Yglesias on legal pot

It would be terrifically cheap.

Matt Yglesias explains one of the main points of our marijuana legalization book: legal pot would be dirt-cheap. (Much cheaper per stoned hour than beer.) That’s been acknowledged by some advocates, including Dale Gieringer of California NORML, but it’s still denied by others.

Two nice things about Matt’s piece: he completely gets the argument, and he writes beautifully. (Shoulda had him as a co-author.) My favorite line:

There are no amber waves of cannabis anywhere in the world today, but under a true legalization regime there would be. And this makes all the difference.

Note that state-level legalization is about the geometric mean between full prohibition or medical-use-only and full national legalization. A gram of high-quality cannabis from a dealer or dispensary today costs $10-$15; if a state legalized, that would fall to $1-$1.50; as a purely legal product, that would be more like a dime (before tax).

In a separate post, Matt also takes on the argument that legalization would eliminate law enforcement costs. Hint: it didn’t for alcohol.


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

17 thoughts on “Yglesias on legal pot”

  1. Please correct me if I’m wrong, but I’ve yet to see a cost-benefit analysis that includes the costs of either regime in human capital. Do the distinguished professors have an informed opinion as to whether it is preferable to society to be handicapping employment prospects through criminal records for pot or to handicap it through demotivation?

    1. It’s pretty clear that they’re dogmatic prohibitionists, and they’d have used exactly the same arguments during alcohol prohibition. I can’t see any daylight between them.

      Hint: you can tax intoxicants. Pot won’t be any cheaper than that, and tobacco and alcohol provide very good examples where the market maintains very high taxes without extensive moonshine or the like.

      1. Marc, our “play nice” rules forbid me to make the appropriate remarks about your IQ and ancestry, so I’ll leave them to your imagination. But someone smart enough to read the book before starting his jaw flapping would have noticed that two of the four “dogmatic prohibitionists” actually endorse legal availability of cannabis, and one of the other two didn’t come down on either side of the question.

        The book also includes a detailed discussion of how much tax you could collect without having to do massive law enforcement against evasion. The current record in high-tobacco-tax states isn’t encouraging.

        1. Re tobacco taxes: this must depend a bit on the size of the tax jurisdiction and borders. There’s large-scale smuggling of tobacco and alcohol from France to Britain in private cars and vans, simply because of differences in tax rates. You can SFIK import an undefined quantity of beer and wine into Britain for “personal consumption”; a lot of time is spent trying to convince customs officers that your vanload of beer is just for a very big party. But the impact is just to lower the effective tax rate to French levels, not to zero. Radical evasion – making the stuff yourself, rather than buying in a supermarket over the border – is much rarer. Does anybody try to grow their own wine or tobacco?
          Sorry for writing this before reading the book as I ought!

  2. One way to imagine how this might all turn out is to consider the earlier precedent of Gin Alley.

    At some point the depredations of the plutocracy, along with their mismanagement of a variety of issues, from the medical system to college loans to peak oil and global climate change, are going to catch up with them. At that point, life looks a lot more pleasant to a plutocrat if the bulk of your aggrieved population are drowning their miseries in cheap pot, than if they are spending their waking hours with functioning brains, complaining to their friends and organizing on the internet.
    At some point, of course, there will be a reaction; there always is. Some sort of civic organizations will look at the nation with disgust and arrange to reduce the incidence of inebriation. But these things take time to organize, and it will allow the plutocrats who institute this system to live out the rest of their lives in the style to which they have become accustomed.

  3. I’m very pleased to have picked up the book here in Humboldt County, where I can assure you not a few statements will inspire spirited debate.

    The thing that jumps out at me, though, is the apparent absence of any discussion of the environmental impacts of marijuana cultivation under the current legal regime. As an environmental advocate, I can say with far too much confidence that you’re missing some pretty important points there.

    Looking forward to the second edition, I guess.

  4. “Without tax” is like saying my car would move in a straight line forever “without friction.”

  5. So pot would probably be dirt cheap if it were legalized…and this is a bad thing how? I don’t understand the point of this post, unless it’s a very subtle form of fear-mongering.

    1. Lower prices are good for non-abusing consumers.
      They also increase the risk of abuse. (Cf. alcohol.)
      How that balances out, and balances against other gains and losses from legalization, can’t easily be computed.
      And that’s the point of the book: this problem is complicated, and having two sides shout simple-minded slogans back and forth will not help resolve it.

        1. Why is that necessarily so? Couldn’t you tax by the quantity rather than as a percentage of the price?

          1. There is a limit to how much people will comply with taxation as a percent of product price regardless of whether its an excise or percentage tax. Some jurisdictions have had to for example roll back tobacco taxes because smuggling and black market untaxed products started to swamp enforcement. So for cannabis, if you want to go with the Ammiano proposal of a $50/ounce tax, that’s much more do-able when an ounce costs $100, $200, $300 than when it costs $20, $10, $5 etc. A black market offering $5 product versus a $55 legal product will be large, a black market offering $300 product versus a $355 legal product will be much smaller.

            p.s. to Mark if you are reading this — what do you project as a likely price of an ounce of pot under legalization and the maximal collectable tax per ounce?

  6. Keith, it depends strongly on the market arrangement. If the stuff were sold as cigarettes are, with a zillion little vendors, tax evasion would be hard to stop for any serious level of taxation. (Doesn’t much matter, for these purposes, whether the tax is ad valorem like a sales tax or a specific excise based on weight and chemical content like current alcohol taxes.)

    On the other hand, if there were a limited number of retailers, and they all had to buy from an even more limited number of distributors, and the growers could sell only to those same distributors – the current alcohol model – then by watching the distributors closely you could collect even a very heavy tax. If marijuana were to become a “brand-name” product like beer, moonshining would be limited by its lack of market appeal, just like the market for cheap smuggled cigarettes is today. (Most illicit cigarette sales in the U.S. represent movement of licit product from low-tax states to high-tax states, not illicit production.)

    So this is not a topic on which it is wise to be dogmatic.

  7. The idea of collecting huge tax revenues from cannabis legalization is rather silly. If the price spikes people will just grow their own. People would grow their own today except that it is illegal. This is different from tobacco, which is difficult to cultivate and harvest for the causal smoker. Just food for thought.

  8. “If the price spikes people will just grow their own.”

    To some extent, as the price goes up more people will grow more on their own.

    “People would grow their own today except that it is illegal.”

    Some people do grow today, and a few people grow a lot, even though it’s illegal.

    Do you understand the difference between what you wrote and I wrote.

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