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Transcript of Legalizing Marijuana
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Legalizat of Marijuana
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INTRODUCTION
The legalization of marijuana has been an issue that has
generated great debate in recent years. Smoking marijuana has
been known to promote birth de ts, genetic abnormalities,
shrinkage of the brain, impairment of the immune system, lung
damage, reduction in testosterone levels, and sterility. Of all
of these hazards, only lung damage has been well established by
subsequent research.
If smoking marijuana seem~ (get quote) to have roughly the
~
same side effects as smoking cigarettes, then why does our
country spend billions of dollars in drug treatment and
prevention, and law enforcement? If the U.S. would legalize
marijuana and the government would supply drugs then wouldn't it
be the case that drug dealers would be put out of business and
much of the law enforcement costs associated with marijuana
arrests be eliminated? Economically, do the social benefits of
legalizing marijuana outweigh the social costs?
Unfortunately, these questions are not accompanied by "black
and white" answers. However, by using various economic
indicators, one can predict what might happen if marijuana were
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legalized and how t might ffect tic prices, consumer and
producer surplus; and soc t I costs, such as law enforcement,
health care and the crime rate.
There are several hundred arguments for and against the
legalization of marijuana. The following arguments provide a
general outline of the issue.
ARGUMENT FOR LEGALIZATION OF MARIJUANA
Ethically and morally, legalizing a drug such as marijuana
would be wrong. However, ethics and morals have done little to
deter people from ling pot. The United States can spend
billions of tax dollars on drug prevention programs, but the
simple fact is that as long as their are profits to be made, as
long as their is a consumer willing to pay for the product the
suppliers will always be there. With marijuana, (get quote) the
least mild of the major drugs, (LSD, crack, cocaine) we have
obviously seen a substantial amount of the population interested
in smoking it. In 1991, according to the National Household
Survey on Drug Abuse (NHSDA), which is conducted annually 12.6
million Americans have used illicit drugs over the past month.
Of this 12.6 million, 9.7 million had reportedly used marijuana
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past mon Marijuana is most popular of the ill it
drugs.
The drug problem cannot be answered with ethics and morals,
but ra with economics. The lization of all drugs is too
outrageous to contemplate, but an experiment with marijuana,
arguably the most widely used drug after alcohol and arguably the
most benign may have beneficial fects on the domestic economy.
Eminent economist Milton Friedman suggests that the first
step should be to legitimize sa of marijuana under controls
like those on alcohol; no sales to minors, no advertising, no
drugged driving, and Friedman adds that if your commitment to
deregulation will tolerate a little protectionism--no imports.
The economic incentive to smugg marijuana would be
eliminated if it could be grown legally in the U.S., where
according to the Drug Enforcement Agency (DEA) , about 20-30% is
already produced. According to the National Organization for the
Reform of Marijuana Laws, marijuana is the number one cash crop
in almost a dozen states (in 1989), bigger than wine in
California, a business that would flourish if pot farmers were no
longer criminals. It is important to note however, that if the
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world price for marijuana would still lower after
legalization, it would not pay to grow the drug domestically,
Most the growers of the crop surely are not listing their
occupations accurately on their income tax forms and hence, they
are not giving Uncle Sam his percentage of the profits.
Furthermore, one third of drug arrests are for simple
possession of marijuana. If law enforcement authorities did not
have to worry about pot smokers, smugglers and growers, they
could concentrate on crack, cocaine, heroin, PCP and
amphetamines, the drugs that are doing the real damage.
Experimenting with marijuana could provide the best
opportunity to test the idea that we would be better off if drugs
were legal and controlled rather than outlawed and out of
control.
ARGUMENTS AGAINST LEGALIZATION
Most of the published journals I have read which encompass
arguments against legalization of drugs seem to focus very much
on social issues and seem not to reach the economic issues.
However, these social arguments make a very convincing case
against legalization.
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in favor of liz marijuana or all for
that matter usually argue that it would "take the profit out of
the drug business." However, in actuality, marijuana dealers do
not earn huge sums of money. Most "grass" use
product regularly, so, they can support there habits and maybe
also set aside some cash (see section on law enforcement.)
Anti-legalization activists say that drug laws are in place
to make drug use an unattractive choice and legalization would
have people thinking that the government feels it's "OK" to smoke
marijuana. Furthermore, activists feel that drug use will soar
with legalization, however, marijuana may not simply because it
is within the average American's budget.
Legalization advocates think that the cost of law
enforcement is too great and legalizing marijuana would save the
country so much money. Many argue that it is more costly to not
have the enforcement. By this, I mean, there may be more drug
related accidents at work, on the highways and there could also
be substantial losses in worker productivity. In addition,
dropout rates may go up and there may be more hospital
emergencies.
CONJECTURE
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are compelling a and aga t
legalization of drugs. However, marijuana is by
dangerous ill it drug. There has never been a s
t
th from
a marijuana overdose (Bureau of Just Statist .) It is also
argued that the short term fects of smoking pot are
harmful than those of alcohol.
As stated in the previous pages, ethics and morality have
not proven to be sufficient in lping to solve the drug problem.
The drug business is exactly that, a business. Therefore, a more
serious look at the economic ramifications of legalization should
at least be explored, holding ethics and morals constant.
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FACTORS AFFECTING THE PRICE OF MARIJUANA
There are many different tors that ef t the price of
marijuana, the most obvious being quality. Product
differentiation is what gets suppliers more or less money for
their product. Marijuana is imported into this country from
different regions and each plant from these regions has a
different THC content (the drug). The higher the THC content,
the more expensive the dope.
A significant economic factor that affects the price of
marijuana are losses due to law enforcement. Suppliers
compensate their couriers, pilots and others for the risks they
must go through in this line of work. Therefore, the more
burdens these intermediaries must endure, the higher the price
will be for the drug.
The price of marijuana can also rise due to the following:
distances the drugs travel, the number of rungs on the
distribution ladder before the retail level, shortages of drug
supplies due to wholesale and retail losses, changes in pricing
at the export/import rates, changes in risk associated with
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retail I , buyer preference a certain quality of drug
(ex. Acapulco gold.)
The elasticity of demand is fined as how sensitive a
change in the use of an item (quantity) is to a change in its
price. For most all commodities if the price of the good rises,
the quantity demanded decreases. The amount of the decrease
depends on its sensitivity to a change in demand. The price
elasticity of demand for harder drugs, like heroin, is lower than
it is for marijuana because heroin is a physically addictive drug
and marijuana is not. As reported by a study at the University
of California Berkeley, the elasticity of demand for marijuana
was 1.3. This means that for 1% increase in the price of
marijuana, the quantity demanded will go down by 1.3 percent.
The current street price of marijuana is $1,760 per pound in
1991. The level of domestic consumption is 23,000 tons in 1991.
The world price (Mexico) of marijuana was $300 per pound in 1991.
The following calculation and diagram show the effects on
domestic consumption after legalization.
The diagram on the following page has a figure of 23,650
tons of domestic marijuana consumption. This figure seems to be
skewed upward, so I will assume therefore, that only half of this
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figure
the new
domest lly (11,825 tons). This will c
1 of consumption from 501,000 tons (displayed on the
graph), to 250,952. Therefore, the increase in domestic
consumption to 239,127 tons.
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CONSUMER AND PRODUCERS SURPLUS
The e ity of demand marijauna 1991 was 1.3. The
quantity of marijuana consumed in this country in 1991 was 23,000
tons. The who price of marijuana Mexico, according to
the Bureau of Just Statistics, was $300 per pound. Consider
that this price may be unusually high, because legalization would
almost completely cut the costs to producers' of selling the
product since the most of the cost they endured without
legalization were attributed to transportation and other costs
which involve the risk of moving the drugs from their country to
ours. Therefore, there is no producers' surplus. The average
street price of marijuana is $50/1/4Ib. This translates into
$1,760 per pound.
Assume that marijuana is produced by a competitive industry
and that there are constant production costs. The cost of
production is the price outside the U.S. (Mexican prices will be
used.) The street price in the U.S. is a fixed mark-up from the
world price.
Because the domestic consumption figure seems to be heavily
skewed upward, I will assume that only half of that amount is
consumed domestically, namely, 11,825 tons.
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When this f i plugged to the equation, consumer
surplus is cut in half to $140,429,000. The demand curve in the
diagram should be drawn flatter so that area B is much greater
than area A.
The diagram below illustrates the gains from the
legalization of marijuana, holding health care and law
enforcement costs constant.
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~ t . t l 5)11,000
? , ' - { f.xx>/I1'00
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~'X V~ -::. ' 1 . " 6 1 . - -
. : 4 ¥ ' l,be>joG-o"::::; C S ' \ ' ' ' ' . , (j:I11~
Sur,. lvs
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SECTION III - - SOCIETIES' COSTS
LAW ENFORCEMENT COSTS
Each year substantial resources are employed in an attempt
to control the drug problem and deal with its consequences.
Furthermore, resources that might have been used to add to GNP
and overall productivity are being used to produce and distribute
illegal drugs which does not add to productivity.
As shown by the graph below, law enforcement costs allocated
to drug expenditures were over $7 billion dollars (National drug
control strategy, Budget summary, January 1992.) Aside from the
dollar outlays denoted by the table, there are other ~costs"
(opportunity) associated with law enforcement.
These "costs" include the cost of lost physical resources,
such as property damaged or destroyed as a result of drug-related
workplace or traffic accidents or drug crime, and unsafe use of
hazardous chemicals by drug producers. In addition, legitimate
industrial production, such as agricultural and manufacturing
land, labor, and equipment diverted to the production and
distribution of illegal drugs which could have been employed
otherwise and add to GDP. Another "cost" is lost labor
productivity, such as absenteeism and lower productivity of those
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using or affec by someone Ise's use of il 1 drugs, or
ting in labor
th from drug c
not of
ion drug c
victimization, or death from drug related workp or traffic
accidents. Lastly, diminished quality of life caused by illegal
drug use, such as the pain and fering of famil , friends,
and crime victims, urban neighborhood decay, and disruptions in
schools and at work.
These opportunity costs assoc ted with illegal drug use are
not included in calculating costs to society of drug use,
however, these costs, if possible to calculate, could be
substantial. It is important to not the opportunity costs of
illicit drug use, but because of their immeasureability, we can
just say that there would be a negative relationship between drug
abuse and overall production.
Drug crime can be drug defined or drug related. Drug
defined crimes, which are violations of laws prohibiting or
regulating the possession, use, or distribution of illegal drugs.
Drug related crimes I which are not violations of drug laws but
are crimes in which drugs contribute to the offense. These
(drug-related) crimes are the following: pharmacologically drugs
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can induce via t behavior, the cost of drugs induces some users
to commit cr to support their drug habits, and vio often
characterizes re tions among participants in the drug
distribution system.
There are also consequences of illegal drug use that are not
net costs to society. Economically, some individual losses are
"transferred" from one owner to another, they are not lost to
society and, therefore, are not included in the calculation of
social costs. These include: stolen cash and property, welfare
payments and other forms of ass tance, and insurance.
FEDERAL GOVERNMENT EXPENDITURES ON DRUG ENFORCEMENT
The Federal drug control budget exceeded $10.8 billion
dollars in 1991 (as shown by the graph). As illustrated, these
moneys are split amongst several different government agencies.
In 1991, the Federal drug control budget was $42.78 per capita in
1991. This increased $6.38 per capita from 1981. Of the 1991
cost, $28.24 was allocated to law enforcement (National drug
control strategy, Budget summary, January 1992.)
The~9urc~l::>ook of Criminal Justice Statistics (1991) reports
total marijuana arrests as 326,850 and the annual expenditures
for marijuana arrests as 1.7 billion dollars (1990.) It is
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important to note that 10 states do not make arrests for
marijuana possession. If they did, the estimated national
expenditure could rise to an estimated 2.5 billion (1990
Obviously, the United States is spending significant amounts
of money on law enforcement to combat the drug problem and these
numbers, past history would indicate, are not likely to decline.
The following tables show the percent changes in the Federal drug
law enforcement budget from 1981 to 1991. As indicated, the
percent changes have more than relative increases and the
increases in spending have gone up almost seven fold in those ten
years.
State and local legal systems spend about $5.2 billion on
illegal drug control in 1988. This is roughly 10% of all state
and local justice spending.
MARIJUANA DECRIMINALIZATION IN CALIFORNIA
During the early to mid-1970's, California courts were burdened
with a huge number of marijuana arrests (over 38,000 in 1985.)
California then implemented the Moscone Act in 1976 which imposed
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a fine of $100 for possess of one ounce or of marijuana.
The number marijuana cases then went down to 8,000 in 1978.
In 1985, 40,761 citations were issued in California,
producing over $4 million in f It would have cost $2875 to
arrest and try each of those offenders. It is estimated that the
Moscone Act has saved California $100 million annually sits
enactment. The estimated savings from the period 1976-1985 are
the following: $464 million in arrest costs, $441 million in
court costs, #38 million in prison costs, and $14 million in
parole costs.
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Costs of Illegal Drug Use
Public and private crime costs
1 drug expenditures (1991)
All law enforcementInterdiction
Investigations
International
Prosecution
Corrections
Intelligence
State and local assistance
Regulatory compliance
Other law enforcement
Drug prevention
Drug treatment
All research and development
State and local crime expenditures (1988)
Enforcement of drug laws
Adjudication of drug law violators
Correction of drug law violators
State Prisons
Local Jails
Juveniles
Probation, pardon, and parole
Other corrections
Other criminal justice
Millions
10,841
7,1572,028
1,288
640
584
1,265
104
1,016
31
201
1,483
1,752
450
5,240
2,007
123
3,072
1,158
890
224
677
122
38
The above costs of illegal drug use include all illicit
drugs, not only marijuana. According to the Department of
Justice Statistics, the annual expenditures for marijuana arrests
are 1.7 billion dollars. In 1982 dollars, this changes to over
1.2 billion dollars. It is important to note that ten states do
not make arrests for most possession cases.
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Wi the legalization of juana, costs (1.2
billion) will be removed. So, just , soc ty is saving a
great I of money that can be allocated in a more productive
way.
HEALTH CARE COSTS
According to a study done by the Institute for Health and
Aging for ADAMHA estimates that health care to diagnose, treat,
and rehabilitate illegal drug users totaled $2.2 billion in 1985.
Half of this 2.2 was spent on short-stay hospital visits. In
1985, public and private psychiatric hospitals and other alcohol
and drug abuse accounted for an estimated $570 million of total
drug-related health care spending. According to the National
Ambulatory Care Survey, office-based doctors and psychiatrists
provided about $52 million in health care services for
drug-related illness'. In addition, expenses for research,
physician and nurses training, and health insurance
administration contributed $201 million to total health care
costs. The Federal Government absorbed 39% of health care costs
for drug-related illness'; State and local funds paid for 25% and
private sources paid for the rest.
Obviously, holding all exogenous factors constant, the net
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fits of lization outweigh soc 1 and private costs.
However, with lth care, a comparison can drawn between
smoking marijuana and the health care costs associated with
smoking cigarettes which are some 65 billion dollars a year
according to the American Lung Association. This figure is
biased, that is, it takes into account the loss in productivity
associated with hospitalization due to smoking. In addition, the
per year annual health care cost per user of smoking cigarettes
is $1,023 dollars which is also extremely biased.
For simplicity, just assuming that the number of new users
of marijuana double from 9.7 million to 19.4 million, these costs
would increase 19.8 billion dollars.
CONCLUSION
The net benefits of the legalization of marijuana seem to
greatly outweigh the net costs. However, when looking at health
care statistics, one would tend to disagree. Almost $20 billion
dollars in health care costs is definitely much greater than over
$100 million dollars in consumer surplus.
There is no direct link to smoking marijuana and developing
an illness that would call for hospitalization. In addition, the
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statistic for annual 1 care cos in Uni tates from
cigarette smoking is greatly b upward in that they take into
account loss in productivity assoc with smoking
cigarettes.
Ignoring the specious increase in health care costs
associated with smoking marijuana, the net benefits of
legalization would be greater than the social costs.
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BIBLIOGRAPHY
Nadelmann, Ethan A. "Drug Prohibition in the United States:
Costs, Consequences, and Alternatives," Articles. Science.
vol 245.
Knight, Jerry. "Should Drugs Be Legal? An Experiment With
Marijuana Might Give the Answerr" Washington Post,
September 12, 1989.
Kopel, David B. "Marijuana Jail Terms: Costly and Hasty,"
Independence Issue Paper, April 24, 1991.
Morganthal, Tom. "Taking on the Legalizers, If Newsweek, December
25, 1989, volume 114.
Stein, Mark. "Recriminal tion: Lenient Pot Laws Going Up in
Smoke," Los Angeles Times.
Wilson, James Q. "Against the Legalization of Drugs"
Congressional Commentary, February 1990.
DATA SOURCES
Bureau of Justice Statistics. Drugs, Crime, and the .rue ci ce
System, December, 1992.
Department of Justice. Justice Expenditures and Employment in the
U.S. 1988.
Schultz, Dodi. Lung Disease Data 1994, American Lung A
Association.