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I heard a Conservative Party advertisement on the radio the other day attempting to depict the pot legalization policy proposed by Justin Trudeau’s Liberal party (and every other major Canadian political party) as if, and I quote directly, “the policy will put marijuana in the hands of young adults like tobacco or alcohol.”
So I’m not Liberal or a Conservative, but I think the advertisement is false and I hope sober voters see beyond the pernicious haze. Pushing practicalities aside, there’s two things I want to talk about today:
First: Pot economics. The demand for pot is inelastic. Pot smokers will buy pretty much the exact same quantity of pot, and smoke relatively the same amount regardless of the price. Nobody decides that they want to smoke more if the price is low (that’s simply undesirable), and they generally won’t decide to smoke less when prices are high because pot isn’t easily substitutable. So what if we’ve established pot as an inelastic good? Well, with inelastic goods, as any public finance textbook will tell you, this is a great opportunity for a tax. As we’ve discussed this does little in changing the demand for pot, so consumers will continue to buy it, but now we have a socially effective, new, cool way of collecting large amounts of tax revenues. Let’s dig deeper into what this tax can do. I think at substantially high real prices, pot begins to become elastic because the substitution effect starts to outweigh the income effect for particularly low income consumers, possibly teens or low income households. What it does to these low income individuals at high, real prices is it forces these consumers to choose not to put pot in their basket of goods – more or less the intended outcome. What increasing the price of pot does is makes pot a more normal good, so that pot smokers must have a decent income in order to smoke. I think this is sort of the effect we see with cocaine – it’s so expensive that it never really comes into anyone’s basket of goods because there are so many better things they could buy with such a large portion of their disposable income. This is a desirable outcome because it gets pot out of the hands of low income individuals and households, as seen with cocaine. This isn’t me being classist, but rather pragmatic. Let’s not forget that teenagers and young adults are included in the group I’m referring to as ‘low income individuals.’ Smokers will smoke, but I think at the point where smokers can’t afford to smoke we start to really affect the decision-making calculus of whether this person is going to buy another pack of cigarettes.
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Second: Illegal drugs are more accessible than legal drugs. The outcome the Conservatives claim is either true or completely false. I will tell you the latter. I think the only way legalization puts pot in the hands of young children is if you have someone else buy it for you. In the case where you have parents or older siblings/friends that are willing to buy pot for you from this dispensary, you are the pot consumer that was going to get the pot either way. The harms of these cases exist in both worlds, but now in one you must pay the price of taxation and don’t have the risk of criminalization or dealing with a criminal. Although en masse, I think the fact that the market for pot is strictly underground makes it easier to get. There’s something to be said about the fact that I could buy pot in my high school cafeteria, whereas the process to buy alcohol and tobacco was much more rigorous and regulatory. So pot is now more difficult to get and more expensive – I think this actually makes the teenager think twice about the feasibility of smoking pot regularly. I also think regulation poses a huge problem for profitability and increased barriers to entry for secondary market retailers (aka drug dealers.)
Don’t get me wrong, I don’t think the State should be backing pot smoking by any means, but I think a pragmatic approach is the correct one. The State fighting pot hasn’t made people think any less of using it. The judicial repercussions of getting caught with pot aren’t that heavy and nor should they be. I think the best way to get the desired outcome (less pot smoking teens) is to make the good unattainable and expensive – two things that come from marijuana reform.
