Economic and Social Benefits of Ending Marijuana Prohibition

ECONOMIC AND SOCIAL BENEFITS OF ENDING MARIJUANA PROHIBTION

Arguing Against Marijuana Prohibition In the United States of America

Tom Moore

Western Connecticut State University

Research Methods Comm 390

Prof Saraceno

April 2,2014

1


Abstract

This paper explores the decade old argument about the effectiveness of marijuana

prohibition and the potential positive impact the removal of such prohibition could have

on our nations economy. This argument will be based on a history of failed prohibition

earlier in American history, an examination of current social opinion on marijuana and a

variety of studies highlighting the potential economic benefits from a combination of

both decriminalization to save money in prosecuting citizens for marijuana-related crimes

as well as taxation of the plant as a cash crop. Most figures used in this review relating to

the economy are directly sourced from government websites and research done both

independently to grasp a local perspective and on a larger scale by more notable research

groups.

2


Over the past few decades, it is impossible to argue that the United States of

America has done anything economically but dig itself into a deeper and deeper financial

deficit. Before Ronald Reagan took office in 1981 our national gross debt was

approximately 1 trillion dollars and since then it has skyrocketed to over 16 trillion

(Kellser 2013). An enormous expense that contributes to those ridiculous numbers is the

“War on Drugs” the United States of America has been unsuccessfully waging since the

1970s. Marijuana is considered a large target of this war on drugs in most states of the

nation but considered legal and even medically useful in others. This research paper will

detail several points about how the United States of America has been mishandling

marijuana within the nation. The USA misses out on a huge economy-boosting cash crop

while wasting billions to enforce dated drug laws that go against the majority popular

opinion and scientific fact, all the while exacerbating the racial injustices underlying

American law enforcement policy. These points will include:

1. The Failures of Prohibition

2. The Economic Benefits of Nationally Decriminalized Marijuana

3. The Economic Benefits of Taxable Government Regulated Marijuana

3


1. The Failures of Prohibition

To better understand the current economic failure of the prohibition we are facing

in 2014 we must look back to the first failed prohibition attempt: the alcohol prohibition

of the 1920s. Although nationally alcohol prohibition did not begin until January 1920,

there was a prohibitionist movement brewing (no pun intended) as far back as the mid-

1800s (Thornton, 1991). It wasn’t until the 18th Amendment was ratified (which stated:

the manufacture, sale, or transportation of intoxicating liquors within, the importation

thereof into, or the exportation thereof from the United States and all territory subject to

the jurisdiction thereof for beverage purposes is hereby prohibited) that the entire nation

was subjected to prohibition of alcoholic beverages (Cornell Law). To piggyback on the

loosely worded 18th Amendment, the Volstead Act - also known as the National

Prohibition Act of 1920- was added to impose the original amendment’s intent since it

never outlawed the consumption of alcohol, just the production and distribution.

The spark behind the prohibition movement had much to do with religious, social

and scientific surges of the Progressive Era, a time where Americans redefined all aspects

of their lives. The main reasons prohibitionists such as the members of the Anti Saloon

League (ASL) gave for their argument for temperance were based off personal beliefs

and opinions drawn from the religious –mostly Protestant—doctrines against drinking

spirits. They expanded their arguments in order to gain more secular supporters. In order

to try to appeal to the general public, the ASL insisted that national prohibition would

produce “major economic benefits by reducing illness, absenteeism and accidents and

increase expenditure on consumer goods” (Hall, 2010). Other reasons given in support of

prohibition were for health reasons as well as to attempt to lower the crime rate. Despite

4


these intentions, the results over the course of prohibition from 1920 until 1933 were

quite the opposite.

What prohibitionists failed to understand was that regardless of the law they

could not alter the concept of supply and demand: people were going to want to drink

alcohol regardless of whether it was legal or not and they were going to turn to whomever

could supply it. Not only did the consumption of alcohol remain unhindered throughout

most of prohibition,

organized crime was born to

fill the void of the now

illegal alcohol distributor.

As seen in the graph below

(Warburton, 1932), although

initially prohibition seemed

to limit consumption of alcohol, soon enough the rates skyrocketed to similar levels of a

decade earlier before nation wide prohibition. On top of the consumption being

unchanged, the development of organized crime made the crime rate drastically increase.

Before the start of prohibition there was roughly 4,000 federal convicts, fewer than 3,000

whom were housed in federal prisons, however by the final year of prohibition the

number of federal convicts had increased 561% to 26,589, and the federal prison

population had increased 366 percent (Wooddy, 1934, p. 95). A shocking two thirds of all

prisoners sentenced in 1930 were convicted of violations against the Volstead Act. Not

only had prohibition failed to save the morality of America, it was outright wasting its

money. According to a study conducted by Charles Hanson Towne in 1923 which was

5


detailed in his book “The Rise and Fall of Prohibition: The Human Side of What the

Eighteenth Amendment Has Done to the United States”, in 30 major U.S. cities all of

which had over 10 million people, the number of crimes increased 24 percent between

1920 and 1921. During that period 11% more money was spent on police and 102% more

people were arrested for violating Prohibition laws. Despite increased funding for law

enforcement there was no reduction in drinking: peopled arrested for drunk and

disorderly conduct increased 41% and arrests of drunken drivers increased 81% (Towne

1923). Homicides and incidents of assault and battery increased 13 percent (Towne

1923).

Clearly the nation’s effort to prohibit alcohol was a failed one so in 1933 the 21st

Amendment to repeal the 18th Amendment was ratified. However just four years later,

the Marijuana Tax Act of 1937 began a national prohibition that would last for over 75

years and a state-to-state prohibition that currently exists to this very day. But how did

marijuana come to be prohibited so early on in American history, well before it became

widely popular in the 1960s? There are two schools of thought as to why it was targeted:

one, a racially biased attack, and the other, a personal belief that was forced upon a naive

nation long before the days of public information on the topic.

Mark Thornton in his book “The Economics of Prohibition” does an excellent job

explaining the two hypotheses. The “Anslinger Hypothesis,” which was developed in the

1950s by Howard Becker, believed that the Federal Narcotics Bureau, headed by the

former Prohibition commissioner Harry Anslinger, played an ‘entrepreneurial’ role in

bringing marijuana to the attention of the general public. After the Great Depression

occurred in 1929, limiting Bureau funding, and the end of prohibition of alcohol in 1933

6


made the FNB’s work less crucial, it may have been possible that Aslinger pushed for

prohibition of marijuana simply to keep the FNB relevant and alive while other Bureaus

were being cut due to lack of government funding (Thornton, 1991). Anslinger was also

the man who started much of the early anti-marijuana propaganda such as the idea of

“killer weed” so part of his reasoning may also have come from a personal moral

standpoint and personal feelings of racism (Inciardi,1986).

The second theory behind such an early prohibition has to do with racial bias

towards Mexican immigrants, blacks and low class urbanites (Thornton, 1991). With the

Great Depression leading to wage cuts across every occupation, Mexicans and other

minorities were willing to work for much lower wages than the white workers of the past.

Displacement of white unskilled workers by immigrant workers has long led to racial

animosity. The Marijuana Act of 1937 may have targeted these groups as a measure of

hate and a means to get these early marijuana smokers (drinking was too expensive for

many of them to afford) harsher legal punishments (Thornton, 1991). As this paper will

later discuss, racial stereotyping in the enforcement of marijuana laws persists to this day,

with drug laws being used as a way to maintain control over minority populations.

One additional theory that Mark Thornton suggested is that the prohibition of

marijuana did not start to combat the smoking of marijuana but rather to halt the

production of hemp as a natural resource in favor of other resources such as cotton and

petroleum. An example he gives is that “chemical industries and companies such as E.I

du Pont de Demours that produced artificial fibers and petroleum based drying oils (used

in paints and shellac) would potentially benefit from the prohibition of marijuana. A

prohibition against marijuana would provide chemical based production and alternative

7


natural sources of oil and fibers with an economic advantage. [T]he DuPont family’s ….

Company held a new patent on a process for wood pulp paper which would have had to

compete against hemp-based paper had marijuana not been prohibited in 1937”(1991).

Based off this theory it would not be surprising if early policy makers, especially in the

wake of the Great Depression were pressured (or swayed financially) to benefit the

economic growth of certain companies.

In the 1970s, Richard Nixon assembled a thirteen-person committee entitled the

“National Commission on Marihuana and Drug Abuse” in order to conduct research

before enacting any policy changes (Christiansen, 2010). To lead the committee Nixon

enlisted University of Virginia School of Law professor Richard J. Bonnie as well as law

professor Charles H Whitebread II. Bonnie and Whitebread found that “neither

philosophy nor science have been shapers of drug policy; instead, the central influence on

government action has been the social context—political, economic, and

cultural”(Christiansen MA, 2010). Additionally they found that the preconceived notion

that “marijuana led to crime” was also false proven by a five-year sociological study

entitled “The La Guardia Report” (after the then mayor of NYC) conducted by doctors

from the New York Academy of Medicine. The study concluded that marijuana “was not

the determining factor in the commission of major crimes and that juvenile delinquency

was not associated with the practice of smoking marijuana”(Christiansen, 2010). The last

part of their findings was that there was no evidence that marijuana had any detrimental

effects on the user worse than any legal drugs or alcohol; the findings even stated that

marijuana might be less harmful.

8


Despite the findings of the National Committee on Marihuana and Drug Abuse

that marijuana should be decriminalized with punishments comparable to a “parking

ticket”, Nixon did not like the results and refused to publically accept the report. His

ignorance based off personal belief is a prime example of how a politician’s personal

agenda have dictated marijuana laws in this nation since they were first created.

Today in most of America this ban on marijuana still exists. Despite the lessons

we learned from the failure of alcohol prohibition both in the forms of economic losses as

well as social rejection Americans refuse to admit their mistakes and move towards better

drug policies. The reasons that still remarkably exist in support of prohibition are nearly

as outlandish as they were at the time of induction of the policy especially considering

that as of 2014 two states have legalized recreational marijuana use and 20 others

condone the medical value.

One such “argument” is that marijuana is a “gateway drug” that if used would

open up the potential users to use other drugs; however, a 2010 study conducted by lead

researcher Dr. Karen Van Gundy of the University of New Hampshire disproved this

theory. Based off data collected from 1,286 Florida public school students she found that

“life circumstances” such as economic hardships stress and unemployment have far

greater contributing factors to trying harder drugs than does first using marijuana (2010).

Dr Van Gundy is quoted saying “There seems to be this idea that we can prevent later

drug problems by making sure kids never smoke pot … But whether marijuana smokers

go on to use other illicit drugs depends more on social factors … not so much whether

they smoked a joint in the eight grade.” It seems obvious even to the non-specialist that

the severity of hard drugs like cocaine and heroin might not be related to smoking

9


marijuana; hardships in someone’s life might drive them to try hard drugs; harder drugs

do not have a similar effect as a user would get consuming marijuana so there would be

no need to ‘chase the first high’ as there are with other closely associated drugs (ex.

smoking crack opposed to blowing cocaine).

Another popular myth pro-prohibition supporters love to rely on is that

“marijuana fries your brain” and makes it hard to remember things. According to a 2012

meta-analysis of 33 studies conducted by a pair of researchers from the University of

Central Florida there is no direct correlation between moderate or heavy marijuana

consumption and any negative effects on the cogitative skills of users (NORML). They

found that there is “ small yet significant” neurocognitive effects within hours of

consuming marijuana but that there is “no evidence of lasting effects on cognitive

performance due to cannabis use" in subjects whose stopped using marijuana for a period

of at least 25 days (NORML). In conclusion they found these results fail to support the

idea that heavy cannabis use may result in long-term, persistent effects on

neuropsychological functioning.

Additionally to the Central Florida’s study, another study in 2011 conducted by a

team of Australians researchers from the University of Melbourne and the Australian

National University Center for Mental Health Research took it a step further. They

assessed various measures of memory and intellect in over 2,000 self-proclaimed

marijuana users versus non-users over an 8-year span and came to this conclusion:

"Only with respect to the immediate recall measure was there evidence of an improved

performance associated with sustained abstinence from cannabis, with outcomes similar

to those who had never used cannabis at the end point. On the remaining cognitive

10


measures, after controlling for education and other characteristics, there were no

significant differences associated with cannabis consumption." They concluded,

"Therefore, the adverse impacts of cannabis use on cognitive functions either appear to

be related to pre-existing factors or are reversible in this community cohort even after

potentially extended periods of use."(NORML).

So with recent studies to support debunking both the myth about brain function

and about gateway drugs, what else could prohibitionists use as an excuse to argue the

necessity of keeping a plant illegal? Personal moral opinion about the negative social

consequences marijuana has on users such as the stigma that “pot heads never get out of

their mothers basement”. To argue against that look no farther then the President of the

United States of America Barack Obama or the past two presidents before him George W

Bush and Bill Clinton, all three of who admitted to using marijuana in their teenage

years. If all three of these two-term serving presidents were deemed responsible enough

to lead the world’s most powerful nation, largest economy and strongest military then

why are thousands of young adults being arrested for doing what they did (Vanden

Heuvel, 2013)? Had any of these leaders been in the wrong place at the wrong time in

possession of the same plant that millions of others have been arrested for perhaps they

would have never had the opportunity to achieve the accomplishments they have and

instead be another statistic in the war on drugs as so many others become.

A final example of failed marijuana propaganda comes from Colorado where law

enforcement officials warned of increased crime rates across the board if marijuana was

legalized for recreational sale via Amendment 64 (Adams 2014). Luckily voters made

the right decision, passed Amendment 64 and now have proven statistics to back up the

11


argument that there is no negative correlation with crime increase and legal marijuana

sale. Recent crime data shows that violent crime actually diminished by about two-and-a-

half percent in the months of January and February when compared to early 2013.

Interestingly, robberies experienced a six percent decrease, while stolen property dropped

by an impressive 13 percent (Adams 2014). There is no sure way to prove these lowered

crime rates may be contributed to by people feeling the calming effects of marijuana and

a general lowered sense of hostility. But the knee-jerk predictions of crime increase were

clearly wrong and foolish to assume in the first place. However, if only two months of

data is not enough to silence the critics of marijuana decimalization a quick look to the

country of Portugal (who in 2001 decriminalized position of all drugs, not just marijuana)

could help paint a clearer picture of the possible benefits of drug law reform. Instead of

incarcerating users of harmful substances and punishing them for their addiction,

Portugal adopted a system, which relies on offering drug users optional drug consoling

and rehabilitation programs (Szalavitz 2009). The result of decriminalization was that

Portugal had the lowest rate of lifetime marijuana use in people over 15 in Europe at

10%. Vs the most comparable figure in America is in people over 12 at 39.8%.

Proportionally, more Americans have used cocaine than Portuguese have used marijuana

(Szalavitz 2009).

Personal beliefs and issues of morals can be argued forever; however, economics

is more of a black and white numbers argument. Regardless of a person’s individual

stance or viewpoint on the issue of marijuana reform, he would be hard pressed to argue

against all the economic benefits America stands to reap. The following two sections will

outline both how America could save money ending the war on marijuana and make

12


money by embracing it as a taxable cash crop instead of letting criminal enterprises reap

the fiscal benefits.

2. The Economic Benefits of Nationally Decriminalized Marijuana

The economic benefits of decriminalizing marijuana nationally are extremely

numerous and the national public support on the issue is at record highs. According to a

Pew Research Poll released in late March of 2014 there is a significant shift in public

opinion compared to the past years. Nearly 70% of Millennials (people born between

1981 and 1996) reportedly offer their support for federal legalization (Adams, High

Times, 2014). Even the majority of the older generations side with ending marijuana

prohibition -- 53% of Gen X and 52% of the Baby Boomers say they believe the time has

come to change the laws (Adams, High Times, 2014). The majority of all voting

demographics are in favor of legalization yet still the American government insists on

continuing with dated drug laws based off 1930s racism and personal agendas. As seen in

the summary of the alcohol prohibition of the 1930s, prohibition is a costly policy with

limited results. Before

touching on ways the

government could

MAKE money off of

marijuana, let us first

examine why they are

LOSING money by

continuing this policy.

Figure 1 (Wing, 2013)

13


Every single year the government wastes billions incarcerating its citizens (making us the

highest prison population in the entire world and actually accounting for 25% of the

entire world's prison population) (Wing 2013). As seen in the graph Figure 1, America

imprisons 716 out of every 100,000 people. For a country that is trillions of dollars in

debt, America could be spending its money on much more important things than mass

incarceration of its citizens. It is horrifying to consider the fact that America, proclaimed

“the land of the free,” has a higher rate of incarceration than communist nations such as

Cuba and North Korea. In a 2007 study conducted by George Mason public policy Ph.D

Jon Gettman entitled “Lost Taxes and Other Costs of Marijuana Laws,”- estimates that

marijuana offenses, which are 5.54% of all arrests, take an equal share of the country’s

$193 billion in annual criminal justice expenditures. Marijuana decriminalization would

equal roughly $10.7 billion in annual savings.

According to the American Civil Liberties Union (“The Uncovery”,2012) in 2010

America spent $3,610,000,000 enforcing marijuana laws. That same year, according to

the FBI uniform crime report, there were 1,638,846 people arrested for drug charges and

of those 852,839 were for marijuana. But what is truly shocking is that of that 852,839, a

startlingly 750,591were arrested solely for possession, an insanely high 88%. While law

enforcement focused their resources and funds on arresting people for possessing a plant

that is currently legal in 2 states and used for medicinal purposes in 20 (21 if including

the nation’s capital, Washington, DC) they only managed to arrest 552,077 people for

violent offenses (FBI).

These outrageous numbers are made more shocking by one statistic: although

blacks and white use marijuana at the same rate, black people are 3.47 times more likely

14


to be arrested than whites (“The Uncovery”,2012). This racist trend speaks volumes on

how American law enforcement still targets minorities. In New

York, a state that employs the stop and

frisk policy that is highly targeted

towards African Americans and Latinos,

97% of marijuana arrests were for

possession.

An important question is why is

the government wastes money on

something that the public does not agree

with or is at most apathetic towards). In a survey conducted locally amongst over 30

Western Connecticut State University Students aged 18 to 34 nearly 65% percent said

they felt marijuana should be legalized

(Figure 2) while another 22% did not care

about the issue. Of these same students

over 96% (Figure 3) said they knew over

5 people who smoked marijuana

while70% smoked weed themselves

(Figure 4), which is a clear indication that

current laws are not prohibiting people

who choose to consume marijuana from consuming marijuana. 70%

of these students stated that these users of marijuana they are familiar had not affected

them at all by their marijuana use, while over 20% said they were “positively

Figure 2

Figure 3

15


affected”(Figure 5). While limited in its scope, this anecdotal study confirms marijuana a

very victimless crime. American widely believe that what a person does behind closed

doors in their free time should not matter if it does not have any negative consequences

on other people; increasingly, this argument for same-sex marriage has come to be

accepted (Feldstein, 2004). Fortunately for those in support of marijuana’s potential

benefits to the economy, there are two states currently showcasing just how beneficial it

could be for the rest of the nation. Additionally, a variety of economists’ studies back the

movement.

Figure 4

Figure 5

16


3. The Economic Benefits of Taxable Government Regulated Marijuana

In a time where Americans are struggling to find jobs and pay bills, America’s

concern should be utilizing all their resources to make as much money for our nations

economy as possible. If America removes any kind of moral arguments about whether its

“right or wrong” to embrace marijuana as an economic savor (which it should

considering they make billions yearly off of far more harmful products such as big

tobacco and alcohol) it is clear to see there is a lot of money to be made. There are a

variety of estimates on how much money the illegal sale of marijuana brings in, but it

ranges anywhere from low end estimates of $33 billion dollars a year to Jon Gettman’s

estimate (who is lead marijuana researcher and currently a professor at Sheppard

university) of 100 billion a year (Bernasek, 2014). Considering the cigarette industry is a

$91 billion dollar a year industry and alcohol is a $97 billion dollar industry illegal

marijuana is close behind or perhaps even in front but the government does not benefit

from it. If anyone were to suggest an outright prohibition of tobacco or alcohol in this

day and age, lawmakers would be up in arms about the loss of jobs in farming and

manufacturing; and yet, lawmakers have failed to see the similar role marijuana growth

and distribution could play.

Whether or not personally one agrees with the moral aspect of marijuana, it is

now among the largest cash crops in the U.S., worth more than both corn and wheat

combined. Additionally, according to the Tax Policy Center, marijuana could add

17


another $9 billion dollars in tax revenue on top of the taxes vendors would be forced to

pay to the government for operating their stores (Bernasek, 2014).

Fortunately for the sake of the argument for whether or not marijuana would be

economically profitable for the entire nation, there are a few states whose preliminary

legalization offers a taste of what could be an extremely lucrative business opportunity.

In the first month alone of legalized pot sales in January 2014 in Colorado, in Denver

alone there was over $14 million dollars’ worth of recreational sales on top of $31.5

million dollars in medical marijuana sales (Adams, 2014). A few months in, although

lower than estimated, there are still large economic gains being made and positive

outlook on the future. According to Jeffery Miron, Senior Lecturer and Director of

Undergraduate Studies in the Department of Economics at Harvard University as well as

a senior fellow at the Cato Institute, in an article for The Cannabist, after Denver released

its first data on the tax, fee and license revenue from legalized marijuana sales the overall

annual revenue would be $42 million dollars (2014). Although these numbers are lower

than expected Miron is optimistic considering that there are bound to be an increased

number of retail shops opening up and points out the fact that ANY money raised legally

is better than allowing unregulated earning on the black market.

The economy would benefit not only from the actual sale of marijuana itself, but

also boost other aspects of society. One thing to consider is the amount of legal, taxable

jobs the legal marijuana industry would create. Take into consideration marijuana “chain

store” weGrow, who with every opening franchise creates 75 jobs (Cannon, 2011).

Needless to say there would be many other marijuana distribution stores that would

create similar job opportunities in every new state that adopts legalization. There would

18


be jobs for farmers in charge of growing marijuana, construction workers employed by

having to build marijuana stores and grow ops, advertisement firms based on the

marketing aspect, teachers in trade schools educating would-be farmers the ins and outs

of cultivation, increased jobs in the financial market for all of the marijuana stocks bound

to arise, etc. The possibilities are endless.

Another way that legalized government regulated marijuana would help the

economy is simply lowering the costs for the consumer. Matthew Yglesias, executive

editor of Vox and author of “The Rent is Too Damn High”, believes that if pot were to

become legal nation wide Americans could expect much cheaper prices than anticipated.

The only experience people have buying “legal” marijuana is through medical

dispensaries or ‘coffee shops’ in the Netherlands that have similar pricing to an average

street dealer. However what is being overlooked is the fact that neither California nor the

Netherlands permit growing or wholesale distribution of marijuana as a legal matter

(Yglesias). Since marijuana is currently illegal to grow for the general public, those who

do choose to grow marijuana are forced to do so in a very expensive and secretive manor

making it highly cost inefficient (hydroponically or in a small scale grow operation).

According to Yglesias, Canada currently cultivates industrial hemp for around $500 an

acre which if replicated in America equal about 20 cents a pound (although that would

turn out to be mid grade buds at the very best). Based off these estimates it is fair to

assume for high-grade marijuana it would cost anywhere from $5,000-$20,000 an acre,

which would equal an amazing mere $20 per pound (Yglesias). California NORML

Director Dale Gieringer suggests in a paper addressed to the California Public Safety

committee that users should expect marijuana to drop down to similar pricing as other

19


popular herbs such as tea or tobacco (2009). He predicts the price to drop 100% from the

average price of $300 dollars an ounce (Gieringer, 2009). This all leads to more money

remaining in consumers’ pockets, which they are then able to spend on other goods in

other industries, overall boosting the entire economy.

Conclusion

The evidence to support the need to legalize marijuana nationwide is

overwhelming. Prohibition of marijuana has become more of hindrance on the personal

liberties and freedoms of Americans instead of a deterrent of marijuana use. Based off of

facts and studies, prohibition is not worth the cost of operation, driving America further

into debt while having no clear-cut effect on prohibiting the use of marijuana. Hopefully,

future policymakers can take an open-minded look at prohibition and realize that it has

never worked throughout history, goes directly against current social opinion, goes

against a modern theory of medicine, and is costing the government billions of dollars

yearly to enforce. It is time for politicians to put aside their personal beliefs and past

stigmas of cannabis and realize all the benefits it could have for the USA. America owes

it to itself to prosper from something that is already proven to generate plentiful

economic gains across the board in a variety of categories. The money America needs is

right in front of its noses; it is just simply a matter of whether or not they are smart

enough to capitalize on what could be the savor of the future of the American Economy.

20

Documents

Economic and Social Benefits of Ending Marijuana Prohibition