## DIY Assessment of Marijuana Market Numbers

Morgan Fox at Cato Institute sees great profit potential from legalizing marijuana because “experts” tell him that the market in this commodity may be worth as much as \$120 Billion a year, which is more than wheat and corn combined. An impressive claim indeed, but is it true?

You are going to hear many numbers like this in the coming year. In my continuing quest to make our democracy work better, I am going to lay out some DIY math that will help you discern in a few easy steps which estimates are believable and which are not. Given the ideological nature of marijuana legalization debates, within 5 minutes of my posting this, someone somewhere on the Internet will write “I don’t care about evidence, I believe X”. If that’s you, skip down to the comments section now and start bloviating, what follows is data, nuance, the encouragement of independent thinking and a lot of other stuff you will find upsetting.

But for the blessed and admirable rest of you….

Step 1: Convert the estimate of the financial value of the U.S. marijuana market into something more understandable, for example number of ounces or joints.

Start with your market number. For the sake of argument, in this case let’s take Fox’s upper estimate of \$120 Billion/year. That’s too big a number for any of us to relate to or understand, so Step 1 is to convert it into ounces or joints of marijuana.

The price of an ounce varies based on where you are, whether you buy in bulk, and what grade you purchase. But \$120/ounce isn’t a bad estimate for a national average in any case, and here it makes the math easy so let’s use it. If marijuana costs \$120/ounce, Americans would have to purchase 1 billion ounces a year to reach the \$120 Billion dollar estimate. Already you will be suspicious of Fox’s market number because this works out to over 3 ounces per American (1 billion ounces divided by slightly over 300 million people), assuming that everyone uses marijuana, including newborns, people in comas and emphysema patients.

For many people knowing ounces gives them a sense of how much pot we are talking about. For others, an estimate of joints is more helpful. Drug policy wonks estimate the size of a joint at .454 grams because that is not a bad estimate and it makes the math easy (1 pound = 1000 joints). So using this “standard joint” metric, an ounce of marijuana yields 1000/16 = 62.5 joints. Data from dispensaries and users indicate that most experienced users actually roll slightly bigger joints than “standard size”. To acknowledge that and again make the math easy, bump the joints/ounce ratio up to 50 and you get in the example we are working with 3 ounces X 50 joints = 150 joints per American (again, counting every man Jack and girl Jill one of the them) per year if the \$120 Billion figure is correct.

Step 2: Divide your ounce and joint estimates by the number of people who are current pot smokers.

We can’t stop at Step 1 because not all Americans smoke pot, indeed the vast majority don’t and never have. The federal government National Survey of Drug Use and Health gives somewhat suspect estimates of the use of heroin, methamphetamine and the like, but it’s marijuana numbers are pretty good so take your estimate of the number of current pot smokers from there. The survey’s current reported number of Americans who have smoked pot in the last month is 17.4 million. You can add a bit to that depending on how much you think people lie. For the sake of our example let’s make the math simple again and assume that another 7.6 million Americans fibbed about not using marijuana in the past month, giving a total of 25 million current users.

When you divide 25 million marijuana users into one billion ounces, you get 40 ounces per user per year. If you were not doubtful of the \$120 Billion figure yet, the implication that the average U.S. pot smoker is sucking down two and a half pounds of marijuana a year should set off alarm bells for you. Again using our simple math above, this works out to 40 ounces X 50 joints/ounce = 2000 joints per user per year.

Step 3: Divide your estimate of amount of marijuana use per user by days of use.

Current pot smokers report that they use marijuana an average of 60 days a year. Using our current example, 40 ounces/60 days of use means that the average user would have to go through 2/3 of an ounce of marijuana on each day that they used marijuana. That’s .67 X 50 or 33.5 joints per day of use. And there’s a terrific bridge for sale in Brooklyn too.

Step 4 (Optional): Do some sensitivity analyses.

I have made the math above transparent so that you can fiddle with the numbers as you see fit and see what happens. You could for example alter joint size or number of users up or down see how that affects the validity of whatever market estimate you are looking at. There is no amount of tweaking of assumptions that will make the “experts” whom Morgan Fox says he believes sound credible, but such sensitivity analyses may help you determine whether other estimates you hear are believable to you.

There’s a big gap between what the Administration said and what it should have said.

When the Obama Administration decided to invite petitions from the public, it no doubt anticipated that there would be one or more about legalizing cannabis, a proposal that now has roughly 50% public support. Of course, the Administration isn’t ready to go there, but it had a perfectly sensible response:

## [Wordless shriek of rage and frustration]

Most of the news in the new household survey on drug abuse is good: cocaine and meth use are down, meth initiations are way down. There’s an uptick in cannabis use, especially among young adults. So why is the official press release headlined “National Survey Shows a Rise in Illicit Drug Use”?

Over the past four years, the number of people self-reporting as methamphetamine users on the big household survey is down by half, and meth initiation rates – a leading indicator, and therefore the one to watch – by 60%. The number of people self-reporting cocaine use is down by a third. Middle-school rates of drinking and smoking are also down, though less dramatically. Initiation to non-medical pain relievers remains high, but off its peak in the early 2000s, reached after a decade that saw initiation rise tenfold.

Oh, yes, and cannnabis use is up some (almost 20% from the 2007 trough, from ), especially among young adults (18-25). Cannabis use among those under 18 is flat. Mean age at first use is up from 17 to 18.4: that’s the direction you want to see it going.

So the on-one-foot summary of the results is “Nothing exciting, but basically good news.”

But if you were really, really, really stupid – or had a job that required you to pretend to be that way – you might just treat all use of illicit drugs as alike and simply count the number of users. In that case, the modest rise in cannabis use would swamp all the other results, because cannabis is by far the mostly widely used illicit drug, and a report mostly full of pretty good news would come out as “National Survey Shows a Rise in Illicit Drug Use,” complete with silly viewing-with-alarm quotes from officials.

(No, dammit, we are not “at a crossroads”! Next year is mostly going to look like this year.)

Even after 30 years in the business, it’s hard to get used to how plain damned dumb the official (and journalistic) discourse on this topic is. The household survey (aptly named NS-DUH, where DUH is pronouned “duhhhhhhhhh”) doesn’t get at what’s really interesting: the number of problem users, and especially criminally-active problem users. But it does contain some useful information. Too bad the people running the show mostly ignore that information and concentrate on fluff.

## Caulkins on (quasi) medical marijuana

How come the number of “medical” marijuana users in some states is so large compared to the total number of self-reported marijuana users? Is there an epidemic of chronic pain among otherwise healthy thirty-year-old men who have been smoking pot for years?

Jon Caulkins of Carnegie Mellon is the lead author on a book on marijuana legalization scheduled for publication next spring. The rest of the team consists of Angela Hawken of Pepperdine and me (who worked with Jon on Drugs and Drug Policy, part of the same series from Oxford University Press) plus Beau Kilmer, who heads the RAND effort studying the possible effects of legalization.

Jon and I don’t come from the same place culturally or politically, and he’s extraordinarily smart (not to mention conscientious and kind), a combination that makes working with him – as I’ve been doing off and on for twenty years – both a challenge and a pleasure. Angela and Beau bring still different personalities, views, and skills to the enterprise – along with razor-sharp minds – Â but so far it’s running very smoothly. Â The concluding chapter of the new book will consist of a brief statement by each author laying out a preferred option; I can’t predict any of them in detail (even my own thinking keeps shifting) but I expect the four statements to embody lots of disagreement.

Jon and I agree more about facts than we do about values or policies. For example, he’s clearly right to say that the profile of “medical” marijuana users looks like a profile of recreational drug users, not a profile of patients, and that their sheer numbers in some states suggest that most of the recreational market is now accessing its supplies through quasi-medical channels. And that doesn’t even count the people whose recreational needs are supplied by friends with medical cards. Whether he’s also right to say that the Justice Department would do well to crack down on the scam is less obvious, at least to me.

## Two Intriguing Developments in Marijuana Legalization

Oakland City Council’s decision not to go forward with a plan to let private companies start enormous “medical” pot farms has two intriguing subplots.

First, the Alameda County Attorney advised the members of the council that it was not clear whether they would be immune from federal prosecution if they approved the plan. This issue hasn’t come up yet because Prop 19 lost, but assuming some state goes pro-pot, it’s an inevitability. If a mayor or city council creates a system regulating cannabis production that is legal under state law and tries to tax it, will federal agents arrest them under federal drug trafficking statutes? I don’t think it’s a question of whether this would be legal but whether a federal prosecutor would be willing to take the political heat this would generate.

Second, small pot growers apparently lobbied the council not to pass the plan for mega-farms. Most analyses of the medical marijuana movement assume that the pot growers would become the vanguard for full legalization. But if you are a small grower, a big corporate producer of medical marijuana will easily be able to under-sell you and thereby reduce your profit. And if there is full legalization, small growers will be in the same position as small family farms trying to stay afloat in a market dominated by massive corporate farms. Some people were shocked that a number of small growers (and dispensary operators) opposed Prop 19, but that may become the normative stance over time once the implications of a corporate presence are more widely understood.