis use, due to legality, price, availability…etc will now adjust their cannabis use to satiety displacing their alcohol use.

        (2)Cannabis and alcohol are complements. So people who abstained from or moderated their cannabis use, due to legality, price, availability…etc will now ramp up their cannabis use to satiety alongside their alcohol use.

        You seem to seriously consider a third scenario

        (3)Cannabis catalyses greater alcohol use. For some unelucidated reason, alcohol users will consume greater alcohol during their cannabis use and/or even during sessions of no alcohol use.

        Now, in the absence of a plausible mechanism for (3), why does it merit serious consideration alongside (1) & (2) as opposed to many other counterfactual scenarios that can be imagined: say, cannabis use will lead to greater cocaine use, or whatever.

        1. Yes, the likelihood of the third scenario doesn’t seem to have a lot behind it, at least not among those of us with direct experience in combination usage of these substances, to whom the sign of the cross-elasticity seems obvious. There are drugs that are very compatible with increased alcohol consumption, like cocaine, meth, or LSD, where the effects of the companion drug are greater and tend to operate counter to the effects of alcohol. With marijuana and alcohol the effects of one tend to reinforce the effects of the other, leaving little incentive to consume more of either one in combination than would otherwise be consumed without the other.

  3. Purchase unit also matters. A sixer of beer is pocket money, an eigth of pot is $40 or so last I knew, but if you bring either one to a party its gone. If legalization drops the price enough to change that comparison there could be a pot for alcohol substitution.

  4. There’s also just the physical part of the transaction. If you inhale, you’re probably going to need to drink something, but not vice versa.

  5. There are a lot of people who haven’t smoked pot because it’s illegal – moral/legal statement, or haven’t because, being illegal, they can;t get it. This situation will change and put a lot of people within reach opf some pot.
    The new data will be crazy and not a good representation of anything – for a while – over a year. I bet everyone knows someone who only smokes in social scenes after already being drunk and lowered inhibitions. These people are not a measure of anything except how uncomfortable can sleep possibly be.
    Combo highs are a mess awith “newbies”, but usually so sleep inducing to be self correcting.

  6. There are a lot of people who haven’t smoked pot because it’s illegal – moral/legal statement, or haven’t because, being illegal, they can;t get it. This situation will change and put a lot of people within reach opf some pot.
    The new data will be crazy and not a good representation of anything – for a while – over a year. I bet everyone knows someone who only smokes in social scenes after already being drunk and lowered inhibitions. These people are not a measure of anything except how uncomfortable can sleep possibly be.
    Combo highs are a mess awith “newbies”, but usually so sleep inducing to be self correcting. BTW, I think a lot of people haven’t tried drugs because of illegality. I’m against legalization of almost all drugs except pot because I think many straight people will ruin themselves on coke or speed. Coke is a ‘straight” drug – just made to eat up Yuppies. Pot, if one can stay awake and not eating, actually brings out the better in a person. Or at least the silly .

  7. There is huge international variation in the prices of alcohol and marijuana. Alcohol is very cheap here (in Italy). I don’t know what marijuana costs. I think it should be possible to estimate cross elasticities.

  8. Dr. Kleiman, has anyone ever looked at the extent to which the 10% of heaviest drinkers buy at expensive dispensaries like pubs, bars and restaurants relative to cheap dispensaries like a market? My gut tells me that the top ten percent of drinkers probably avoid actual eateries like the plague because of the, what, something like 400% markup from a supermarket to a restaurant?

    1. @Student: The heaviest drinkers spend about 80% less per unit of alcohol than the average drinker, which means they drink a lot of cheap stuff, which generally (though not always) means supermarkets rather than bars.

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