04 September 20XX
SUMMARY: Economic Analysis, LLC contracted with the bi-partisan Committee on Legislative Initiatives to provide an analysis of the economics of legalization of marijuana. This summary presents the highlights of our findings. With regards the question - Should the Committee on Legislative Initiatives recommend passage of Senate Bill 5786, “The Legalization of Marijuana Act of 2017” - the answer is “yes.”
This conclusion is made based on our economic analysis alone. We make no moral judgments. Milton Friedman summarized this issue best. By his estimate the current system of criminalizing marijuana results in 10,000 homicides a year. He notes that this is the same result as the prohibition on alcohol in the 1920s (Friedman).
Block confirms this view (Block 690). He takes a libertarian position on the question of harm. While there may be a case to be made of an expense associated with drug use, Block points out that the risk is to oneself and freely born (Block 692).
For Beckett and Herbert it is more a question of effectiveness. They report that 44% of all drug arrests in 2006 were for marijuana. More to the point, with all of these arrests availability of marijuana on the street has not been interdicted (Beckett and Herbert 52). Their also note there is no evidence that legalization, or decriminalization, lead to increased use (Beckett and Herbert 53).
Miron focuses on government budgets as they are affected by the criminalization of marijuana. He points out the irony involved. Other substances, alcohol and tobacco for example, are taxed and bring revenue into government coffers. Marijuana is criminalized and requires significant expenditures (Miron 2).
In essence, the status of federal marijuana laws in 2017 is analogous to the situation during Prohibition. In a market based economy when there is a demand for a product there will be a supply to meet that demand. This concept applies whether we are discussing apples and oranges in the United States or the purchase of a handgun in heavily controlled Chicago.
The economics of the system are simple. As with any other commodity, each stage of the supply chain requires that the business at that stage make a normal profit. The grower sells to the broker. The broker sells to the processor. The supply chain continues until it gets to the consumer. The issue with marijuana in the current environment is that each stage of the process demands a “criminality” premium. A 50 pound bag of potatoes, for example, might cost the producer $10 to produce and he sells to the broker for $12.50, a price that covers his expenses plus a normal profit. If that product is marijuana, however, then the “criminality premium” means that the producer needs $20 to cover potential legal bills as well as support his family during his incarceration.
In conclusion, the prohibition against marijuana is not an economic choice made by rational decision makers. Rather, it is a moral choice that has some significant costs associated with it. Our recommendation, as an economic analysis firm is to vote “Yes” on this bill and furthermore, to support it when it comes to the floor.
Works Cited
Beckett, Katherine and Herbert, Steve. “The Consequences and Costs of Marijuana Prohibition.” University of Washington Law, Societies & Justice (2008): i – 60. Web. 13 January 2017.
Block, Walter. “Drug Prohibition: A Legal and Economic Analysis.” Journal of Business Ethics, Vol. 12, No. 9: (1993): 689-700. Web. 13 January 2017.
Friedman, Milton. “Interview with Milton Friedman on the Drug War.” Schaffer Library on Drug Policy. (1991). Web. 13 January 2017.
Miron, Jeffrey. “The Budgetary Implications of Drug Prohibition.” Criminal justice Policy Foundation. (February 2010). Web. 13 January 2017.
