Following ballot measures last November, producing and selling marijuana are now legal in both Colorado and Washington state. Several other U.S. states have decriminalized simple possession of marijuana, or allowed its medical usage. The latter is also the case in Canada.
The financial consequences of a complete and general legalization across the continent would certainly be huge.
Over the past couple of decades, billions of dollars have been spent fighting this unwinnable war, which has fuelled corruption, organized crime, and violence. Thousands of people are killed in drug fights every year in Mexico. In Canada and the U.S., it has justified growing government intrusion in commercial and private life, from the money-laundering bureaucracies to civil forfeiture laws.
Despite this, recreational use of drugs is as popular as ever.
The simple economic fact is that when there is a demand, a supply will be forthcoming — legally or illegally. We should therefore reconcile ourselves with what economists call “consumer sovereignty,” that is, let people consume what they want, and let’s prosecute only real crimes.
From an economic perspective, it would be a lot more profitable for everyone if we stopped wasting resources trying to suppress this trade, and instead let it develop legitimately and have governments regulate and tax it. I don’t like taxes, but in that case, that would mean a huge improvement in terms of economic efficiency.
In British Columbia only, where a lot of marijuana is illicitly being grown, legalization could generate $2.5 billion in government tax and licensing revenues over five years, according to a recent research paper from Simon Fraser University.
Both the Wall Street Journal and The Economist have been convincingly arguing for many years against the war on drugs. And for the first time in more than four decades of polling on the issue, a majority of Americans now favour legalizing the use of marijuana. In Canada, public support has also been high for several years.
My point is not that drug consumption is a good thing or that I encourage it, but merely that any rational person can see that the current policy has not been a success despite all the money spent and all the people jailed. It is high time we rethink our strategy in this regard. Let’s end the war on pot and make money with it instead.
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