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This analysis was then repeated for minor, major and permanent injuries. In summary, the probability of a fatality given the number of days of cannabis consumption current was applied to the estimate of projected changes in days of use to derive the number of fatalities, minor, major and permanent injuries. With these assumptions, the increases in fatalities range from one to four, and serious injuries increase by ten to fifty in a year. For both the status quo and legalised—regulated model, the statistical value of a life year lost was sourced from the existing literature [70].

The costs of the injuries were sourced from Ngui Cannabis acutely impairs cognitive performance [12] but whether there is a lasting cognitive impairment of the still-developing brain when cannabis use begins in adolescent years continues to be debated.

The potential impacts of cannabis consumption on educational attainment in both the status quo and the legalised—regulated models were estimated by combining the prevalence and consumption data as described earlier with estimates of the negative impact of cannabis consumption on educational attainment [21] , [22] , [23].

Typically economic evaluations conducted in the illicit drug and alcohol fields have not recognised any positive utility wellbeing from the purchase and consumption of tobacco, alcohol or illicit drugs [72] , [73] but it is often argued that any positive utility from consumption must be included [26] , [74].

Cannabis users when asked why they consume cannabis provide a number of reasons such as it helps them to relax, to get intoxicated, to socialise, it enhances some activities, lessens boredom, and aids in sleep [75]. Thus to the consumer, the consumption of this drug provides some change in wellbeing.

Without some measure of wellbeing, any valuation of the legalisation of cannabis would be undervalued. The problem is that there is no monetary metric to quantify the change in wellbeing. We also do not know the shape of the demand curve for cannabis [16]. In the absence of this knowledge [16] , we used as a proxy the change in the value of the quantity of cannabis consumed holding the price constant.

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Legalize It -- The Economic Argument

The assumption here is that the demand curve shifts outwards with legalisation. For the purpose of quantifying wellbeing, consumption by those with a cannabis—use disorder or under the age of 21 was excluded. The proxy for wellbeing was then estimated by multiplying consumption by the median street price of cannabis in NSW [76]. The costs for the legalised—regulated policy option were estimated given the features of the model as described in Table 1.

The regulatory framework included a licensing program as one way of controlling cannabis tourism, and to ensure those purchasing cannabis were aware of potential harms and where to seek help if required. The cost of non-compliance to regulations i. The costs to the grower of complying with the regulation included testing for potency, employee training, and licences.

The cost of enforcing regulations and providing consumer information, quit programs and support were extrapolated from recommended per capita expenditures for tobacco control in Australia [80]. These estimates were adjusted for the expected prevalence of cannabis use in the population Distribution and retail of cannabis in this model occurred through a government monopoly although another form of non-profit monopoly would achieve the same purpose.


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A monopoly structure was used as one way of countering claims of anti-competition by potential profit making businesses given advertising was not permitted and plain paper packaging would be required. The costs of operating the retail enterprise were based on the presumption of cannabis shops across the state two in every council area selling only cannabis or cannabis implements; and operating for 12 hours per day, and staffed with two persons.

Payment to the contracted growers was based on a two-to three—and—half—fold difference in farm gate to retail prices [83]. Cannabis price was held constant in the model. With this strong and potentially unrealistic assumption discussed further below , all change in demand for cannabis was attributed to the change in legal status a shift in the demand curve. How best to manage the income generated from revenue associated with the sale of cannabis under the legalised—regulated model required some thought.

In a CBA, benefits normally only accrue to consumers and producers, or to third parties through externalities. If a policy change affects government revenues indirectly through changes in tax revenues, welfare payments, or subsidies they are normally ignored as they are considered transfer payments which do not affect overall net economic benefit [33].

When moving from a situation where the revenue from cannabis sales will accrue to governments rather than being captured by the illicit drug market it could be argued that some of these revenues are a gain to society and they should be included. The results are presented both without and with potential government revenues included in the legalised—regulated model.

The assumption of a constant price and the likelihood of a continuing black market for cannabis as well as home growing generated considerable uncertainty around the estimate of government revenues. Others have projected larger losses as a result of the black market particularly if attempts are made to retain prices at current levels [9] , [16] which if true would result in less government revenues. Once the values were obtained for each component, the costs and benefits were summed to generate the NSB for each policy. An additional design feature, which some may regard as a limitation, is that the comparison involves an ex post alternative the current status quo and an ex ante alternative the hypothetical.

It was not possible to conduct a fully ex post analysis, as cannabis legalisation had not been introduced. Conducting a full ex ante comparison, while possible would have entailed establishing a hypothetical status quo.

Amsterdam Law Forum

This would have been somewhat counterintuitive to the audience of policy makers, who consider what currently exists and the possible alternatives. In addition to the primary estimates a range was constructed for every variable using credible assumptions. All costs were in Australian dollars. Monte Carlo simulation with a normal distribution and repetitions was conducted to generate the 5 th and 95 th percentiles around the mean. The specific costs for each component are detailed in Table five.

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As can be seen, under the status quo the largest single expenditure was on criminal penalties, followed by policing costs. Both wellbeing from cannabis use and the value for decreased educational attainment were larger in the legalised—regulated model due to increased consumption of cannabis detail is found in Table 4. There appears to be no substantive difference between the NSB for these two policy options.

The results are presented in Figure 1.

Be cautious, but be bold

The addition of government revenues results in a larger NSB for the legalised—regulated model. However, the level of uncertainty around the results also increases.


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An important caveat is that this assumes all revenues which go to government are new revenues, i. Figure 1 demonstrates the uncertainty around the main estimate using ranges from Tables 4. In addition, because of the potential influence on the results and uncertainty in measurement, the impact of varying two key benefits wellbeing and educational attainment was further explored in the sensitivity analyses. All other benefits and costs were held constant in the simulation. Not surprisingly, the NSB increased when the negative impact of cannabis on educational attainment was halved, or removed completely.

Varying the costs within the ranges presented in Table 5 resulted in minimal changes to the NSB ranging from a 6. In undertaking a cost benefit analysis of the impact of two policies for cannabis this study has gone beyond the common evaluative approaches in cannabis research. Here, the costs to the criminal justice system and the potential costs of establishing a regulatory framework, of providing health care in response to cannabis induced harms, personal costs and economic benefits such as stigma, wellbeing and impacts on educational attainment are captured. The two policy options analysed represent the current policy in New South Wales, one Australian jurisdiction, and a modelled public health approach legalised and regulated that was constructed with the objective of minimising harms both from the policy itself and from cannabis consumption.

In presenting the total costs and benefits for the two policy options, the base to which each policy option was compared to was no cannabis consumption. Such an assumption, which also meant there was no change in consumption of an alternative product, is obviously not a realistic one but it did provide a common comparison for the two policies of interest.

Account Options

One limitation of the study design was the use of an ex ante policy with an ex post comparison. This was done because our purpose was to conduct an experiment with useful intuition for policy makers, but not to demonstrate how much governments might save or loose under the options. If governments were to consider cannabis legalisation, the next step would be to conduct a marginal analysis. There appears to be no substantial difference between the NSB for the status quo in NSW and the NSB for a legalised—regulated alternative excluding potential revenue to government.

The simple addition of the revenues to government, although not normally included in CBA, increased the NSB making the legalised—regulated option appear attractive. The confidence intervals increased substantially demonstrating the additional uncertainty, and given uncertainties around the price under legalisation [16] , [36] , the confidence intervals could be considerably wider.

Money from marijuana legalization — provinces weigh costs and benefits

Both policies result in significant opportunity costs. For the status-quo costs are incurred by the criminal justice system police, corrections and to a lesser degree in providing health care while in the legalised—regulated model costs are more widely dispersed across policing drug driving testing , prevention and education services, health care services and to individuals for the purchase—licence program. The task of conducting a CBA where one policy is highly speculative and the good itself is illegal required many assumptions.

In the complex area of illicit drugs policy the list of possible inputs, harms and benefits is long [12] , [13] , [43] and despite the extensive cataloguing of costs and benefits there were exclusions. Key in these were the potential impact on family members; the costs of combating gang related activities; the potential political consequences to those advocating for or against a change in policy; the potential effects on alcohol consumption if cannabis were to be legalised; and the impact on international relationships should cannabis be legalised.

The Economic Benefits of Legalizing Weed

All of these categories were excluded due to the lack of available data. Additionally, based on the costs of combating gang-related activities for the illicit sales of tobacco [84] , even under legalisation gang related activity would likely continue to some degree. With respect to the impact on alcohol consumption, currently the literature is in disagreement [85] , [86] as to whether alcohol and cannabis are substitutes or complements and, even if this was known with certainty, it is not known whether the current relationship would persist if cannabis was legalised.

Room et al. Limitations for any CBA are the exclusion of some variables, and further research should attempt to include these costs and benefits. The quantification of costs and benefits required assumptions around the likely uptake of cannabis if it were legalised. The quantity increased more than the prevalence as some who were already consuming cannabis under the current laws consume more under legalisation.