Ed Brayton is a journalist, commentator and speaker. He is the co-founder and president of 
This is a guest post by Jim Benton, aka Prup, who comments here frequently and has his own blog as well. He is interested in hearing feedback to the ideas expressed herein. I have not edited it in any way, all ideas contained in it are his alone.
MARIJUANA AS AN ECONOMIC STIMULUS
All the discussion about the economic effect of Marijuana legalization seems centered around the tax benefits and savings in police, legal, and incarceration expenses. That argument alone was enough to convince Milton Friedman and 500 other economists -- including two other Nobel Laureates -- to endorse the Miron report favoring legalization.
It's a powerful argument, and I'll be referring to it. But in today's economic climate, there's an even more powerful economic argument that, afaik, nobody's making. Marijuana legalization, over and above the revenue benefits, would provide a strong economic stimulus without the necessity for a New Deal type program. (I'm a New Dealer by nature, and know the benefit and necessity for these programs, but it is good to have other forms of stimulus as well.)
"Marijuana as an economic stimulus." Is Prup merely trying to tie a pet program to a pet problem? No, but it's a good question to ask any 'solution-provider.' It's too easy to see an idea as a 'one-size fits all' answer, take Republicans and their fetish for tax cuts.
But this solution really does work. An 'economic stimulus' is simply putting more money into the hands of people who will spend it. Tax cuts are an economic stimulus -- just the least efficient and least productive of any that have been proposed. Food stamps are the best economic stimulus out there, because the money gets used immediately for food -- and because it frees up money to be used on what food stamps can't buy. Tissues, cat food, even liquor sales all go up because of food stamps -- and they all stimulate the economy.
But there's another way of getting spendable money into the hands of people. Lower prices. The math is simple. If x costs $A and the price drops to .6A, and the annual consumption is C, the stimulus effect is, initially, C($A-.6A). Or .4C.
Of course, for most products it isn't that simple. Most prices are not that elastic, and if such a drop occurs -- ignoring technological advances, as with computers -- it means that there is a decrease in cost due to cutting wages, cutting employment, or cutting out middlemen. Those lost wages or lost jobs have to be figured against the stimulus above, and lessen or eliminate it. This is because most steps where the price increases occur between initial production and consumption involve -- at least theoretically -- value added. Shipping, packaging, paperwork insuring proper deliveries, even advertising all directly 'add value' to the product.
Marijuana is different. Some steps do add value to it, yes. Product still has to be packaged, shipped, distributed from wholesalers to retailers, and they may have necessary expenses to set up their operation. But even here what causes the price increase at each stage is not 'value added' but 'assumption of risk.'
Let's take shipping, as a simple example. If you are shipping a ten kilo package of couscous, or chocolate covered cashews, or fenugreek, or whatever, to a retailer who will unwrap it and sell it by the ounce, you simply call DHL or FedEx or whoever, order a pickup, and tht's it. The shipping costs are relatively small, as a wild guess maybe $10. Double it to include handling, meaning the salary of the secretary who placed the order and the guy who carried the package to the truck. You add six cents per ounce to the cost of your product, which gets passed on to the buyer.
Can't do that with marijuana. Well you can try shipping it by UPS, but you take the risk of losing not merely your shipment, but your whole business if a package cracks open -- not just 22 pounds of couscous. And you might reimbursed for the couscous, but not for the marijuana. No, you have to make 'special arrangements.' I won't go into details -- the reader has seen the same tv news shows and dramas I'd get them from. (I've never knowingly even spoken with someone in that end of the business.) The important point is that they add far more than six cents an ounce to the final cost.
I will make one point though. If DHL loses a shipment because a truck is hijacked, your fenugreek is insured. More importantly, the company can count on the willingness of authorities to investigate and prosecute. Again, 'can't do that with marijuana.' Your insurance against theft is likely to be an unpleasant type literally 'riding shotgun.' Even with him, you are going to suffer some losses along the way, from theft or police 'interference.' (And you might need to have a very expensive arrangement to support the loved ones of an arrested employee.) Both types of losses have to be figured into the final price of marijuana, but not of fenugreek.
The same thing can be shown at every step of the progress from planting a seed to selling an ounce to a user. (And it doesn't matter if the buyer has a state card permitting him to buy it legally. That doesn't lessen your risk as a dealer one bit -- except in California. He's protected, but his risk has never been a factor in the price. You aren't, and that is a factor.)
And that is why legalization would drive the price down incredibly. True, there would be 'value added' costs that would probably increase. technology to do what is done by hand, like deseeding and drying, more quality control, packaging, even advertising and branding. And there would be state and federal taxes on the marijuana as well (and income and sales taxes as well to be paid and figured in the costs). But even with these, assuming the taxes are reasonable -- in a proposed legalization Amendment I will include, I've set the federal tax at $10 an ounce plus a tarriff on imported marijuana of $20 an ounce, reasonable since it is likely that the only imported marijuana will be higher quality and higher priced -- the price will be considerably less than current prices.
This is one reason why decriminalization is such a poor 'compromise.' I will discuss the problems with decriminalization at greater length in an appendix, but it is enough here to point out that it neither provides any revenue to the state nor the economic stimulus that is the main point of this article. It doesn't make marijuana taxable, or marijuana dealers able to pay income taxes, it only slightly reduces court congestion -- and may lead to longer trials since the option of 'bargaining down' to simple possession is eliminated. There's no reason to release the inmates currently in jail and save the costs of their incarceration -- or the loss of income their conviction may cost them through their lifetime. And it doesn't lower the price one bit.
Neither does legalization of medical marijuana. (California is a slight exception, because their policy seems to be, in practice, 'medical marijuana is legal, and if you tell us it's for medical use, we'll take your word for it,' and because they have developed an 'alternate distribution network' whose employees at least pay income tax and where prices might be slightly lower.) In every other state, 'legal medical marijuana' amounts to nothing but, in effect, a 'Get Out of Jail Free" card for users. But sellers and growers and other people along the chain are just as liable to prosecution as ever. Thus it gives no downward pressure on the price.
(Just in passing, I leave it to legal professionals and theorists to discuss the paradox that it is legal for A to buy marijuana from B, but illegal for B to sell it to A. And I should mention that Amsterdam -- the supposed home of a sensible marijuana policy -- suffers from the same paradox. It is legal for coffee shops to sell small amounts to customers, but -- technically -- illegal for them to buy the product in any amount larger than what they sell.)
But legalization would provide both benefits, and in surprising numbers. Let's run some numbers.
I said above that the Stimulus Effect Equation was simple. S = C(illegal price-legal price). And that remains true even if the money expended is on more marijuana or higher quality marijuana, as long as it's legal. The money remains in the economy, because marijuana dealers still have to buy diapers, lunch, and cat food.
(I am sure there is an equation comparing the stimulus effect of money spent in the legal and the underground economy. I don't happen to know it, but would appreciate anyone supplying it for the final version of this.)
Now all we need are the numbers. I've seen one figure on annual marijuana consumption, from Jon Gettman, a long time advocate. He lists it as 31 million pounds a year in the US. That seems possible but a bit large -- both sides have incentive to inflate numbers. Let's cut it in half to 15.5 million pounds a year, and convert that to ounces -- perhaps the most common 'unit of sale.' The numbers are very convenient for the math, 250 million ounces a year, or 20 million a month are both good approximations.
Now, as far as I can tell from comparing prices on marijuana forums -- where the participants usually have solid information and little incentive to lie -- the average price for 'good commercial marijuana' seems to be about $160 an oz. There's some fluctuation, but not much, and of course I have no way of comparing what is considered 'good commercial' in different regions. Premium, specialty, and luxury types are much more expensive, ranging from $400 to $600 a month. (Worth it? My only experience with this level of marijuana was, literally, finding a bagged bud on the street that someone had dropped. Don't know the variety or the cost, but it certainly was worth, comparatively, the price I quote.)
But what would the price of legal marijuana be? (I'll stick with the commercial grade to avoid complications.) I could, i suppose, spend a week researching and estimating all the costs involved, but we are doing a rough estimate here. Now marijuana is very easy to grow, as I've said. It takes very little labor, or special equipment. I suppose there would be some extra expense for legal that an illegal grower doesn't dare use for fear of calling attention to himself. And drying and deseeding add an additional cost, but I find it hard to imagine the price at the producer level being much over $10 an ounce.
But there are a lot more steps along the way. Shipping, packaging, advertising, wholesalde and retail mark-ups. Let's say they increase the price to $30 an ounce. Add my proposed federal tax of $10 an ounce, and a similar state tax. Then add $10 for sales tax and 'those things I would have thought of if I were a better businessman.' And we reach a total of $60 an ounce to the user. Let's use that.
(In fact it is likely that market forces would cut this way down. People can grow their own at minimal cost. It's not easy to develop the patience needed, but it can be done -- and you can choose the types of seeds you plant. That factor will force prices down considerably, and perhaps cut some of the steps mentioned above. Especially if you can buy ready-started plants from a nursery the way you would gladiolas or bonsai trees.)
Okay, we have the numbers. C=20,000,000 oz a month. P(i)=$160. P(l)=$60. Which means S=$2 billion dollars a month.
And tax revenue is even easier. If we take my proposed $10 per ounce tax for both federal and local, this would raise $2,500,000,000 a year for the national treasury and the same for the state treasuries, without including sales or income taxes, tariffs, license fees, etc. Not enough to balance the budget, but still 'real money.'
Of course my example is unrealistic in one way. Federal legalization is possible, and long overdue. I would not be surprised to see it as soon as this summer. But this would leave state options, and, at first, many states would not legalize it. And while it is likely that there would be some drop in prices in these states because dealers would be in competition with legal sellers in neighboring states, these states would not get the full stimulus effect or any tax revenue at all.
I should mention there is a factor that may act opposite to that as far as overall revenue was concerned. I have only mentioned the premium, specialty, and luxury types. They would certainly sell at a much higher price than commercial grade, but perhaps the ratio would be less, and grow increasingly less as legal growers concentrated on them. But let's say they stabilized at $200 an ounce. That changes the stimulus equation so that each ounce sold gives a stimulus effect of $300, not $100.
How much does that change the total? I can't answer that one. I have never seen any estimate as to what proportion of the market is premium grade or above, and doubt one exists. (If I am wrong, please let me know.) And the same can be said about my proposed tariff. It may be more likely that there is a reliable estimate of the proportion of imported and domestic marijuana in the country, but I have not seen it, if it exists. (Again, help requested.)
And I haven't mentioned hashish at all. (For those of you who don't know this, hashish is the same plant as marijuana. Marijuana refers to the leaves, hashish to the pollen and resin of the plant. Hashish is stronger -- though the differential has dropped far more than the price, which is why it has dropped in popularity -- but not substantially different in effect. Legalization might bring it back into popularity -- the taste is great, it's more suited for use in cooking, and there is a certain flair to smoking it. That would involve some interesting questions, only because of the areas that are traditionally known for hash -- Turkey, Pakistan/Afghanistan, and 'the Biblical Lands,' all of which could use the economic benefits if it regained popularity.
So, to sum up, an economic stimulus that also makes the government money, and which has other beneficial effects. What's the counter argument? I haven't seen any.
(Note: This is a preliminarty version of what I hope will be a much longer article. I plan to discuss medical marijuana in much more depth -- and while I have the formal regulations, practice often differs from theory, so I would appreciate any anecdotes about how they work in practice. I've asked for some specific information in the article, if available, but I'd also like other material that might be relevant, either links or anecdotes. (I won't put my e-mail address down directly, but if you remove the o and the space from my 'real name' and remember that my ISP is Verizon, it should be easy to 'net' it.) I will also be discussing the problems with decriminilization, and any info I can get on how the illegal market works in different areas. I'd be 'shocked, shocked' if any of you actually used the stuff, but maybe you have friends you can ask.)
Prup
Politics
Comments
A couple of quick comments. I still keep my own blog up, but mostly so people can find my e-mail address -- which I will break the ordinary rules and post here, instead of giving you the puzzle above.
Send any comments that you don't want to submit here to
jimbentn at Verizon dot net. (I don't mind anyone figuring it out, but I am prejudiced against robots.)
My deepest thanks to Ed, because I gave him more trouble than he needed. I sent him a copy of a first draft of this, then Saturday told him to hold it and rewrote the entire piece, taking out a major misapprehension -- that other states' medical marijuana programs were similar to the California one -- and going at it from a different angle, even though the basic arguments remained. What's more, I've sent him a follow-up article on the problems with 'decriminalization' and comparing it to DADT. (Relax, Ed, even though I can see places where it can be tightened up, I won't do it, because I will be sending the draft out with copies of this.
And finally, I do intend to send this -- complete with comments -- to Barney Frank, as well as to my Senators, Schumer and Gillibrand, and my local Representative. This shouldn't inhibit anyone, but you should be warned.
Posted by: Prup (aka Jim Benton) | February 9, 2009 9:39 AM
I mentioned in the article that I had a draft legalization measure. Here it is -- comments in brackets are notes:
Draft Bill for the Federal Legalization of Marijuana:
1.0 Effective on passage of this Law, all Federal Laws criminalizing the sale, possession, growth or importation of marijuana and hashish shall be repealed except as noted below. However, the transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of marijuana or hashish, in violation of the laws thereof, is hereby prohibited. {Copied from 21st Amendment}
1.1 As soon as Administratively feasible, all persons federally convicted of possession of less than 4 oz. of marijuana, and all people who can demonstrate that their marijuana-related offense was directly connected to a Medical Marijuana program legal in the State where the offense was convicted, shall be released from incarceration, and their convictions shall be quashed and expunged from their record.
1.1.1 A Board shall be set up in the Department of Justice with authority to review all other marijuana-related federal convictions and, at their discretion, to suggest to the relevant court that such convictions be canceled, sustained, or that prison sentences shall be commuted to 'time served. {It is necessary to include some form of adjudication because 'marijuana-related' offenses could include violent acts.}
1.1.2 Such board shall also make recommendations to the AG concerning the return of or restitution for assets seized in cases involving no offenses other than those against marijuana laws. {I know you'd prefer this to be extended to other cases, and so would I, and I'd expect it would be, but it will be hard enough to get this through as is.}
2.0 All marijuana and hashish sold within the United States shall be subject to a one-time tax of $10 an ounce. While such tax would be normally paid at the point of retail purchase, a retailer, wholesaler, or distributor may 'pre-pay' such tax and label such marijuana as 'tax paid.'
2.0.1 Marijuana or hashish used as an ingredient in other prepared foods shall be taxed at the same rate and such taxes shall be paid by the preparer of such. {From here on, to save time, 'marijuana' refers to 'either marijuana or hashish.'}
2.0.2 Such taxation shall not be considered to preempt the right of any state in which marijuana is legal from imposing such taxes as it sees fit, including both specific marijuana taxes and sales taxes.
2.1 Fradulent use of such a label, or selling untaxed marijuana shall be subeject to a fine of ... and confiscation of all marijuana currently in the offender's possession. {I want the fine to cover marijuana previously sold over a period of, say a week, and to be 'per oz' but I am not sure if such a provision is acceptable.}
2.2 The importing of marijuana, even if tax has previously been paid on it, into a state where it is illegal, either from another state or abroad, shall be illegal and any person imprting more than a pound of subject to a fine of $50 an ounce, as well as confiscation.
2.2.1 Such penalties shall be in addition to any state penalties and shall not be considered to preempt such penalties.
2.2.2. No penalties shall occur if marijuana is transhipped through such a state in sealed containers, provided the shipper can show a consignment order to a legal marijuana provider in the state of destination.
3.0 Marijuana imported into the United States shall further be subject to a tariff of $20 per ounce. {For reasons of encouraging the growth of a hashish industry in areas where it is traditional, and because of their foreign policy importance, as well as being unaware of any domestically produced hashish, I have deliberately set the taxes on hashish low -- hashish is customarily sold by the gram, and a comparable tax to that of marijuana would tax one gram of hash at the same rate as one ounce of marijuana. I have also not considered the question of taxing 'premium, specialty, and luxury marijuanas' -- which sell at 2 1/2 to 6 times the price of 'commercial grade' -- at a higher level. A comittee considering this legislation should explore this as well.}
4.0 Effective with the signing of this legislation, all marijuana currently growing on Federally-owned land ... {And here I am stumped. Technically it should become the property of the Federal Government -- see 5.0 below -- but at the same time it seems unfair not to figure out some form of compensation for those who had put in the work. One alternative would be to provide some sort of 'time window' effectively letting the growers harvest it. But all of these seem administrative nightmares -- how do you prove that's your marijuana patch -- and 'forced harvesting' could, at wrong time of year, waste a majority of the marijuana, as well as impacting the market. Perhaps it should be claimed by the government, divided into segments, and simply auctioned off while it remains in the ground, since I see no reason for prohibiting future leasing of federal land for marijuana growing. It is not, afaik, in any way harmful to land to have marijuana grown on it.}
5.0 Any marijuana confiscated by the Federal Government according to the provisions above shall not be destroyed, but shall be auctioned off at regular intervals to people authorized to distribute or possess marijuana in their own states. {Which could get interesting once corporations enter the marijuana business. I would personally favor an auction that would be weighted in some way to small retailers and even users, but don't know if this could be accomplished.}
-------------
That's the Amendment. Do any "Members of the Comittee of the Whole" have any suggested Amendments? Especially concerning the question in 4.0 about marijuana currently on federal land.
Posted by: Prup (aka Jim Benton) | February 9, 2009 9:43 AM
An excellent article on a worthy issue - props to Prup!
I do have a small monkey wrench for your works, Prup. And that is if marijuana is legalized, I think most folks will eventually simply grow their own. These days, plain ol' homegrown pot, or even wild pot, is ridiculously potent. Gone are the days of smoking a fistful of homegrown only to reap a headache.
Pot is very easy to cultivate, and by pinching of buds, a single plant, grown attractively in a nice ceramic planter, would supply most households with all the psychoactive biomass they would need.
This means, I think, that your economic justifications for pot legalization should not include quite so much in the way of tax revenues. However, it actually makes your liberation of capital even more persuasive. Think of all the extra potato chips and ice cream that will be sold. :)
Posted by: Gingerbaker | February 9, 2009 10:04 AM
As true as everything you say is, Gingerbaker, it is also true that people are lazy (er, we conserve energy?). I brew some beer at home because it is fun and the product is lovely, but it takes work too so I buy more than I brew. I also bake bread and make cheese but again, I find it much simpler to buy these products from a specialist than make all of my own.
These are quite different from nursing a plant, but nonetheless, I (with no reason except my personal experiences) expect a minority of people to produce their own entirely.
Posted by: Chris A | February 9, 2009 10:18 AM
Now id only we could turn bong-water into biofuel... :) DJ
Posted by: DIngoJack | February 9, 2009 10:18 AM
I'm with Chris A on this. The only thing that is as easy to grow is tomatoes, yet most of us buy them -- even if they rightly reject the red pool balls sold as tomatoes.
Two other points that explain why people don't grow more, patience and cats. It's hard to wait the time for the plant to grow, and so tempting to sample it to find out if it is ready. And cats love the little seedlings. (And I consider a home without cats to be an oxymoron -- yes, one of mine is on my lap as I type.)
Posted by: Prup (aka Jim Benton) | February 9, 2009 10:29 AM
Sorry about the above post, I've got a cold. :)
Really Prup, cats love the tomatoes seedlings? How curious, I've always loved the smell of tomatoes too (and have owned many cats, although not now).
Weirdly (and fortunately) the multitude of cats that claim our house as territory haven't figured out how delicious either my dope plant or the tomatoes are. Whew! - DJ
Posted by: DingoJack | February 9, 2009 10:44 AM
My solution to the cat-plant problem is simple -- separate (but not quite equal, of course) environments! I have a nice sun room where my tomatoes grow, and I don't let the cats into it. They hate this, because it is sunny and warm, but I like real tomatoes and there really are plenty of other sunny spots for the felines to enjoy.
It is also a good place to grow catnip and various other herbs. If I did not have to worry about being arrested, I would probably grow some herb in there too...
Posted by: Chris A | February 9, 2009 10:54 AM
Money used to purchase illegal items is still in the economy.
Taxes are transfers. It is not new money being put to work, and praising it as an economic gain is nonsense.
Any proper analysis of the economics of legalization would have to weigh in the downside of people affected in their current employment. This includes those engaged illegally in the trade, and those engaged in enforcing the current laws. You can't just tote up the benefits you like and ignore the losses you think are good for society. I mean, you can, but then it isn't an "economic" analysis, merely propaganda for your cause.
Posted by: william e emba | February 9, 2009 11:13 AM
I brew beer and I have grown dope in the past and I reckon brewing beer is far easier. Growing dope seems really easy until your watering or lighting system fails one day, or you get an infestation of red spider mites, or you suffer any one of the thousand other problems that can wipe out a crop. Growing really high quality dope in a dependable fashion requires much more sophisticated propagation techniques than most amateurs are prepared to get involved with.
As for the idea that a single plant in ordinary domestic settings will produce all the dope needed for the average household... Maybe, if you only smoke it for Christmas and birthdays. The flowering cycle is controlled by day length, so you can't grow a successful crop just sitting in your living room.
Posted by: Dunc | February 9, 2009 11:24 AM
One thing I'd like to point out is that there are no cost-increasing expenses that would come into play if marijuana were legalized that don't apply now.
There may be additional expenditures, but they would only be made if they resulted in a decrease of the net marginal cost; either by enhancing the yield, or reducing the cost. (Automation, for instance, costs capital, but reduces labor costs - which means if you produce a sufficient quantity, your net expenditures are lessened. Which is, of course, the point.)
I agree with william emba's point in that you have to address the negative effects, though I imagine that given the state of our legal system and law enforcement, they would be relatively unaffected from a purely economic standpoint.
Posted by: Michael Ralston | February 9, 2009 12:13 PM
Two minor drawbacks to legalizing pot:
1) It does seem to induce a deep-seated lethargy/complacency in habitual users, which probably isn't good for the economy.
2) Smoking it does have some other detrimental physical effects.
You'd want to try and get data for how much these effects these would be were pot to be legalized. Some questions to consider for that:
How many people would try pot if it weren't illegal?
Of those who've tried pot, how many try it more than once?
Of repeat users, how often do they use it, and how much more often do they think they would use it were it legal?
How significant are effects 1&2 when measured?
Would smoking be the main consumption method, or would brownies be preferred?
How do the other use methods compare to smoking in user impact?
How much are these likely to net affect (up or down) the economy?
And then... together with the identified benefit, is the result a net benefit or net harm, and how does that net compare to the uncertainties in the analysis?
I've no strong position one way or another on the legalization; I'd just prefer the factions pro and con be willing to do an honest comparison, rather than push an agenda. (My experience from discussions is to be sympathetic to the pro-legalization folks, since they're more willing to concede that there might be some balance to consider, while the anti-drug faction tend to be unwilling to consider any possible downside to their position. However, having my sympathy means I think they should be listened to carefully, not that I think they're right.)
Posted by: abb3w | February 9, 2009 12:37 PM
I'm all for it, even though I'm well past the age where I can handle that sort of a buzz. One thing struck me:
Srsly? I'd be shocked and amazed and astounded. Slap my arse and call me "Sally" but federal legalization by this summer? What is in the works that leads you there? Veep Joe is one of the major meddlers in the buzz factory. I can't see him rolling over for a tummy rub and a bong hit any time this century.
Anyway, I hope you are right. My kids are nearing the age when they might come into contact with other kids who smoke, and I'd hate for them to get caught up in a legal nightmare for being curious. Even though they've been indoctrinated into the DARE program pretty thoroughly at school, it doesn't mean they can't succumb to peer pressure, or get rebellious all of a sudden. Weirder things have happened.
Well done, Prup.
Posted by: bybelknap, FCD | February 9, 2009 1:07 PM
Ed,
how have we offended you? If we did we are partly sorry......
Posted by: Kevin | February 9, 2009 1:09 PM
I don't know how difficult it is to grow your own compared to how difficult it is to make your own beer, but perhaps that's another datapoint in the "you could make your own, but don't" graph.
Posted by: Eric | February 9, 2009 1:11 PM
Taxes are transfers. It is not new money being put to work, and praising it as an economic gain is nonsense.
Any proper analysis of the economics of legalization would have to weigh in the downside of people affected in their current employment. This includes those engaged illegally in the trade, and those engaged in enforcing the current laws. You can't just tote up the benefits you like and ignore the losses you think are good for society. I mean, you can, but then it isn't an "economic" analysis, merely propaganda for your cause.
Ah, but what Prup is arguing is, in part, that the price per unit will fall dramatically as a result of legalization, and that will be found money for the economy. The likely taxes he's already included, so there is still money left over.
Of course, we will have to factor in the jobs being lost in the DEA and law enforcement, not to mention parole/probation officers and other criminal justice professionals, but I think we'll be able to keep at least some employed. After all, David Vitter, who violated prostitution laws, is still in the Senate, so at least some of them could be put to use tracking that dipsh*t down. Maybe we could send some other such professionals after the leaders of the Catholic Church who are still walking the streets even though they conducted the largest criminal conspiracy since the 5 families.
Posted by: CPT_Doom | February 9, 2009 1:15 PM
I think 10$ an ounce is more likely, both in the short and long term. Consider;
1) legalization would initially glut the market as those factors which drive up the price, the measures taken to avoid prosecution, also restrict the flow of goods. Given that pot is as prevalent as it is regardless of this, the supply must be enormous.
2) the majority of pot sold in the contiguous 48 is grown either outside their boarders (though, admittedly, this may only be my impression as a boarder citizen; perhaps in the middle of the country native fare is more common) and these growers already have a wide distribution network in place. As a result, besides the easier availability the logistics of commerce would tend to favor these producers gaining an early, and initially monopolistic need until;
3) The cigarette companies begin producing marijuana products. They have the distribution, they have the political clout, they have a network of compliant growers, they have richly funded product development labs, and a much larger bankroll than any potential competitors. Allowing a year or two to get a decent commercial crop developed, tested, and pitched, they would likely begin to roll out product within 3-4 years. If not for the punitive taxes laid on cigarettes, they would sell for something near a dime a pack, so given the ease of growth initial pot-crops would present, and assuming the legalization legislation would not lay on similar health taxes(which it probably would), one would think that the price would be rather insignificant, though additives would likely drive it up a bit. Eventually pest concerns would come to the fore, which would also push up the price, but one assumes that by that time the cig companies would be well on their way to doing with pot what they did with tobacco; namely, isolating the active agents, developing highly addictive additives/preservatives to cut it with, and toning down some of the more negative side-effects without sacrificing the buzz.
As to the stimulating nature it might have on the economy, I'm not so sure. Emba's point shouldn't be ignored, though I do think you'd see some increase in gov revenue from a move to legitimate sale from under the table dealings, and given the logistics of industrial agriculture, I think it's more likely to see current 'legitimate' growers adopt this crop than to see many new growers enter the market. In certain areas, like Appalachia, where most growers are growing on their own land, this could have a significant impact if the cig companies or a particularly savvy and well-heeled distributor was willing to put in the money to systematize collection and processing, but in the southwest and California, where most growers are growing illegally on public or unclaimed land, property laws would limit the number of growers able to legitimize. I do think that it would generate an initial boost by freeing up funds for other purchases which would have been spent on hazard markup before legalization.
Posted by: Julian | February 9, 2009 1:41 PM
CPT_Doom: Indeed; an important non-monitory consideration would be the potential drop in corruption and system-gaming by Vice cops once the marijuana trade is no long providing such low-hanging fruit for it. And surely, those resources could be better used elsewhere.
Posted by: Julian | February 9, 2009 1:48 PM
that should be monetary. My poor self-editing strikes again :/
Posted by: Julian | February 9, 2009 1:56 PM
I agree that these are minor; really really minor compared with the drawbacks of legalizing alcohol, which creates far more violent and criminal behavior. I've known some long term pot users who are perfectly employable and even responsible (if not exactly a bunch of go-getters). The 50-year-old drunks, on the other hand, are all but worthless to an employer and do nothing but prop up more alcohol sales. If I could magically turn every brew into a joint, I'd do it in a second.
Posted by: Scott Hanley | February 9, 2009 2:04 PM
Nice article man, you hit some of the nails right on the head. Tax it, regulate it, enjoy it!!!
Posted by: Tim | February 9, 2009 2:07 PM
gingerbaker -
Do you grow all your own veggies? Raise meat? Brew beer or distill liquor (assuming you drink)? Considering there is much more motivation now to grow your own, due to the dangers of buying and or selling it, I don't see that being a significant issue.
william emba -
Any proper analysis of the economics of legalization would have to weigh in the downside of people affected in their current employment. This includes those engaged illegally in the trade, and those engaged in enforcing the current laws. You can't just tote up the benefits you like and ignore the losses you think are good for society. I mean, you can, but then it isn't an "economic" analysis, merely propaganda for your cause.
Displaced workers in the illicit drug trade are low on my list of concerns. While I know there are plenty of reasonable, decent folks employed on all sides of illicit cannabis, there is also a massive culture of corruption involved that comes at great cost to our society. From violent criminal elements, to corruption in law-enforcement, I believe that while those displaced are certainly an important consideration, the net trade-off is a reasonable one.
abb3w -
How many people would try pot if it weren't illegal?
Impossible to say, but I would hypothesize that there might be an initial spike, which would settle back closer to current figures. Reason being, the percentage of the population that tries it now, is pretty massive.
Of those who've tried pot, how many try it more than once?
Somewhat lower, but still fairly high.
Of repeat users, how often do they use it, and how much more often do they think they would use it were it legal?
Most people who use cannabis, use it in much the same manner that most people who drink use alcohol. That is to say, they may use a little every day, or just on weekends or save it for special occasions. Few enough have addictions that lend them to interfere with their ability to contribute to society.
How significant are effects 1&2 when measured?
1 is pretty insignificant. Taking a direct comparison of alcohol and cannabis users, I would say that alcohol users are much worse for this than cannabis users. I.e. more users of alcohol allow their drinking to interfere with their ability to function in society, than cannabis users do.
2 is relatively low impact. The average cannabis user uses little enough to be a significant factor, no matter how they consume it. And there are plenty of methods that reduce the health risk substantively.
Would smoking be the main consumption method, or would brownies be preferred?
First, there are a great many other ways to consume it. I would suspect that vaporizing would become more popular than smoking, in the long run. While not quite as effective, it is near enough to make the health benefits worth it.
Eating it is probably not going to be as popular, because it minimizes the overt effects, unless one ingests enough to keep them high for too long a period. The caveat for that, is a lot of people with probably combine smoking/vaporizing, with ingesting some. This extends the duration of a stronger over high.
How do the other use methods compare to smoking in user impact?
Smoking it causes many of the same problems that smoking tobacco produces. This is completely eliminated by other use methods. However, there is also some effect on neurological function, though not as much as smoking (smoking asphyxiates brain cells). These affects however, are much more reasonable than the effects of drinking or a great many prescription drugs.
How much are these likely to net affect (up or down) the economy?
Limiting the question to usage (which I assume you're doing), the effect would be pretty negligible.
And then... together with the identified benefit, is the result a net benefit or net harm, and how does that net compare to the uncertainties in the analysis?
Ultimately, while there are uncertainties, what is certain, is that prohibition is a complete failure. And I don't limit that to cannabis. This is true of illicit drugs across the board.
The bottom line is that we have fostered a culture of corruption and violent crime with the status quo. This comes at significant financial cost to our society, as well as a climate of fear that accompanies violent crime and distrust of lawenforcement.
On top of that, it has also fostered and encouraged an addiction/substance abuse paradigm that has been a proven failure. By necessity, our treatment of addicts becomes a "one size fits all" mentality, that leaves the vast majority of those with substance use issues out in the cold. Effectively telling the majority of addicts and abusers, "fuck off, we can't help you." And under the auspices of prohibition, that not only won't change, it can't.
Posted by: DuWayne | February 9, 2009 2:36 PM
How long before Drug Monkey arrives to insert his learned opinion? That will kill the buzz...
Posted by: Onkel Bob | February 9, 2009 2:52 PM
No one mentioned the Millions of Dollars and Police Hours we would save by not arresting and prosecuting the Millions every year who are charged with Possession and Selling?
What about the Moral implications, like that it is UNCONSTITUTIONAL for the government to be intervening in people's personal affairs!
I understand the need to crack down on the violence in the drug trafficking industry, which are run by gangs throughout the nation, but if it were legalized, I believe it would greatly reduce the power that gangs hold. I just don't understand why pot smokers are prosecuted with more efficiency than rapists! Or abusive partners or parents! Or why instead of taking care of orphans we hand them off to a horrible "Foster Care" System!
People who are addicts, are addicts! Legalization has nothing to do with it, Addicts will find a substance to abuse. If they can't get their coke they'll get pills, if that runs out they'll turn to booze. Marijuana users are not the problem, the law is. The Leviathan is.
Posted by: Pep | February 9, 2009 3:09 PM
DuWayne said:
"gingerbaker -
Do you grow all your own veggies? Raise meat? Brew beer or distill liquor (assuming you drink)? Considering there is much more motivation now to grow your own, due to the dangers of buying and or selling it, I don't see that being a significant issue."
I've had a nice veggie garden when I lived where the soil was good, and I used to brew a few batches of beer. All those fell by the wayside...
but I have always had a few houseplants. Everybody in the world has at least one or two houseplants. If MJ was legal, I would have a few more house plants than I do now, and that would be about all the pot my wife and I would need, I would think. MJ would make a great houseplant - its beautiful, grows tall, responds to trimming, and it's hardy as heck. It would be easy as all get out to grow casually at home.
"smoking asphyxiates brain cells"
say what? Do you have a proof source for that?
Posted by: Gingerbaker | February 9, 2009 3:42 PM
Gingerbaker -
No, not everyone in the world has a few houseplants. I don't - never have, never will. And most of the people I know don't either. While houseplants aren't uncommon, they aren't nearly as widespread as you seem to believe.
But more importantly, there are a rather small percentage of people who grow their own anything. And growing good pot isn't nearly as easy as you seem to think it is. I've done it (more helped others do it) and even growing just enough for personal use is quite a bit of work, unless you just want crap weed. And if cannabis were legal, weed would be reasonably enough priced to make the effort rather pointless for a lot of folks.
As for smoking and braincells, here you go. I am posting the link to the google search, because the spam filters hold up comments with more than one link - the info is all there to be had. I would like to link the article I first read about this, but don't have time to look for it. Honestly, I rather thought this was fairly common knowledge.
Posted by: DuWayne | February 9, 2009 4:17 PM
Yes, but you are forgetting one thing. THE CHILDREN!!!
Won't SOMEBODY think of the CHILDREN???!?!?!
Just kidding. Great post, Jim.
Posted by: Michael | February 9, 2009 4:48 PM
I don't think anyone has mentioned this major stumbling block : The millions that the drug companies will lose when the drugs that they push to calm people down are no longer needed. As far as the laziness/lethargy argument goes, I know many people who smoke pot that hold down steady jobs with no trouble. I know one person who has an alcohol problem and he has bounced through three or four jobs in the last couple of years. Here is the biggest question of all though : If so many people want/need an escape, isn't there something wrong with our way of life? Whether you are talking about legal or illegal escapes, it's a big business. The majority of the population is willing to pay money to relax, calm down, or "even out". To me, that says that something is wrong.
Posted by: Strummer | February 9, 2009 4:58 PM
Minor quibble" Hashish is not pollen and resin. It is finely powdered, high quality hemp leaves heated and compressed. Back in the day I used a microscope on many samples. The leaves are easy to identify due to the resin glands. See the movie Blade Runner for an example.
Posted by: Blind Squirrel FCD | February 9, 2009 5:00 PM
Some great comments enough that I may need a couple to respomd. (I am sorry that no one has yet commented on my proposed bill -- the second comment -- but I hope that will change.) Again, feel free to e-mail me with any comments as well -- and if you mention this and discuss it on your own blog -- as I hope many of you will -- drop me a line to let me know about it.
First to William Emba: As a couple of other people pointed out, you should read the piece again. I very carefully kept mentions of tax revenues and stimulus effect separate. As for your other concerns, I see them as minor or non-existent.
I can't see that any policemen or DEA agents need lose their jobs, unless they have been corrupt. Both groups could simply be reassigned to more useful areas of law enforcement, which would have a beneficial but unquantifiable effect on society.
As for the legal end of things, public defenders and prosecutors would probably equally welcome the unclogging of their calendars, as would judges. And there would be an end to 'prisoner releases on grounds of overcrowding' another benefit that would be difficult to quantify.
(And, btw, small claims cases might increase a little as people are able to settle disputes legally. Can you picture Judge Melian arbitrating a case. "Your honor, the defendant advertised his seeds as Northern Light, but what grew was nothing more than low-grade commercial.")
As for people involved in the business already, I see no reason why they could not continue at whatever level. (Another benefit of full legalization over decriminalization.) Low level dealers would have to keep better records, maybe pay for a license, and their profit margin would be down -- but that would be counterbalanced against the possible loss of all their stock and profits, as well as the danger of jail time. I'd bet most of them would take the trade. As for higher level people, maybe their expertise and contacts could be useful in the legitimate trade. Why, if you are a corporation, say, would you hire people to develop contracts from scratch when you could hire someone who already knows the best growers in Thailand?
And a quick comment to Julian: You may be right about the basic price settling at $10 an ounce -- before taxes. But I am assuming federal and state taxes equal that, and other costs you underestimate. (Btw, I was considering, in my draft legislation, including a provision capping State tax at the same rate as Federal tax, but I'm not sure if that would be wise or legal.) $10 an ounce sounds great, but I'll settle for $50-60 at first.
More to most of you later, but Pep, cool down. (If you got 'em, smoke 'em -- and you need 'em.) No, it is not unconstitutional for the government to declare a substance illegal and prohibit its use. Unwise, maybe, but 'UnConstitutional" has a meaning and shouldn't be abused.
Posted by: Prup (aka Jim Benton) | February 9, 2009 5:23 PM
Blindsquirrel beat me to it. No one would pay 160 dollars an ounce for leaves. The buds themselves are what are typically sold as marijuana. Most of the potheads I know have never smoked a leaf in their lives.
I'd love to see it legalized, but I'm not holding my breath for it.
Posted by: JThompson | February 9, 2009 6:30 PM
See and I have been saying,"If the gov. would legalize it, they can provide jobs to the farmers, open shops to give jobs to retailers, open up the doors wider for the trade market with other countries, over time it will ease the debt, let the police focus on the murderer's and the drug dealer's, it would help the stocks, and you can create food, clothes, rope, medication, and paper from it for schools, business, newspaper stations to help out the enviorment, and people wont be fighting or hating. on top of that, it only has the side-effects of drowsey, increase of appitite, and being happy. compared to a allergy med that has a chance to cause heart attacks or death. so I DON'T CARE IF YOU HATE MARIJUANA! I'm going to vote for it and convince as many people to do the same."
Posted by: Green | February 9, 2009 9:10 PM
WTF? Where am I? Is this a rational discussion on the "legalization" of marijuana?
Where's the hysteria? Smoking weed makes jebus cry!!
We need a "slippery slope" argument here. Just reading this gives me heroin urges.
Reading the police files one day, I come across this... 15-year-old boy is busted, having done a break and enter, sitting in his neighbors house watching the big screen TV whilst drinking a beer. He gets a ticket.
Next listing: Man arrested for possessing a gram of marijuana.
Burglary:ticket. Joint:arrest. The stupid, it burns.
Back in the day, getting "busted" meant the cop would dump your bag out on the ground and laugh at you.
Now, a pot bust gets you locked up, sometimes for a long stretch, with violent criminals.
C'mon, Prup, you're kidding me, this is going to be fixed? I don't believe it. Nothing this irrational ever gets overridden by rational thought and discourse.
Posted by: kamaka | February 9, 2009 9:17 PM
"Minor quibble" Hashish is not pollen and resin. It is finely powdered, high quality hemp leaves heated and compressed"
Well back in my day hashish was NOT leaves...it was closer to gum opium than leaves. Maybe now in commercial coffee shops you get leaves...
"Hashish (from Arabic: ŘŘ´ŮŠŘ´ ḥashÄ«sh, lit. "dry herb", from hashsha "to become dry"; also Hash) is a preparation of cannabis composed of the compressed trichomes collected from the cannabis plant. It contains the same active ingredients but in higher concentrations than other parts of the plant such as the buds or the leaves."
Legalize it. Tax it. Regulate it. Private consumption and transfer permitted. Public availabilty at dispensaries.
Stop the War on people who use non-alcoholic, non-presciption, non-nicotine mood enhancers.
Posted by: Kevin | February 9, 2009 9:45 PM
Duwayne - just to be pedantic, I wouldn't say "asphyxiates brain-cells" but rather, "makes the brain hypoxic". The former implies smothering or choking, and I'm not sure that a cigarette or bong reaches out their tiny little hands and chokes or smothers your brain cells. Again, just a very minor point -DJ
PS As for lower oxygenation of the brain, I think you're confusing stoners with huffers.
Posted by: DingoJack | February 9, 2009 10:33 PM
Minor quibble" Hashish is not pollen and resin. It is finely powdered, high quality hemp leaves heated and compressed. Back in the day I used a microscope on many samples. The leaves are easy to identify due to the resin glands. See the movie Blade Runner for an example.
Umm, I hate to break it to you, that just shows you were getting shitty hash. I've made hash on my own, with my preferred method and I've helped make hash with a less preferred method, albeit making a far more potent end product (the kind that has the consistency of mercury).
My preferred method, is to sift several pounds of good leaf, with some buds for good measure, with a screen, to shake loose the resin glands. This results in a lot of plant matter getting through, so you then put the whole mess through filtered washes with alcohol - the alcohol evaporates and what is left behind is good, blond hash.
The less preferred method is to wash the buds and leaves with alcohol and ether, which converts more of the cannabinoids. After a few washes, what is left is a very potent oil.
Other methods include stuffing a PVC pipe that is screened on one end, with leaf and buds - very tightly, then shooting propane through the pipe. Sometimes kerosene or white gas (camp fuel) is used. This method produces a shiny black hash, potent, but I cringe at the thought of what makes it black, as apposed to blond.
This isn't to say that the hash you're describing won't get someone high, or that it isn't hash. But back when I smoked, I would get really irritable if someone claimed to have good hash, and busted out some of that.
Posted by: DuWayne | February 9, 2009 10:46 PM
Thank you for writing this.
Posted by: ReggieH | February 10, 2009 1:36 AM
Hashish is a highly variable product, manufactured in a wide variety of ways. You can't generalise about its content.
No, it's really not that easy - believe me, I've done it. In fact, I have pretty all the kit needed to start up again... But you know what? It's not actually worth it, unless you can do it at a fairly large scale, and preferably with free electricity. You simply won't get a crop unless you're rigidly controlling the lighting, and decent grow lighting is not cheap to run.
Posted by: Dunc | February 10, 2009 7:52 AM
I just want to chime in about the buying vs. growing debate.
I live in Amsterdam and although I used to have a couple of plants in my garden it's way easier to just hop on my bike and go to a coffeeshop, so that's what most people do. I think the only people who grow their own weed here are those that smoke more than they can afford to buy.
Posted by: Jeroen | February 10, 2009 8:04 AM
Posted by: william e emba | February 10, 2009 9:06 AM
Even worse, your estimates regarding the size of the stimulus were based on a price that included taxes. Only the base price can be used to measure economic gain, because ultimately that alone is what encourages the suppliers to produce. The taxes, instead, end up as gifts for other people.
Of course, were these taxes funnelled back as a marijuana growers' aid program, then you could count them. But I seriously doubt legalization can occur in the first place. It's sort of like electing a black president in our lifetime kind of fantasy long shot. The promise of tax revenue for everybody else, as opposed to sheer common sense, is going to be an absolute prerequisite. (And if want to argue otherwise, well, OK, but to be consistent you must then remove mention of $2.5B estimated annual tax revenues.)
This is wishful thinking, not analysis.
Posted by: william e emba | February 10, 2009 9:47 AM
william -
You missed the point about trade-offs, probably because I didn't really touch on it.
Every worker in the illicit drug trade, on both sides, comes at a cost already. The corruption of law enforcement is a massive problem. The violent criminal acts committed by people who have no legal venues for conflict resolution also carry a high cost. Displacing these workers, a relatively small percentage of the population isn't going to outweigh the economic benefits that would lead to their displacement.
Keep in mind that many of them will continue at their jobs. And while some are displaced, legalization is also going to create new jobs, employing people who are currently unemployed.
Posted by: DuWayne | February 10, 2009 10:22 AM
"This isn't to say that the hash you're describing won't get someone high, or that it isn't hash."
sounds like you know WAY more than I do....
Posted by: Kevin | February 10, 2009 10:23 AM
I did not miss the point about trade-offs. I simply asserted the totally obvious fact that it was not analyzed in the first place. I offered no analysis myself.
The fact that a proper economic analysis has to include the new employment prospects of violence prone drug dealers is something most amateurs and pundits are simply unaware of. Even worse, the fact that dealer unemployment is actually a downside, which is blatantly counter-intuitive, gets misunderstood as some kind of advocacy or the like.
They're just numbers in an economic analysis. If you want to be judgmental, then do so, but stop calling it an economic analysis. It becomes propaganda for your side.
Posted by: william e emba | February 10, 2009 11:26 AM
william -
Maybe I'm not explaining clearly enough, in part because I don't have figures in front of me and little time while I'm at school.
It's not judgmental to factor in the financial cost of the violent crime. And that cost is just as important as the employment issues for violence prone dealers. Just like the financial cost of corrupt law enforcement officials and officers is also just as important as the displacement of some people in law enforcement.
And I don't think that anyone is ignoring the employment of violent dealers, while I think that Prup takes a rather simplistic approach, he certainly seems to recognize that it's a factor. Ultimately, it boils down to the huge amounts of money we're discussing here. It would take an awfully massive number of displaced workers, to counter the those sums - both the monies spent fighting the drug war and keeping people in prison - and the monies that would come in as tax revenue. Not even mentioning the money drug users would save.
I will get back with real numbers when I'm not getting set to run into class.
Posted by: DuWayne | February 10, 2009 11:58 AM
I am not an economist, but I have some follow-up questions to several posts.
One poster indicated that most of the higher quality marijuana is not grown in the lower 48. So a lot of it is imported (Mexico, South America, etc.)
Another poster pointed out that even if money is spent illicitly, it is still in the economy. But if it is imported, then doesn't some of the money go overseas? Wouldn't the money would then have to somehow be "laundered" to get back into the economy?
Posted by: Marko | February 10, 2009 12:58 PM
Wm:
I seriously want to thank you for your copntributions. I may disagree (and will) but I needed someone to force me to think about the questions you raise. And even when you are totally wrong or have misread my piece, I am sure others will do the same, so it's good to have the objections where I can answer them.
Let's start with the question of 'violent drug dealers.' I explained in several places that the violence in any illegal trade comes from the illegality and 'outlaw status' of the business.
I've tried to avoid too many comparisons with alcohol prohibition, but this one is obvious. When alcohol was illegal -- and unconstitutional -- there was plenty of violence in the 'beer and whiskey' trade, see any story about 'the Roaring 20s' in Chicago. That ended -- for the most part -- as soon as Prohibition was ended.
And, in many cases this was handled the way I suggest, for example, speakeasy owners became bar owners, and many wholesale distributors remained distributors. Yet, because they were no longer -- in the strict and technical sense -- 'outlaws' they did not need to continue to use violence to protect their businesses. (Yes, some of them were violent by nature and may have tried to continue the type of turf wars of the Prohibition era -- but then the distribution of newspapers in Chicago had the same sort of violence attached at the time, and no one talked about 'violent news dealers' and condemned newspapers for the violence they caused. They were simply criminals -- and could be prosecuted as such.)
One major reason for the existence of the legal system is to provide a non-violent method of resolving disputes. To take an extreme case, if somebody murders your sister, you get him prosecuted, you don't kill one of his relatives in return. Or more to the point, if someone robs your store, you don't have to hunt him down and shoot him, as an 'example' to keep other people from trying the same thing. You just have him arrested. The system doesn't work perfectly, but it keeps us from being 'between the wars' Albania, where 'blood feuds' were endemic.
But participants in an illegal business are not able to use this system. You can't call the cops if someone steals the five pounds of grass you were planning to sell. Small claims court doesn't let you sue your dealer for misrepresentation. You either have to 'take the hit' or respond violently.
The fact is, btw, that, in low-level marijuana dealing -- I've stated I never had contact with the higher levels -- 'take the hit' is the more likely response. Marijuana dealers just aren't violent types. In fact, about half of the dealers I've bought from have had 'day jobs' as well, others have made their dealing a 'regular job' and treat it as such. (I knew one person who was at the same place, every day, for the same period of time, for a period of at least twelve years, only taking off a month a year to go home to bhis native Puerto Rico. He was never a main source -- his prices were far higher than the average -- but it was good to know he was there as a 'back-up.')
So the phrase 'violence prone drug dealers' just isn't generally applicable. (But, just in case you missed it -- I thought it was obvious, but didn't specifically state it -- that was the purpose of the 'review board' I set up. Possession would bring an automatic 'trelease and quash,' non-violent felonies involving medical marijuana as well, but only the offenses involving marijuana, other offenses would require the review board if they were reviewable at all.)
But as for the whole question of the lost revenue to dealers, this is the classic 'buggy whip' fallacy, as DuWayne points out implicitly. Any economic shift causes some displacement. The introduction of the automobile created many jobs, but it also displaced the makers of carriages, buggy whips, and other implements required for 'horse carriages.' The dial phone was a benefit, but it cost the jobs of many telephone operators -- one was a relative of mine when dial phones hit Jersey. And a sensible medical insurance system -- ideally single-payer, I'd say, but let's not get distracted on this -- would be an overall benefit, but it would greatly eliminate the 'medical billing secretary' which is currently one of the better jobs available for relatively unskilled workers.
You make a number of other inaccurate point, but it needs a further comment to deal with them.
Posted by: Prup (aka Jim Benton) | February 10, 2009 2:02 PM
Wm:
Of course, the main error in your argument -- I'm surprised no one else commented on this -- is that you are using "Reagonomics." Your argument and error is basically the same -- that money inserted into the system at any point has the same stimulus effect. "Tax cuts for the rich, food stamps for the poor, they both put money into the system (and since we happen to like rich folks better than poor folks...)."
Not true, as has been pointed out by every liberal/centrist commenter on the current stimulus package. The key to a stimulus is to get money into the hands of people who will spend it, in this case, the consumers, and not to people who will stash it in the Cayman Islands.
Of course, for those who continue in the business, or who replace them at the same levels, it is possible to argue that their overall returns won't drop that much. They may have a lower profit margin, but they also avoid the expenses of illegality, and the risk that one blunder will cost them all their profits and put them in jail. There will be some 'buggy whip makers' in the transfer, but they are likely to be 'support personnel' from armed guards to the guys who outfit the trucks, and many of them will still find (legal or illegal) uses for their talents.
To switch points, I continue to insist that i very carefully, while mentioning both, kept the tax revenues out of the main argument. That there would be tax revenues is obvious -- and is one main point made by the Friedman group of supporters -- and I was glad to be able to give a ballpark figure for them based on a specific tax rate.
But I figured taxes into the stimulus effect. Were marijuana legalized but untaxed -- except for sales taxes -- the price could easily fall to the $10-20 an ounce level, or even lower if most commerce was with local, independent growers. This would increase the stimulus effect by 50%. It is the state and federal taxes -- and the administrative costs and record keeping they involve -- that keeps the cost at the $50 level.
(This is why I'd propose an amendment to my legalization bill -- that no one has addressed directly yet -- limiting state taxes to the amount of federal taxes per ounce.)
And yet another point you got wrong. My argument that there would be no marked loss of employment for police officers was analysis, not 'wishful thinking.' I just did not spell out all the factors in this preliminary discussion. But police departments are, in most states, undermanned. And 'drug cops' are first of all cops who have been assigned to a 'drug enforcement' division -- but this is rarely the whole of their career. They routinely get reassigned to other departments over time, this would just speed up the process. And remember, as far as DEA agents go, other drugs would still be illegal under this proposal, so they don't even need to be reassigned.
(If anyone out there wants to draw up a formal analysis of this and sends it to me, I'll consider using it as an Appendix as well.)
I'm not through with you, and have more to say to others of you, but laundry and mailing a birthday card to my father-in-law are calling me away. More later.
Posted by: Prup (aka Jim Benton) | February 10, 2009 3:49 PM
One quickie, though. Marko, you got it reversed. NOT 'most high-quality marijuana is imported' but 'most imported marijuana will be high-quality.' (It's obvious. Why pay shipping costs, tariffs, etc., to bring in stuff no better than what you can buy cheaper if domestic? Okay, marketing could give it a certain 'cachet' -- after I heard a once good coffee proclaim that 'now it is 100% Arabica" I gave up expecting sense from consumers -- arabica is the lowest grade of coffee, btw, usually used as 'filler.')
As for some of the money eventually winding up in foreign hands, that's true (for marijuana, cheese, beer, coffee, and any product now supplied by China) and irrelevant. The money spent on marijuana isn't the stimulus, it is the money saved on it.
Posted by: Prup (aka Jim Benton) | February 10, 2009 4:26 PM
DuWayne: again, my point was simply that these details were not figured in whatsoever. I have absolutely no idea if they are small or large effects. Jim did not enlighten us.
Jim/Prup: it is logically impossible to conclude that I believe in Reaganomics from my postings. If I'm saying you can't create stimulus by taxes because it just shuffles money around, it follows that I'm also saying you can't create stimulus by stopping the tax shuffle either. My argument was the exact opposite of what you are rebutting. You can't include tax revenues as stimulus because you are not putting money in the system. You are shuffling it.
Now, it's certainly true that high velocity money (ie, the poor) is more stimulatory than low velocity money (ie, the rich), as you've pointed out several times. But since you haven't said one word what a marijuana tax would be used for, it's impossible to draw a conclusion. The odds are high that because the number of low-income people are overwhelmingly greater than the number of high-income people, most of the tax incidence would be on the poor, and of course, like all taxes on the poor, most of the tax benefits would have nowhere to move but up the income scale. In other words, it's likely to be an antistimulatory regressive tax in practice. For a first approximation, it's best to just leave taxes out.
The buggy whip "fallacy" isn't a fallacy. Not even close. What to do with sudden obsolescence of human capital is an issue that has to be addressed in an economic analysis. Should American carmakers just go bankrupt already? Maybe. And perhaps we ought to throw in a good riddance? Maybe. Meanwhile, there are economic consequences, and a proper analysis must deal with it, not ignore it. Not even the most archcrazy Republican is saying that such a bankruptcy would be unimportant, just that there are higher principles.
Before you simply asserted that police levels would stay the same. That you expanded on your statement with details proves my previous point: the naked assertion before was emptiness, not analysis.
Etc. You can't bother to notice what I actually write, and your other riffs on what I wrote are just as inaccurate. You point blank included taxes in your stimulus estimates. Fix your mistakes instead of griping that I'm an incompetent reader.
Posted by: william e emba | February 10, 2009 6:21 PM
william -
DuWayne: again, my point was simply that these details were not figured in whatsoever.
I can't tell you how very glad I am to see you say that. Because while I would have looked, I really don't have time. I have a ton of schoolwork and would rather not take the time I afford myself when that's done looking up the figures. Economic arguments are not my forte, though I've gone there. I prefer to argue from a harm reduction standpoint. At it's heart just another form of economic argument, but one that is much easier to deal with.
If you're actually interested, or if Prup wants to work that into his argument, about ten years ago, some guys at MIT actually came up with an algorithm to determine a reasonable estimate of the human capital involved in the war on drugs at a given point. Though I don't believe they broke it down in terms of individual drugs - which is fine by me, as I am a firm believer in legalizing, regulating and taxing them all.
Posted by: DuWayne | February 10, 2009 7:09 PM
Thanks Prup, for the explanation: "The money spent on marijuana isn't the stimulus, it is the money saved on it."
Good luck with the campaign!
-Marko
Posted by: Marko | February 10, 2009 8:29 PM
Dear Mr. emba:
I am still unable to understand if your difficulty comprehending is 'provocative obtusenss' or simply poor reading comprehension. Take your statement
"Before you simply asserted that police levels would stay the same. That you expanded on your statement with details proves my previous point: the naked assertion before was emptiness, not analysis."
No, actually it 'proves' that I had made my analysis before I made my original statement, had not included it because it seemed obvious and I assumed it would be unnecessary for most readers -- and fergawdsakes my comments are long enough -- and gave it when asked for it.
But our main dispute is whether I included taxes as part of the stimulus. [Sorry for the time on this, if you are as bored by it as I am, skip to the next comment]
To recapitulate:
In the article I mentioned both tax revenues and the stimulus effect, carefully keeping them separate, and even figuring tax by year and stimulus by month to make the point.
You argue that I have included tax revenues as part of the stimulus, and they are not, because they are transfers, not creation of 'new money.'
I suggest you reread the original article and see that taxes and stimulus are both mentioned -- and calculated seprately -- because they are both benefits caused by legalization. (I don't point out, and maybe I should havem that I don't even add the two together because they are 'apples and oranges.')
You insist again that I have included taxes as part of the stimulus benefit.
I explain, at considerable detail that not only are taxes NOT part of the stimulus benefit, but in fact they subtract from it.
And now, to quote you directly:
" You point blank included taxes in your stimulus estimates. Fix your mistakes instead of griping that I'm an incompetent reader."
One last time, and maybe with simplicity and BIG BOLD LETTERS you might discover where -- and with whom, the error lies.
The stimulus effect is the illegal price minus the legl price.
Anything that increases the legal price decreases the stimulus effect.
Taxes increase the legal price.
The administrative costs associated with tax-paying also increases the legal price.
THEREFORE Taxes are not included in the stimulus effect except negatively -- which is NOT what you have been asserting.
Of course, this (deliberate?) confusion gives you a chance to make your breathtakingly inane argument in the center of your last post "The odds are high that because the number of low-income people are overwhelmingly greater than the number of high-income people, most of the tax incidence would be on the poor, and of course, like all taxes on the poor, most of the tax benefits would have nowhere to move but up the income scale. In other words, it's likely to be an antistimulatory regressive tax in practice. For a first approximation, it's best to just leave taxes out."
Maybe I can illustrate this by a slight change in lguage. The current price of marijuana is kept artificially high because of governmental action against marijuana businessmen. For the sake of this point, since a tax is an increase in price because of governmental action, let's for the sake of this point, call this the 'assumption of risk tax.' (It may not be collected by the government, but it is caused by the government.)
Legalization replaces the 'assumption of risk' tax with a straight marijuana consumption tax -- that this goes to the government is irrelevant here, or how it is spent.
Therefore, any marijuana consumer benefits because a 'tax' of $120 an ounce is replaced by two of $10 an ounce -- one federal, one state. If marijuana smokers are proportionately poor -- even if because there are more poor -- then the benefits of this tax reduction goes to them.
It is possible that you are making a point, even vaguely possible that it is a valid one -- but you'll never make it by countering an argument I am not making.
Posted by: Prup (aka Jim Benton) | February 10, 2009 9:27 PM
Wow! This is the best post and discussion on Ed's blog in months.
There's a lesson here: No need whatsoever to waste any more time on whining about WorldNutDaily bloggers, or STACLUlessness, or yet another notpologist.
This discussion is very, very good because there is a distinct possibility that the intelligent people who posted above can influence a real change.
Thanks to all of you!
Posted by: Free2Choose | February 11, 2009 12:16 AM
I'll make it easy for you: it's your own self-made stupidity at work here.
Which means I read what you wrote correctly, you are aware that I read what you wrote correctly, but you go nattering on that somehow I'm not reading what you wrote correctly because I'm supposed to also read your mind? Sheesh, you're just wasting bandwidth.
Yes, that is the crux. Transfer payments are normally not a stimulus. One as might as well argue that drug forfeiture seizures are a "stimulus". They aren't.
I've read and reread your article. But you make it dead easy this time, basically proving my point. Taxes are not a benefit. They are a transfer, robbing Peter to pay Paul, as the cliche goes. They are no more an economic benefit than drug forfeiture seizures.
The proper way to think of taxes is that they are a necessity. The free market seems to do most things sort of right, but it has its shortcomings. It undervalues education and scientific research (because of free riders benefiting from spillovers), so taxes should support these. It overvalues cell phones (by not charging users for yakking in total strangers' ears) so an excise tax ought to be applied to them. And so on. In other words, we are all benefiting from the decades of undervalued research that created the Internet, but we had to be dragged kicking and screaming into paying for it in the first place.
Including taxes in a "stimulus" article is, in fact, adding them together, unless you say otherwise. You threw out the $2.5B/year tax revenue figure for a reason, making it sound like a good thing, and now are directly calling it a "benefit". You could just as well call it an unnecessary $2.5B/year drag on the system, leading to deadwood losses.
Yes. Your price of $60/oz was $30/oz free market and $30/oz taxes. You then ran with that $60/oz figure.
Crackpot alert!
Actually, this doesn't mean anything. It wouldn't even pass Econ 101. You have to cross supply curves with demand curves. It's not the difference in prices, but the difference in revenues=prices*quantities, that have to be accounted for.
In other words, you have the reading problem. You are including taxes in your calculations. You are saying so now in very slow, deliberate motion. Taxes are transfers. They shuffle the money. They do not, in themselves, stimulate. I will also add, before you make the illogical leap into reading Reaganomics here, they also do not depress the economy. (They do have deadwood losses.)
Actually, the extremely well-known fact that sales taxes and excise taxes on cheap goods are regressive is not "breathtakingly inane".
Now you're just making up definitions for your own sake. What difference does it really make if a high price is caused by government interference or incompetent technology? The US is way behind Europe and Japan in wireless networking. Is it a tax over here? No, just a drag.
Actually, it is extremely relevant. High prices net costs are kept by the suppliers, and help motivate them to provide product. It doesn't matter whether this is due to naturally high prices or governmental high-handedness. High taxes, in contrast, motivate nobody. They distort the economy.
The consumer? Is that your point? Sorry, I thought you were talking about the economy. Really, when giving a cost-benefit analysis you may not take sides. Everybody has to be included, and the question is where the plusses are and where the minusses are, and how big they are. At some point you step back and make a policy judgment, but only after all the gains and losses are in.
Anything else is propaganda. Every time a pundit or politician spells out how proposal X helps blankety-blank, and does not spell out how others get hurt by it, you are getting half the story.
As I pointed out, it's not a tax reduction. The current high price has no taxes in it, because all the price goes into the supply-and-demand story. What you are now saying is that the poor would benefit from an income effect, but as far as the newly imposed taxes go, they still would probably not see anything of it.
Posted by: william e emba | February 11, 2009 9:46 AM
Jim,
If I understand you correctly, you're arguing that the price reductions resulting from lower pot prices would create an economic stimulus by putting more money in the hands of consumers.
But it would do so by taking money out of the hands of producers, creating an anti-stimulus. To some degree it would just be a wealth transfer instead of creating new wealth.
Of course if the price savings are then spent on some more productive purchases it might have some small positive economic effect.
From the political side, lower prices (including lower expected costs due to not having to worry about being incarcerated) means more people would smoke pot, creating the drug warriors' worst nightmare. So lower prices may not be a politically pragmatic argument.
Posted by: James Hanley | February 11, 2009 10:05 AM
Re the emba echo chamber.
Mr. emba has repeatedly made several assertions about statements he claims I made. I have repeatedly pointed out that I did not make the statements he claims, and have pointed out what I actually did say. Which seems to cause him to continue to claim I made them.
Let me, briefly, make a final answer. After that, unless he either makes a new point, or unless one of the regular posters here -- at the site, not just in this thread -- agrees with him that I have not answered his points, repeatedly -- I will simply ignore him. (He does confirm a point I have made in recommending DISPATCHES to others, that even the trolls here are remarkably literate and talented.)
So:
We agree that 'taxes are not stimulus.' You continue to claim I included them in the initial figuring of the stimulus effect, merely by mentioning them in the same article. The fact that I didn't include them in my figures, and that the average fourth grader with slightly above average marth skills could look at the math I used and see that I didn't seems to make no impression on you.
The fact that I have repeatedly stated that taxes depress the stimulus effect seems to make no impression on you.
(Ironically, in thinking about the post, I realized that we were both slightly wrong. Taxes themselves do not create stimulus, but the cost of hiring someone to do the necessary record keeping, and the cost of hiring an accountant can result in a slight stimulus effect -- which is more than counterbalanced by the increase in price which decreases the overall stimulus.)
You also claimed that my argument that the benefit -- again NOT figured in the stimulus equation -- of savings in police, court, and incarceration costs would mean that people would be fired, and would thus depres the stimulus effect. When I pointed out that the savings came from more efficient utilization of manpower for more beneficial purposes -- and that I had referred to uncluttering court calendars as a particular example of this, you argue that the initial assertion was an 'empty' one -- ignoring the court calendar point -- and that my explanation of my reasoning was a later rationalization.
You also continue to ignore the most vital part of my argument -- and surprisingly, James Hanley does as well, see my more detiled response to him -- that 'assumption of risk' is not the same as 'value added.'
So, unless you have something new to say, or unless someone else argues that I have not, suitably and repeatedly, answered your inaccurate claims, I will not waste any more of Ed's bandwidth on you.
Posted by: Prup (aka Jim Benton) | February 11, 2009 12:49 PM
James Hanley: Welcome aboard, and let me say that you were the person I most had in mind when I invited people over from the other thread. We may frequently disagree, but your opinions are always valuable, and you force me to think hard and carefully if I wish to refute them.
Even here you forced me to make my point about the difference between 'assumption of risk' and 'value added' more clearly -- and reminded me of a factor I had overlooked that makes my point even stronger.
Let me try an analogy -- and the details are, deliberately, absurd but the point is valid.
You grow brussels sprouts for the market. But there is a specific bacteria that can, at any point, attack brussels sprouts, while they are growing or after they are picked, up to the point they are in the market. This bacteria is so fast acting and virulent that it renders your crop totally useless. There is, you know, an X% chance that this bacteria will hit your fields -- and there is no way you can buy insurance against it. Therefore, your price to the distributor includes a substantial mark-up to counter the losses you may incur from an attack of the bacteria.
But your shipper needs to ship the product in bacteria-resistant trucks that lessen, but do not eliminate, the possibility of the crop being ruined in transit. His price to you includes the extra cost of the trucks and the mark-up to cover the possibility of total loss of the crop. This further mark-up is in addition to your mark up.
But the distributor needs to store the brussel sprouts in special warehouses that are, again, bacteria-resistant, not bacteria-proof. Again there is a further mark-up covering the cost of the warehouses and the risk that youy'll go to the warehouses and find the sprouts are now an unusable vegetable mass.
Ditto with the wholesaler.
Ditto with the retailer.
The final price to the consumer includes five mark-ups because of the bacteria. And remember, the bacteria is an authentic risk. In fact, while it is a minor factor overall, a particularly virulent outbreak of it in a particular area can raise the price in that area both because of increased risk, but also because, by removing products from market, it activates the supply/demand factor.
Then BFP Labs comes up with a method of totally eliminating the bacteria, entirely removing the risk factor. Each area along the chain now removes the mark-ups that are now unnecessary, causing the price to drop considerably. (In fact, ideally, the price would drop by the amount of the markups minus the cost of the BFP process.)
But, (sorry for the bold, but it seems desireable here) since the mark-up was a legitimate cost to each person along the chain, because the risk was real -- even though a particular individual might be lucky never to suffer the loss -- removal of that cost and the resultant markup does not result in a loss to the grower, the transporter, etc.
As I wrote this, i realized that a more realistic example would involve the bacteria also infecting the person holding the crop when it hit, keeping him from being able to work for a period of years, which makes the mark-up higher because the risk is higher, not just loss of a crop but loss of the entire business, at least temporarily.
Look at some figures. If the cost -- other than the risk factor -- of growing a bushel of brussel sprouts is $1, and the farmer sells it to a distributor for $2 his profit is $1 a bushel.
But if the farmer reasonably assesses the risk factor of the bacteria at $2 a bushel, and therefore sells his sprouts at $4 a bushel his profit is still $1 a bushel.
Eliminating the bacteria and the resulting mark-up means he will be selling his sprouts for $2 a bushel. His revenue will be cut in half, but his profit remains the same.
It would 'put money in the hands of consumers without taking it out of the hands of producers or middlemen.
(Minor quibble that I'll anticipate. There would be a very slight 'anti-stimulus' effect because of the unemployment, or change in employment, of those who made the bacteria-proof vans and warehouses. But this would be so slight overall as to be ignorable.)
I believe the analogy should be obvious to everyone but Mr. emba, but for his benefit I'll spell it out.
The 'bacteria' is, of course, law enforcement, which, at the least, can confiscate and destroy marijuana anywhere along the chain, causing a total loss, not just of expected profit, but of whatever he spent. It can further put the person entirely out of business, and even incarcerate him.
The risk is real, and if the majority of marijuana businessmen escape police interference, the ones that do can suffer 'catastrophically' enough that it could, in some cases, put them 'in the red' for their entire career. (My previous dealer might have come close to that, but I've never discussed the details of his business, or exactly how much was the 'large amount' he was caugght with.)
Therefore the mark-up is legitimate 'assumption of risk.'
"BFP Labs' solution eliminating the bacteria is, obviously legalization.
And thus we have legalization putting money in the hands of consumers not by 'taking it from producers' (or middlemen) but by reducing their costs.
James, thank you again. I needed your appearance to make that point.
Posted by: Prup (aka Jim Benton) | February 11, 2009 2:21 PM
not to mention we would no longer importing the product from overseas and hemorrhaging wealth in the process..
BUY AMERICAN (weed)
Posted by: wes | February 11, 2009 4:23 PM
there would be no job loss for the DEA or any other anti drug organizations for they would be the one making sure the taxes were paid and people fallowed the legalization laws and that out of country imports are taxed
Posted by: Anonymous | February 11, 2009 10:12 PM
Thank you, anonymous. That had occurred to me as a response to the various embalisms, but I hadn't mentioned it and am glad you did.
And, Wes, I think most marijuana smoked in America is, by now, grown in America -- though I have no figures to substantiate this and would appreciate it if anyone has. Even if it is imported, the various mark-ups I have mentioned stay in the country. A relatively small portion of the cost goes to the foreign growers. Sorry, but that one isn't a good argument.
Posted by: Prup (aka Jim Benton) | February 11, 2009 11:19 PM
"The stimulus effect is the illegal price minus the legal price."
Not sure I follow. With legality (reduced risk tax)and much lower price, I'd assume a huge increase in the quantity of pot consumed. It seems like you're assuming that the quantity consumed would stay the same after a big drop in price.
How do you know that total spending on pot won't actually increase because of increased use by existing users and many new pot consumers?
Did total spending on liquor fall after prohibition ended? I don't know, but I wouldn't be surprised if total spending on liquor actually increased.
Let's say total spending stays the same after legalization. How is it more stimulative if the money goes to ABC corporation than if the money goes to the Latin Kings?
Posted by: Dr X | February 11, 2009 11:20 PM
Not quite, Dr. X. The stimulus is the money saved, not the money spent. It goes to neither the ABC Corporation or to the Latin Kings, or to the independent small-time dealers that I have dealt with all 40 years I've been smoking.
It goes to the drug store, or the supermarket, or the liquor store, or to the mortgage company or the landlord, or to buy a new I-Pod or a 42 inch tv, or to make the payments on a new car more manageable. (And yes, it goes to buying more -- or higher quality -- marijuana, but since that is as legal a commodity as the others, the money has the same 'multiplier effect.' As I've said, dealers have to buy cat food and diapers and lunch as well as some of the rest of us.)
And this reminds me of a comment I should have made to james Hanley earlier. You say "From the political side, lower prices (including lower expected costs due to not having to worry about being incarcerated) means more people would smoke pot, creating the drug warriors' worst nightmare. So lower prices may not be a politically pragmatic argument."
But the 'drug warriors' are not the problem. Surveys have repeatedly shown the populace as a whole overwhelmingly supports legalization. The problem is 'reluctant politicians' who can be reached through this sort of argument -- especially if there is enough blog discussion -- from various parts of the spectrum -- on this idea to 'smoothe the way.' That's why I am sending a copy of this whole discussion to several Congresspeople.
Posted by: Prup (aka Jim Benton) | February 12, 2009 12:02 AM
The stimulus is the money saved, not the money spent. It goes to neither the ABC Corporation or to the Latin Kings, or to the independent small-time dealers that I have dealt with all 40 years I've been smoking.
You're assuming that money would be 'saved.' How do you know that? You're assuming that there will be a reduction in the total amount of money spent on pot (what you call savings) and that the 'savings' will go to landlords, groceries and other goods. But after a price reduction, total spending on pot could be less, the same or even more, in which case there is absolutely no savings. You seem to assume that quantity demanded doesn't change with a change in price. False, unless there is a completely inelastic demand curve. Not only is it fairly safe to say that existing users would increase consumption, but new users would become consumers as a result of the drop in price. I'm not making Hanley's argument. I'm talking about the effect of a price change on the total amount consumers spend on pot. You assume that amount would fall (you call it a savings). That's not necessarily so.
There might not be any "savings' in terms of the total amount of money spent on pot after legalization. Again, consider the end of alcohol prohibition. We don't know if there would be extra money for the landlord, extra money for groceries and other goods. The quanity of pot consumed will increase with a big drop in price and we don't know if that will mean less money spent on pot, the same amount or much more (I'm speaking in in the aggregate, which is what counts economically).
It seems to me that you completely omit the notion of a demand curve in your argument.
I'm not saying I know how it would shake out, but you don't know either.
Any economists in the house?
Posted by: Dr X | February 12, 2009 12:41 AM
Just to be clear, you propose:
C($A-.6A). Or .4C.
What is C? Total consumption of pot, i.e. quantity demanded?
C is not a constant. C varies inversely with A. When A falls, C rises. Thus, C($A-.6a) does not equal 4C unless the demand curve is completely inelastic. That possibility is beyond ridiculous. When the price falls to .6A, it's possible that C doubles or triples or quadruples. I don't know and you don't know exactly what happens to quantity demanded with some hypothetical reduction in price, but the equation you propose is false unless the quantity of pot demanded is completely unresponsive to price.
Posted by: Dr X | February 12, 2009 1:10 AM
Thanks to Prup and co for your reasonably coherent dialogue on this subject. You folk are doing well and keeping the discussion topical. I've enjoyed reading the OP as well as each and every comment (missed lights-out, but it was so worth it)!
I know from a consumer standpoint that the current prices are absolutely out of line with the quality being delivered. Not just where I currently reside, but in all places I have taken residence and sought out tasty trichomes. Unless you're a longtime user with a nose for it, there are no guarantees that you are not buying inferior product until you spark up. That is a problem!
In any other purchasing scenario, I have a reasonable assurance from government regulations to the manufacturer, to the retailer that the goods I buy are of a standard quality. Of course, it isn't a rock-solid guarantee across the board and probably never will be. It's still quite possible to get shafted if you're not careful. Still, a reasonable assurance is good enough for my peace of mind.
I support legalization not only for an (admittedly perceived, and as-yet-untested) economic benefit, but also because as a consumer, I would like to be secure in my transaction.
Were the price to decrease, and the product regulated in a meaningful way, I would be grateful. I certainly can't speak for all users of the "devil weed", but my personal consumption would not increase significantly. To maintain my own personal standard of living, it would be foolish to consume more. Any potential savings would be applied to other purchases as a matter of course.
This is something I have not yet seen mentioned in this discussion: Education and its effect on various levels of the process.
When I was slogging through the (absolutely craptacular) public education system, the level of awareness and open, honest discussion of the effects of and consequences of drug use was - to put it politely - abysmal. Misinformation was and still is a large factor. That I had to educate myself on the subject, via the local library and gathering anecdotes from longtime users and/or addicts, well it pissed me off. If we had sexual education, which was and is also very broken and laden with misinformation, why could there not be at least part of a class devoted to bringing these subjects (drug use, effects, consequences, economics) to light?
It has always been my personal belief that in order to effect a positive change in society as a whole, we need to stop burying facts. We need to examine these issues from all conceivable angles in a public discourse, and take action based on the best information we have. Legalize drugs, Regulate drugs, Educate the populace about drugs, Assist addicts in recovery, and for the sake of all our futures, stop screwing up peoples lives because they choose to partake. Life is already hazardous enough!
I realize that it's a bit off-topic, as I have nothing to contribute in an economic vein, but I feel it needs to be said:
The overall benefit of increased education at earlier levels has yet to be seen. Based on my lifetime and the trends I have witnessed (and taken part in, wholeheartedly), it cannot be bad for us. Not just in North America, but across the globe. Cannabis has been with us since we learned what she's good for (and it is a lot more than getting high), and she's not going away. If we, as nations, as people, continue to fight against nature and enact poorly-rationalized punitive measures against a significant portion of our own kind, it is only going to get worse.
The pseudonym I post this under is meant to be ironic, in case you wondered. I abhor history for being so cruel and inflicting these current injustices on us all. Can't change history, but we can make our future!
Please continue with your dollars and cents discussion. It makes a lot of sense to be talking about it in these terms, especially now. I applaud you all for your efforts to better understand and come to terms with these issues.
Posted by: Joey Rockefeller | February 12, 2009 5:02 AM
There's nothing to follow, as it's just gibberish. I pointed it out that the issue is total revenues, not prices, but Prup wants to argue again and again about how totally clear he really was, even if that includes presumed mind-reading talents.
Anyway, the consumer is half the issue. The gains the consumers make, which Jim is calling some brand of "stimulus" are obviously offset by the losses the producers suffer. Making things better for some people and worse for others is the usual consequence of any economic change. Proper analysis requires looking at both sides, not merely the plus side.
In this case, the reduced money that goes to dealers and growers hurts them. This is not less money thrown away as someone opined above--it's still money and still part of the economy.
Posted by: william e emba | February 12, 2009 12:23 PM
I've made quite a few new points, which you continue to ignore, preferring to bicker about how transparent you really really were first time around, even to the point of criticizing me for pointing out that your article did not mention economic effects on law enforcement, which was darn trollish of me, since of course I was supposed to give you credit for secretly analyzing it. Sheesh.
Economic stimulus refers to everybody, not the individual. You haven't addressed the trivial fact I mentioned that revenue, not price, is what has to be measured. And everybody means everybody, not just the consumers. What happens to the suppliers losing so much of their revenues under legalization?
Really, you'd best leave economic analyses to the professionals. Trying to impress congressmen with an incompetent and incomplete analysis will only convince most of them that a mind is indeed a terrible thing to waste, and you're living proof that marijuana should remain illegal.
The fact is legalization will simply be too much of a political impossibility for at least one more generation. Pretty much no one in power cares about the economic aspects.
Posted by: william e emba | February 12, 2009 12:39 PM
First, thanks to Joey R, both for the kind words -- I too am glad we kept on topic -- and for bringing up the quality control aspect. This is something that legalization does take care of. Again, one 'outlaw' can't sue another 'outlaw.' If your dealer claims it is an exotic variety -- and charges you $500 an ounce -- and you get it home and find it's average commercial, maybe worth the stndard $160 -- if you're generous -- there isn't much you can do. You can stop buying from him, or tell other people who might be customers, or punch the guy out. (That last isn't an option for a 62-year old 150-lb guy who already has arthritis, a bad back, a partially torn rotator cuff and zero fighting experience.)
Make it legal and you can sue the guy or bring him before a tv judge like Judge Milian or Judge Young. (And I'm going to go a little OT here myself, and ask anyone else who shares my guilty pleasure at watching THE PEOPLE'S COURT "If there were a case like this -- and there will be once legalization happens -- and Judge Milian calls a recess to do some 'research,' who is going to do the testing, Judge Milian herself or Douglas?")
I haven't mentioned it in my draft legislation -- and, damnit, my only complaint about the discussion is that I'd hoped for more focus on the specific provisions of this -- but there will have to be some sort of committee setting up standards and rules. I can hear the debates now.
"Does a country description refer to the origin of the product, or origin of the seeds?" (In other words, can you grow Thai weed or Afghani hash domestically and call it that if the seeds are from the country?)
"What additives are allowed for hash to make it more smokable, and in what percent?"
Etc.
(There also might be an equivalent to the tea-taster board that is -- was? -- set up to ensure quality control. It would sound like a 'dream job' but I'll admit that I don't have enough experience with premium and above to qualify. But if anyone needs consumer input on the committee I mentioned, I'd be glad to apply.)
One thing that may prove interesting is the foreign policy implications. Thus my draft bill keeps the tariff on hash very low to encourage its production in the countries that traditionally produce it, which we, for other reasons, want to support. But one interesting fact I discovered in my research is that one country where the status is described as 'legal/illegal' -- meaning that the laws exist but prosecutions are rare to non-existent -- is Iran. What the implications of this are aren't clear, but it would be interesting to speculate.
I'll put my response to Dr. X in my next comment, but I'll leave you with a question. There is only one ountry where the status is listed as, simply, "Legal." What one? (No, it's not Jamaica.)
Posted by: Prup (aka Jim Benton) | February 12, 2009 12:43 PM
And before I can get to Dr. X, lo and behold, more embalisms. Most of them are the same old complaints that have already been asked and answered repeatedly -- as I said, if anyone disagrees with that, I'll try again, but so far no one but Mr. emba has.
But he does give me a chance to make one point yet again. Profit and revenue are not the same. Profit is revenue minus cost. Risk management and compensation are costs! That is true for every business.
Every time you check out at a Department store, a certain percentage of the bill goes to compensate the store for the expected losses through shoplifting and employee theft. Every time you visit a doctor, a certain portion of your bill goes to pay his malpractice insurance.
But anytime you reduce or eliminate a cost, you can drop the price. Revenues go down, but profit remains the same.
(And -- an important point -- these 'risk costs' are figured on an 'industry wide' basis. a doctor may, correctly, be sure he is so competent he will never be successfully sued for malpractice, but he buys the same insurance -- and passes the cost on to the patients. A store that has, fortunately, never suffered from employee theft still figures the loss factor the same -- and again adds it to your bill.)
This is less obvious for marijuana for three reasons:
The risk is potentially so catastrophic that the markups are very high;
Marijuana businessmen have to be 'self-insured' which always raises the cost. (Nobody is selling insurance against police raids.)
But most of all because the risk, and thus the mark-up, occurs at every point along the distribution chain, thus compounding it incredibly. (Imagine what your doctor bill would be if every office worker had to buy the same insurance at the same rate as the doctor did. Or if a doctor needed to insure himself against being included in a suit against any doctor he referred a patient to.) Only it is compounded, not added. Each step figures its risk management costs based on the price they pay, which includes the risk management costs paid by every earlier step in the chain.
Again, I, and another contributor, forgive me if I don't check which one, figure that a fair price for (untaxed) marijuana would be in the neighborhood of $10-20 an ounce, which provides profit for everyone along the chain. But risk management costs increase the price eight to sixteen times that much.
(And yes, to anticipate a possible response, it is true that the mark-ups are traditional, that an individual marijuana businessman might make the same mistake our Mr. emba does, and might leave the business -- to be replaced by someone else. But that does not affect the thrust of my argument.)
Posted by: Prup (aka Jim Benton) | February 12, 2009 2:39 PM
And, finally, to Dr. X. Your point about an increase in the onsumption of (legal) marijuana going up is probably true -- and totally irrelevant. A person who receives an additional $100 to be spent and spends it (at least on a legal, domestically-produced product) creates the same multiplier effect whether he spends the money 'wisely' or 'frivolously.' The effect is the same on the economy if he buys booze or baby food, porn (on the newstand), porterhouse steaks, or pet food. And it is the same if he buys more (legal) cannabis with it.
In fact, if he saves up his savings for a year, uses it for a trip to Las Vegas, and gets into a poker game with a chubby ex-stand up comedian, the effect will still be there, only it will be Ed spending the money and not him.
(In fact, I wonder if the more likely shift will be towards higher quality rather than more quantity. I know I'd love the chance to try out varieties I'd never been able to afford -- and I might get away with spending some of the savings for my birthday, though my wife would veto any general increase.)
Posted by: Prup (aka Jim Benton) | February 12, 2009 2:56 PM
So far, you still haven't said anything about what the new revenues would be, nor what the losses to suppliers. I take it this is just your way of not admitting you have no idea of what you are talking about. Sort of like the non-apology apology, we have the non-explanation explanation.
So please, for the sake of rational drug laws, please do not contact any congressmen and share with them your non-knowledge knowledge.
Posted by: william e emba | February 13, 2009 10:13 AM
Just to let you know, I ran off hard copies of the article, with the discussion up to the last comment above, and will be sending it -- and my appendix on decriminalization -- to Rep. Frank and Clarke and Sen. Schumer and Gillibrand either later today or tomorrow, depending on how long it takes to be satisfied with the cover letters I am writing.
However, while I think hard copies by snail mail are more attention getting than would a simple cite, the typeface is so miniscule that they may prefer to read the original online, so they will get a chance to see any further discussion.
Posted by: Prup (aka Jim Benton) | February 13, 2009 10:19 AM
Oh, dear, I had missed Mr. emba's example of non-reading reading. I've answered everything he asks, repeatedly.
But, since I blogwhored this at my diary at TPM, I might as well mention that I am discussing this there as well, and could use some comments. It's http://tpmcafe.talkingpointsmemo.com/talk/blogs/jim_benton/
Posted by: Prup (aka Jim Benton) | February 14, 2009 4:14 PM
I like your idea. I think you should probably include an age limit in your proposed legislation, i.e. must be 18 or 21 similar to alcohol and tobacco. Also, I would reconsider your wording on a 1 time $10 tax. Do you only have to pay the tax the first time you buy an ounce? Finally, I would include licensing fees in your legislation. For example getting growers/producers license would cost $10,000 (initial)+$1,000/year. This would generate a lot of revenue for the government and the capital could easily be produced by entrepreneurs if it was legal. It would be easy to find investors.
Posted by: werjack | February 17, 2009 11:10 AM
you left out one other huge economic factor of legalizing marijuana. the legalization of marijuana would also legalize the cultivation of hemp(cousin of marijuana)!! hemp which produces 4 times the amount of paper pulp per acre than trees. in a 1938 article in popular mechanics it stated that hemp would be the first billion dollar crop in america. henry ford made a car with panels that were hemp. hemp can be grown in very harsh soil and could be grown all over the US
IMHO the hemp industry would benefit the economy as much or more than just the marijuana conspution industry.
Posted by: reational | April 8, 2009 5:57 PM
yayy!
Posted by: Jerimiah Springfeild | June 15, 2010 1:40 PM