The Economist – Executive Summary

Cannabis Business

In November 2012 Colorado and Washington became the first states fully to legalise cannabis.

In August 2013 the federal government officialy indicated that it would not stand in the way of their experiments so long as they were properly regulated.

Moreover, the decision throws open the gates for other states to pursue similar cannabis legalization efforts, so long as they include robust state systems of marijuana regulation.

With several more states likely to legalise cannabis in the coming years it is little wonder gold-rush metaphors are being thrown around. The legal cannabis market was worth $1.2 billion in 2011. By now it will be much bigger. Some look forward to a fully legalised industry worth $100 billion or more.

stoner states

Marijuana legalisation

In November 2012 Colorado and Washington state became the first jurisdictions in the world to legalise marijuana for recreational use.

On August 2013 the attorney-general told the governors of Colorado and Washington that the Department of Justice would not seek to block their experiments. Furthermore, a memo was issued to the 93 US attorneys, who enforce federal law in the states, saying that in states that have legalised marijuana (including the medical sort, 20 have done so: see map) they should focus on eight priorities, such as keeping the drug out of children’s hands and stopping it from crossing state borders.

The attorney-general calls for robust state systems of marijuana regulation replacing illegal activity with tightly run markets, that are compliant with the Department’s eight priorities, thus accommodating public-health aims with the realities of state-legalised marijuana.

The conversation has changed. Indeed, with most Americans backing full legalisation, and more states likely to remove their bans in the next few years, investors are taking a keen interest. Troy Dayton, the boss of Arcview, an angel-investment group with interests in marijuana, says his phone has barely stopped ringing since Mr Cole issued his memo.

Economic Arguments

Many have argued that a legal cannabis market allowing for production, distribution and consumption would constitute a substantial economy, with large amounts of income and profits.

In 2005, more than 530 distinguished economists called for the legalization of cannabis, including conservative economist Milton Friedman and two other Nobel Prize-winners. They stated that marijuana legalization (replacing prohibition with a system of taxation and regulation) would produce tax revenues of at least $2.4 billion annually if marijuana were taxed like most consumer goods and as much as $6.2 billion if taxed similarly to alcohol or tobacco. Tax revenues of this magnitude would indicate a 2005 market of at least $18 billion annually (irrespective of the taxation regime).

In 2006, the United Nations Office on Drugs and Crime released the 2006 World Drug Report, which stated the North American cannabis market is estimated to be worth $60 billion annually.

In 2006, a study by Jon Gettman entitled “Marijuana Production in the United States” was published in the Bulletin of Cannabis Reform. The report states cannabis is the top cash crop in 12 states, is one of the top three cash crops in 30 states, and is one of the top five cash crops in 39 states. Gettman estimated the value of U.S. cannabis production at $35.8 billion, which is more than the combined value of corn and wheat.

Drugs that cause most harm

Most people would agree that some drugs are worse than others: heroin is probably considered to be more dangerous than marijuana, for instance. Because governments formulate criminal and social policies based upon classifications of harm, the study published by the Lancet makes interesting reading. Researchers, led by a former chief drugs adviser to the British government, asked drug-harm experts to rank 20 drugs (legal and illegal) on 16 measures of harm to the user and to wider society, such as damage to health, drug dependency, economic costs and crime.

Alcohol is the most harmful drug, scoring 72 out of a possible 100, far more damaging than heroin (55) or crack cocaine (54). It is the most harmful to others by a wide margin, and is ranked fourth behind heroin, crack, and methamphetamine (crystal meth) for harm to the individual.

dope harm overzicht

“Drug harms in the UK: a multi-criteria decision analysis”, by David Nutt, Leslie King and Lawrence Phillips, on behalf of the Independent Scientific Committee on Drugs. The Lancet.