Economic value of cannabis reform

Extract below from a paper published online today by my colleague Dr Stephen Thornton of Bluegreen Economics  – a preliminary examination of the Economic and Social Benefits and Costs of Legalising Recreational Cannabis in Queensland. Nice job Dr Thornton, tackling a large topic very efficiently…

“An increasing number of countries and states are taking a more health-focused and less justice-focused approach to cannabis regulation on the back of the well documented failed ‘war on drugs’ by either decriminalising recreational cannabis use or legalising it by adopting ‘regulate and tax’ schemes…

We undertook a preliminary examination of the main, likely economic and social benefits and costs of a Queensland recreational cannabis market (QRCM) by using data collected by government agencies as well as drawing on data from the Colorado Department of Revenue. We find that both the state government and cannabis consumers would realise a significant net benefit under a regulated and taxed recreational cannabis scheme. For government, there is likely to be increased tax and fee revenue of around $90 million in the medium term (three to five years) and significant savings in terms of decreased police, court and prison costs. The economy is likely to benefit from a new cannabis industry, depending on the particular regulate and tax model adopted, with new jobs created. These benefits would offset some additional costs to government in terms of the establishment and ongoing administration and compliance of the scheme, as well as a likely small increase in mental and physical health costs associated with new consumers or existing consumers who increase their usage. These additional health costs could be mitigated by a public education campaign.

For consumers, once purchasing cannabis on the black market and at risk of being fined and imprisoned with the associated police record and social stigma limiting their future job prospects, significant benefits would be realised by purchasing from licenced premises. They would also benefit in terms of product safety and in some cases lower transaction costs by conveniently purchasing from local businesses. Importantly, they are also likely to realise a financial benefit via a consumer surplus as the scheme matured and the price of cannabis decreased to below the black-market price in a competitive environment…”