The Economics of Pot
Everywhere I looked today I just couldn’t avoid the topic of marijuana. From my morning news, to my RSS news feeds and political websites, there was pot, everywhere. Ahead of the all important holiday to stoners (420), I thought it appropriate to discuss the economics of pot.
Marijuana as a Business
In just a few decades, the public discourse regarding marijuana has moved from hippies getting stoned, to patients using it as medicine and more recently fresh calls for downright legalization. The younger generation is growing increasingly tolerant of the plant, drug, medicine, whatever you want to call it, and soon enough I believe you’ll find it for sale on virtually every street corner. No really, every street corner. Already in California there are more medical marijuana shops than there are Starbucks
Calls for Taxation
One of the most common arguments among pot advocates is that it represents a new revenue stream yet to be tapped by the government. As of 2009, marijuana was an $80 billion dollar business in the US, allowing for $20 billion in revenue just from a 25% tax. Cigarettes, by contrast, are taxed at roughly 50% of their wholesale price with $1.01 in Federal taxes and $1+ plus from most states and municipalities.
What about the Trade Deficit
The best (economic) argument for legal pot, in my opinion, isn’t taxes. Instead, the best benefit is the improved trade deficit from regulation. Right now, as much as 50% of the supply in America comes from neighboring Mexico and Canada which are worth roughly $40 billion. If instead we required that marijuana sold in the United States was cultivated, packaged and sold in the United States, we could keep an additional $40 billion within our borders and possibly export even more. Plus, legal marijuana could be a huge boon for the travel industry, just look at the red light district in Ampsterdam that attracts hundreds of thousands of travelers and millions of dollars.
Reducing Crime
Legal marijuana wouldn’t just add billions of dollars to government coffers, advocates say, but would also reduce crime. Criminal organizations, I’ve been told, love current drug laws that allow producers to make hundreds of thousands of dollars in inflated prices. Removing marijuana’s tough laws would allow people to buy from well regulated and well established businesses, rather than street criminals, and force gangs and other organizations into a legal market. Just think, you never see Pfizer and Merck, two drug producers, go out in the street and beat each other up. Why? Their businesses are protected and regulated by the government. No more do they have to go out and kill each other to maintain their “territory.”
Give it a Whirl
I’d love to see a city take it to 100% legal and see the effects. My guess is that tourism improves, crime is reduced, and city coffers overflow. Of course, no one is recommending frequent drug use. However, with the proper guidelines in place, and plenty of oversight, I believe the end result would be a safer and less expensive product. What do you think?
