Economics of Marijuana Legalization

A blog about business and economics.
July 19 2012 1:08 PM

Economics of Marijuana Legalization

I've got a column up on the site about how true marijuana legalization—as opposed to Netherlands-style tolerance—could make pot trivially cheap, something like a few cents for a joint. One takeaway from that which I get into is that this means there's a lot of scope for pretty hefty taxation of legal marijuana.

A few people who've read it said I should have delved into the possible fiscal benefits of reduced enforcement costs. I actually avoided that for a specific reason, namely that you have to remember that under some new regime there would still be enforcement costs. Alcohol, for example, is legal in the United States. But we still have tons of alcohol regulations and tons of enforcement of those regulation. Between drunk driving arrests, liquor license public hearings, tax collection, and all the other banal humdrum regulation of a basically legal substance you're still looking at a huge bill. So as long as we assume that we're not talking about making pot a totally unregulated substance, the level of enforcement costs is basically a matter of choice. Just like today there would be a bunch of rules on the books and a lot of violation of those rules and then different jurisdictions would have to think about how much they want to invest in trying to stop those violations.

Advertisement

The really big change here really is that genuinely legal pot could be produced in much more efficient ways than current illicit pot. The resulting economic surplus would then get divided up between the government (through taxes), producers (as profits), and pot smokers (as a cheaper high) with some inevitable spillage due to tax evasion if you try to make the tax really high.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

TODAY IN SLATE

Politics

Talking White

Black people’s disdain for “proper English” and academic achievement is a myth.

Hong Kong’s Protesters Are Ridiculously Polite. That’s What Scares Beijing So Much.

The One Fact About Ebola That Should Calm You: It Spreads Slowly

Natasha Lyonne Is Coming to the Live Culture Gabfest. Are You?

A Jaw-Dropping Political Ad Aimed at Young Women, Apparently

The XX Factor
Oct. 1 2014 4:05 PM Today in GOP Outreach to Women: You Broads Like Wedding Dresses, Right?
Crime

Operation Backbone

How White Boy Rick, a legendary Detroit cocaine dealer, helped the FBI uncover brazen police corruption.

Music

How Even an Old Hipster Can Age Gracefully

On their new albums, Leonard Cohen, Robert Plant, and Loudon Wainwright III show three ways.

Tattoo Parlors Have Become a Great Investment

This Gargantuan Wind Farm in Wyoming Would Be the Hoover Dam of the 21st Century

Moneybox
Oct. 1 2014 8:34 AM This Gargantuan Wind Farm in Wyoming Would Be the Hoover Dam of the 21st Century To undertake a massively ambitious energy project, you don’t need the government anymore.
Behold
Oct. 1 2014 6:59 PM EU’s Next Digital Honcho Says Celebs Who Keep Nude Photos in the Cloud Are “Stupid”
  News & Politics
Politics
Oct. 2 2014 11:01 AM It Wasn’t a Secret A 2013 inspector general report detailed all of the Secret Service’s problems. Nobody cared.
  Business
Business Insider
Oct. 2 2014 11:16 AM Some McDonald's Monopoly Properties Matter More
  Life
The Vault
Oct. 2 2014 11:07 AM Mapping 1890 Manhattan's Crazy-Quilt of Immigrant Neighborhoods
  Double X
The XX Factor
Oct. 1 2014 5:11 PM Celebrity Feminist Identification Has Reached Peak Meaninglessness
  Slate Plus
Behind the Scenes
Oct. 1 2014 3:24 PM Revelry (and Business) at Mohonk Photos and highlights from Slate’s annual retreat.
  Arts
Brow Beat
Oct. 2 2014 10:36 AM How Bad Will Adam Sandler’s Netflix Movies Be?
  Technology
Future Tense
Oct. 2 2014 11:01 AM Surge Pricing Is Not Price Gouging
  Health & Science
Medical Examiner
Oct. 2 2014 9:49 AM In Medicine We Trust Should we worry that so many of the doctors treating Ebola in Africa are missionaries?
  Sports
Sports Nut
Oct. 1 2014 5:19 PM Bunt-a-Palooza! How bad was the Kansas City Royals’ bunt-all-the-time strategy in the American League wild-card game?