Law enforcement officials in Colorado and Washington will soon be grappling with the question of how to police illicit sales and production of cannabis after the legal cannabis market is in place. The logical approach would be to prioritize illicit market enforcement immediately after legalization takes effect. The enforcement and resultant busts would be coupled with press releases full of head-shaking quotes along the lines of “I can’t understand why people keep engaging in crime now that recreational marijuana is legally available”. Such tactics would help undermine the black market by driving people into the legal cannabis market.
However, once there is a legal market in a drug, enforcement against illegal markets becomes much more challenging. When a drug is illegal, mere possession is prima facie evidence of crime. But when the substance can be legally possessed, law enforcement must catch someone in the act of illegally selling, buying or producing the substance to make an arrest, which is much more difficult.
Further, smart criminals will seek legal cover, making law enforcement’s task even more challenging. If you operate a regional marijuana distribution ring for example, you’d be well advised to buy a license to operate legally in Colorado or Washington. Your subsequent possession of marijuana and associated equipment will thus appear legal sans some careful investigative spadework, which police may not have the resources to undertake.
Barring some unusual foresight by and targeted resources for law enforcement in Washington and Colorado, risk of arrest will probably drop rather than rise in the illegal cannabis market post-legalization. Reduced risk of arrest will make the black market less unappealing to customers than it was in prior years. This drop in legal risk will help the black market survive, particularly as its prices will be likely be dropping at the same time.
Alison Holcomb says
As a preliminary observation, this article may rest on an inaccurate assumption: that the act of buying marijuana was ever illegal in Washington State. It wasn’t. Only “manufacture” (growing), “delivery” (includes both selling and gifting), and possession were crimes. This is relevant to the analysis of how policing resources are deployed because now that adult possession is fully legal, no “careful investigative spadework” is necessary or warranted in determining how the adult came to be in possession of the marijuana. Buying marijuana is not and never has been a crime under Washington state law.
Also, unlike the situation in Colorado, home production of marijuana is not legal under Washington’s new marijuana law, so investigation of the legality of a residential or unlicensed garden is no more complicated now than it was before November 6, 2012. Generally speaking, it is difficult to see how investigation of illegal production and selling is more difficult in a regulated market than in an unregulated market. If you have a license, law enforcement knows where you are and can inspect your premises and books to check regulatory compliance. In the black market, law enforcement has to find you first.
“Reduced risk of arrest will make the black market less unappealing to customers than it was in prior years.” Why? As explained above, buying has never been a crime, regardless of the source. Given the new option of buying regulated, quality-controlled product from a legal source, why would the black market now be less unappealing? “This drop in legal risk will help the black market survive, particularly as its prices will be likely be dropping at the same time.” This would only be true if black market prices managed to always drop lower than the legal market’s. Given that illegal (unlicensed) manufacture and delivery continue to be felonies, and the property of those engaging in illegal marijuana commerce continues to be subject to forfeiture, slashed profit margins would make the black market increasingly unattractive to suppliers — just as bootlegging and moonshining became unattractive ventures after repeal.
Three factors impacting the policing question that weren’t mentioned in this piece should be considered:
1. Washington’s new marijuana law dedicates $5 million annually off the top of the new marijuana excise tax for administration and enforcement by the state’s primary regulatory agency;
2. As with the repeal of alcohol Prohibition, consumer demand will shift and likely have a greater impact on the black market than policing; and
3. Before the passage of Washington’s new marijuana law, the overwhelming majority of state marijuana law enforcement — 90% of marijuana arrests — was for simple possession, not manufacture or delivery. Now that simple possession is legal for adults 21 and older, significant policing hours have been freed up and could, should local jurisdictions so desire, be refocused to enforcement against unlicensed marijuana producers and distributors.
Alison Holcomb
Criminal Justice Project Director
ACLU of Washington
Initiative 502 author
Freeman says
As with the repeal of alcohol Prohibition, consumer demand will shift and likely have a greater impact on the black market than policing
This. There are still moonshiners to this day, but it’s such a tiny problem that it requires very little policing. We experienced a huge violent black market shrink to today’s proportions, and it wasn’t law enforcement that achieved that feat, but rather the natural shift in consumer demand once we licensed and regulated the market. The consumer’s incentive to deal with black market characters evaporates when you can just go pick some up at the pot shop. When you consider that consumer demand remains strong enough to continue supporting and even expanding the black market in the face of well over a half-million possession arrests annually, it’s easy to see where the power lies between law enforcement and consumer demand. Reducing the black market to manageable proportions will require the power of the consumer.
We’re going to have issues with illicit interstate commerce in mj until the rest of the nation catches up, but anyone who can’t see that wave coming is making a deliberate effort not to. Even here in the Bible Belt, mj legalization is a big topic that’s gaining more and more support with each passing day.
Fr33dom says
Thank you, Alison.
In addition, even if the black market undercut the pricing of the legal market, who amongst us would buy an illicit bottle of booze even if it were a quarter the price? In fact, there is no low price point at which most people would be willing to risk buying booze from an unregulated source.
Lastly, there is no illegal tobacco production in the US. There are only tax evasion schemes in which people sell regulated and packaged cigarettes. This should serve as a warning to regulators not to place an overly burdensome tax on cannabis.
Keith Humphreys says
Greetings Alison and thanks for this thoughtful comment. 4 quick responses:
1. I did not know buying was legal in Washington (it isn’t in Colorado) — thanks for letting me know. That will make the transition easier in Washington than in Colorado, but reduced arrests of sellers also makes a black market more appealing to buyers. Lower risks of arrest means more people willing to sell, which should increase access and choice while lowering price in the illicit market.
2. I agree that the licit price will drop after legalization, however with the cost of regulation + the threefold 25% tax, it seems unlikely that the licit market will be cheaper than the illicit market. The licit market will have to compete on other factors, like quality and safety AND if law enforcement does the smart thing, the increased, visible enforcement in the black market.
3. In terms of the Prohibition example, I don’t see the parallel. It was legal to drink and to possess alcohol (as well as to manufacture it at home) during Prohibition (which wasn’t Prohibition in the sense we use the word today, it was really decriminalization).
4. I think the extra $5 million for enforcement is an excellent idea, if that was your proposal, then good on you.
Alison Holcomb says
1. “… reduced arrests of sellers also makes a black market more appealing to buyers. Lower risks of arrest means more people willing to sell, which should increase access and choice while lowering price in the illicit market.” How? Are you arguing that there will somehow be a reduced risk of arrest for unlicensed, black market sellers? Why? The law remains the same for them; selling without a license, or out of regulatory compliance, remains a felony. If that’s not what you’re arguing, then you seem to be arguing that increased access and choice within the legal market will lower price in the illicit market, which is probably true, but to get to your ultimate conclusion that law enforcement needs will increase as a result, you have to assume an increase of demand for black market product over current demand. Increased access to legal options weighs against that possibility, as does the decreasing attractiveness of being a black market seller when the risks remain the same but the profit margin decreases.
2. Why do you think legal, regulated marijuana will be more expensive than current black market prices ($200-260 per ounce in Seattle, roughly ten times the price of tobacco)? What are your assumptions about the actual cost of production and processing of cannabis plants in a legal market? As for the tax, “threefold” 25% tax includes two wholesale levels (which means a tax that is only a fraction of the tax assessed at the retail level), and in reality only one tax assessment at the wholesale level in most instances. Most producers will opt to be their own processors as well, which will mean only one 25% excise tax at the wholesale level in the majority of the industry. The consumer will experience only one level of 25% excise tax at the retail level, plus retail sales tax. That translates to roughly the same tax as that leveled on spirits in Washington State, and much less than the Washington tax on tobacco cigarettes.
3. The parallel to alcohol Prohibition is on the supply side. Bootleggers — the sellers — were not run out of business by law enforcement. They were run out of business by legal competition and the migration of consumer demand.
4. Thank you.
Keith Humphreys says
Greetings Alison,
At a meta-level, I am not sure if you are disagreeing with the post. The premise is that in order for the legal market to cause a constriction of the black market, enforcement on the black market should be emphasized when the legal regime is created. Do you disagree with that?
1. The reason risk of arrest will drop in the black market in the absence of a concerted law enforcement effort is that it is much harder to make a case for something that is legal sometimes and illegal sometimes than something that is always illegal. Police, like all human beings, are sensitive to cost/effort and their departments have a fixed budget. If a police officer sees someone with an a few ounces of pot under prohibition near the state border, they know they can just make an arrest and they have the guy dead bang. But under a legal regime, he could claim to be a legitimate provider and they will need to investigate. He may even have a legal license and they would then have to prove that this particular action is illegal even though other activities with pot by the same individual are legal.
Reduced risk of arrest (again, in the absence of what I am proposing, a burst of enforcement - which it seems to me you would agree with as a key purpose of the initiative as you know was to reduce the black market) will mean people are more willing to sell pot illegally, which will increase choice in the black market for consumers.
2. Black market prices tend to be lower than legal prices because the legal market has taxes and regulation. There is a thriving trade in black market cigarettes for example, because it is easy to undercut the legal market price. The countervailing price factor in a black market is enforcement, which raises prices through risk compensation, the need for private enforcement of contracts and other mechanisms. Again, following my proposal, this would mean that increasing enforcement will be important to push up black market prices above those of the licit market (which is why I would think you would embrace it).
3. Bootlegging persisted long after Prohibition (in my home state of West Virginia for example) and enforcement was essential to driving it out. This is also the current experience in South Africa for example, where the government has embraced (for well or for ill) SAB Miller as a legal vendor and cracked down on the illegal shebeens. Which brings me back to thinking that I can’t understand if/why you are disagreeing with me. If Washington takes the view that enforcement against black markets doesn’t matter because shifting consumer demand will solve everything, that will help the black market survive, which neither of us wants (unless I have badly misunderstood you).
Matt Elrod says
It is legal to brew your own beer and make your own wine. According to you, this makes enforcement against black market beer and wine more difficult. Maybe so, but the beer and wine black market is insignificant.
Industrial hemp was legalized in Canada in 1998. The industry is heavily regulated.
http://www.hc-sc.gc.ca/hc-ps/substancontrol/hemp-chanvre/about-apropos/faq/index-eng.php
To my knowledge, no one is growing or selling illicit hemp in Canada. According to the DEA, the U.S. can’t legalize hemp because, unlike the mounties, America police can’t tell the difference between a regulated hemp field and an illicit marijuana field. Organized crime will grow cannabis under the cover of hemp licenses. Do you agree with the DEA?
Alison Holcomb says
Keith,
What I take issue with are the article’s two premises that (1) increased (“prioritize[d],” “emphasized”) law enforcement resources are necessary to implement a legal, regulated approach to marijuana, and (2) law enforcement will be more difficult in a legal, regulated market than in a prohibition regime.
1. The idea that it is harder to make a case in a system where marijuana is legal for some people but illegal for others, and that this means more policing resources are necessary, doesn’t seem to take into consideration that fewer people are breaking the law in the first place, and most people want to operate in compliance with the law. Your argument might make sense in a medical system where, presumably, marijuana possession is legal for relatively few people (people with established medical need), but I don’t find it convincing when you’re talking about a system where possession is legal for anyone 21 years of age or older. Even in medical systems, in most states (Washington happens to be an exception), probable cause for an arrest ends when a valid medical authorization is presented.
I’m not sure how your example of the person near the state border with a few ounces of pot adds to your argument. Under Washington’s law, possession of more than an ounce remains a misdemeanor (more than 40 grams remains a felony), while proximity to the border is irrelevant to the legality of possession. Sellers must be licensed retail outlets — standalone, marijuana-only stores. These are all pretty easy facts for law enforcement to establish.
2. You and I agree on the countervailing price factors in the cigarette example, but we can’t use that example to make a case for increased law enforcement resources for legal marijuana. This is because we’ve never had a ban on cigarettes enforced through policing of a criminal prohibition. In contrast, we have had police-enforced prohibition with marijuana, and those pre-existing law enforcement resources haven’t gone anywhere. Why do we need more?
3. Bootlegging persists to this day, but not at a scale that poses public safety and health concerns warranting increased, prioritized, or emphasized law enforcement resources.
I think that our only point of disagreement is whether current law enforcement resources are adequate to enforce a regulated marijuana system. Would you disagree that it is possible current marijuana law enforcement practices might reflect political choices more than availability of resources? Here in Seattle and King County, it’s fairly apparent that the lack of enforcement against people who appear to be operating outside the legal bounds of our medical marijuana law reflects political choices more than a lack of resources. Other local jurisdictions in Washington have not made the same choices and have deployed their law enforcement resources differently. I think the patchwork medical marijuana enforcement in California reflects the same localized political decision-making.
Going forward, I would agree with you that it makes sense for local law enforcement and elected officials to be explicit about their intent to be less lenient with medical marijuana enforcement once the fully-legal and regulated market is operational, should that be their policy decision. Simply putting medical marijuana operators on notice will have an impact, as it has with the DEA warning letters issued to those operating within 1,000 feet of schools, e.g. But I have yet to hear a convincing argument that more police than are currently available will be necessary to shrink Washington’s black market once the legal market is up and running, and competing for customers.
Best,
Alison
Keith Humphreys says
Alison,
Thanks for persisting on this.
I agree that policing will reflect political choices. Indeed, I would argue that policing *always* reflects choices — it has to. As you know a very small proportion even of committed felonies ever result in an arrest…there is always more for cops to do than they have the the time and resources to do. That is a reason I wrote my post, to suggest what choice should be made immediately post-legalization (And I would say again that I think you should be embracing that choice unreservedly. It was an argument for I-502 made to the voters that the black market would shrink, therefore I think those who made that argument have an obligation to fulfill the promise afterwards).
There will be a great temptation for police to completely give up on black market MJ enforcement after legalization. A number of cops have said as as much to me, they feel they are off the hook on this one and they can forget about it entirely, or that much of any attempted enforcement will be a waste of time (quote by a California cop to me recently: “I see someone smoking pot and I think ‘I bust him and we go to court and then he pulls out his medical card and it’s all a waste of time’”). If that relaxation happens right after a legal market is created it is bad because it helps the black market survive. I am arguing that policy should go directly against that understandable human impulse by doing a pulse of high-profile, high-intensity policing of the illicit market.
I did not argue for a lifetime expansion of illicit market enforcement and an enduring growth of police presence throughout the State of Washington, rather, I argued for increased policing following legalization coupled with press/publicity to drive people out of the black market. Switching costs are a real phenomenon, and an increase in enforcement counters those switching costs until there is a new equilibrium with people moved to the legal market and then staying there. An analogy is hot spot policing, which has good evidence of being able to create a new self-sustaining equilibrium even after the burst of enforcement stops.
On your point here: “You and I agree on the countervailing price factors in the cigarette example, but we can’t use that example to make a case for increased law enforcement resources for legal marijuana” I assume you mean resources for ILlegal marijuana. Assuming that is what you meant, that was the referent to your rhetorical question: Why do we need more enforcement?…but you yourself wrote that you put extra money in the initiative precisely for such enforcement…so again I am a bit mystified that you objected to following through on what is in the initiative and to fulfilling one of its central goals as explained to the voters in advance. My post gives a strategy for making the initiative work as promised…isn’t that what you want?
Keith
Chris says
ACLU rep:”The law remains the same for them; selling without a license, or out of regulatory compliance, remains a felony.”
You say this like its a good thing?!
Alison Holcomb says
No, I say it to call into question the notion that entering the black market has somehow become more attractive with the creation of a legal, regulated market.
Dan Riffle says
It is a bit misleading to say that “buying” marijuana has always been legal in Washington. I don’t know how you buy marijuana without then, in most cases immediately, being in possession of marijuana.
Here are some of the issues I spotted with this piece:
- “The logical approach would be to prioritize illicit market enforcement immediately after legalization takes effect.” It seems to me that one of the lessons to take away from the rapid shift in public opinion on legalization, and relative landslide passage of both I502 and A64 is that the public would prefer law enforcement resources be devoted to violent crimes and real threats to public safety. The black market does foster some attendant violent crime (another reason the initiatives passed by overwhelming margins) but just as police don’t “prioritize” enforcement against moonshining or people driving in from Canada with cartons of Marlboros, it shouldn’t prioritize enforcement against black market marijuana sales.
- “But when the substance can be legally possessed, law enforcement must catch someone in the act of illegally selling, buying or producing the substance to make an arrest.” This is not true for cigarettes, and won’t be for marijuana. Tax stamps and other chain-of-custody and compliance measures make enforcement easier than Keith describes it as being.
- “If you operate a regional marijuana distribution ring for example, you’d be well advised to buy a license to operate legally in Colorado or Washington. Your subsequent possession of marijuana and associated equipment will thus appear legal.” First, obtaining and maintaining a license isn’t just that easy; the state has some review and discretion before and after awarding a license. But more importantly, the whole point of operating on the black market is to avoid having to comply with burdensome regulations. If you’re going to go to the expense and hassle of applying for and receiving a license (which again, run-of-the-mill drug dealers can’t do anyway) why not just operate legally and save yourself the risk of serious prison time?
- “[The whole last paragraph]” See Alison’s response.
Dan Riffle
Director of Government Relations
Marijuana Policy Project
Alison Holcomb says
Hi, Dan.
I don’t think it’s at all misleading to explain that buying has never been a crime. If it were, police and prosecutors would have had to prove the possessor’s involvement in a prior commercial transaction, which would have required more effort — more law enforcement resources. As I explained, “This is relevant to the analysis of how policing resources are deployed because now that adult possession is fully legal, no ‘careful investigative spadework’ is necessary or warranted in determining how the adult came to be in possession of the marijuana.” Going back to pre-502 illegality of possession, no careful investigative spadework was necessary then either. If you were in possession, you were in possession. It didn’t matter how that came to be.
This also means tax stamps, proving chain of custody, and whatever other compliance measure you envision are unnecessary administrative and enforcement expenses.
Best,
Alison
James Wimberley says
Alison’s point about policing resources is critical. Assuming - apparently counterfactually - that there is fixed lump of policing for cannabis control, reallocation from a mass of now legal street transactions to a smaller illicit supply chain should make for greater effectiveness. Accordingly Keith’s suggestion that “the risk of arrest will probably drop rather than rise in the illegal cannabis market post-legalization” seems very unlikely.
At present the police have to operate, as in Prohibition, in a sea of general public disapproval of at best indifference to their efforts. Post-legalisation, illegal cannabis suppliers will be like tobacco smugglers, without a social licence to operate, and the usual policing method of rewards to informers will become more effective. In particular, legal cannabis suppliers will have every incentive to cooperate in the policing of their illegal rivals, who will have to undercut them to survive.
strayan says
As soon as brand reputation has been established, this issue will barely register as a problem. People sell ‘chop chop’ (an Australian expression for unbranded/untaxed tobacco) everywhere (even my 86 year old grandmother was buying up until she died of lung cancer), but few people actually smoke it and no one wastes time policing it. Why? Because a Marlboro man is a Marlboro man (an identity) and few smokers are prepared to switch to a cheaper product. In-fact it’s quite possible that people are more likely to quit altogether than switch to a cheaper brand as a price minimisation strategy: http://onlinelibrary.wiley.com/doi/10.1111/j.1360-0443.2011.03492.x/abstract
Ebenezer Scrooge says
Strayan’s cure is worse than the disease. The establishment of brand reputation may drive out the gangsters, but will also drive up consumption. Think of the payday loan market. If payday loans were illegal, the Mafia would get back in the business. But the Mafia can’t take out teevee ads explaining that: “You deserve a great vacation.” The tradeoff here is between increased consumption and increased illegality. Mark constantly makes this point.
I’ve always thought that the way to drive a wedge between consumption and legality is to legalize stuff and regulate quality, but give it no trademark protection. There is no profit in Evil Tobacco Company pimping the Man from Marlboro, if any tobacco vendor could also call their product “Marlboro”. The Aussies are doing something like this for tobacco. The three-level system of alcohol retail also did a pretty good job of driving the gangsters out of the post-Prohibition market.
There is also a technological response to Keith’s argument: taggants. If your dope is legal, get the state to spray alumina microparticles on it. They’re harmless (AFAIK), and there are all kinds of ways to make them unique and difficult to duplicate (also AFAIK). The gangsters may have some chemists on the payroll, but they’re less likely to have-say-materials scientists. And the taggant technology may change with time-it’s easy for the good guys to win this arms race.
claygooding says
“”The establishment of brand reputation may drive out the gangsters, but will also drive up consumption.”"
So what.
“”There is also a technological response to Keith’s argument: taggants. If your dope is legal, get the state to spray alumina microparticles on it.”"
The reason marijuana has never killed anyone is that it requires no additives,no distilling process or man’s help,,it just is and now,like all good little prohibitionist you want to “add” something that could make marijuana dangerous. Aluminum is suspected of causing Alzheimers so why don’t you snort some of that stuff you want on peoples pot.
Ebenezer Scrooge says
“Aluminum is suspected of causing Alzheimer’s.” I’ve heard this before. I’ve also heard that marijuana is suspected of causing young men to grow breasts. So have you: it’s an oldie-but-goodie of Partnership for a Drug-Free America. Why don’t you cite this, as well, to show your omniscience of ill-documented factoids?
Anonymous says
how about you address the “”so what”?..and my point was putting anything in marijuana is a no-go,,who are you Mansanto or Dupont Chemical trying to build a market like you did with nylon by prohibition of hemp,what part of adding anything nature doesn’t being a bad idea. Address that instead of slinging insults and we will talk further.
Ebenezer Scrooge says
I don’t argue with libertarians: they have a habit of being always right regardless of the facts because liberty. The “so what”, if it makes any sense at all, is a libertarian point. It is in effect an assertion that increased consumption cannot possibly be harmful (or alternatively, we can’t try to control the harm) because liberty.
I’m not sure how to handle your argument against additives; it seems to be a Rousseauvian argument for naturalness. It applies equally well to fluoridation of water or-for that matter, chlorination. Chlorination, after all, is well-known as a ruthless killer of the perfectly natural causative agents for cholera or typhoid.
However, there are limits to my disagreement with you. I do believe that your 8:24 argument is perfectly sound, insofar as it goes. I agree that the cost of the current war on drugs far exceeds any possible costs to complete deregulated legalization. However, we still have plenty of room to disagree on the relative cost-benefit of policies that fall between these extremes.
Freeman says
I’ve also heard that marijuana is suspected of causing young men to grow breasts.
That one’s true. It took 40 years, but I finally got mine!
Windy says
The “so what” probably had more to do with the complete harmlessness of cannabis, but also the numerous health benefits from ingestion of it. Cannabis has more health benefits than the next more healthful plant we ingest (whatever plant you may think that is — blueberries, broccoli, quinoa), which is why I wonder that there is any more regulation of it than of any of those other plants. Even the hig is not harmful, though some of the effects of the high might be found by some to be inconvenient, unpleasant, or undesirable, but it takes heat to create the high, so ingesting the raw plant (juicing, using in salads, or just chewing a leaf or bud) one avoids the high and still get the health benefits. Additionally, some of the cannabinoids in cannabis are destroyed by heat, others are created, so to get the full spectrum of benefits one should do both — ingest it raw, and ingest it either cooked or heated in a pipe or vaporizer. BTW, in these united States of America, “because liberty” is the most important reason of all.
strayan says
You may be prepared to ignore the severed heads and vats of acid in order to prevent a smallish plague of cannabis use, but I’m not.
How do you make a trade-off between murder and self-harm?
I’d rather no murder and more self harm over any kind of ‘sweet spot’; a little more murder for little less self-harm. Wouldn’t you?
Ebenezer Scrooge says
Fair ’nuff. Deontology is more common on the right of the political spectrum, but it’s perfectly respectable wherever found. We seem to disagree for a perfectly legitimate reason: different values. I’m more of a consequentialist myself, so I can imagine trading a small-ish number of severed heads for a substantially larger amount of self-harm. But I understand why you don’t find that trade-off very attractive.
LOL says
I wanted to reply to this further up the thread but the ‘reply’ button was not there.
You claim to have a problem with libertarians but it seems your problem is restricted to deontological libertarians. But this is only a sub-set of a greater whole. To focus on the most prominent 20th century libertarians, M. Friedman, Hayek, and Mises were not just consequentialists but even utilitarians.
Narrowing our scope to contemporary libertarians who do work on drug policy, I must say that I rarely see libertarians like Jeffrey Miron or Rob Kampia spin out Kant-inflected arguments about the nature of rights or ornate theories of our ethical duties.
So, to reiterate, there’s no need to overgeneralize about libertarians.
Ebenezer Scrooge says
Fair ’nuff.
Jeebus says
One problem is identifying self harm. It’s easy to recognize the non-self harm of a severed head. But self harm always seems to get defined by those who don’t own the “self” they are overly concerned with. If we have trouble deciding how much marijuana is harmful on an individual level, then using such imprecise measurements as decreases or increases in overall consumption becomse troublesome.
Matt Elrod says
“The tradeoff here is between increased consumption and increased illegality. Mark constantly makes this point.”
And it’s wrong. Tobacco use has been declining for decades. Very few people huff solvents, despite their legality. According to the Supreme Court of Canada, cannabis usage rates rise and fall with “no apparent statistical relationship” to cannabis laws and their enforcement.
Besides, increased use does not necessarily lead to increased abuse and harm. Illegality impedes education, prevention, treatment and harm reduction (see vaporizers), and the evolution of social customs and mores.
To the extent legal regulation drives down the “street value,” illicit cultivation and distribution will be less attractive … for obvious reasons.
Ebenezer Scrooge says
The tobacco example isn’t well-chosen. A key method of tobacco control is taxation. Increased taxation decreases smoking, but increases smuggling.
I’ll agree with two points you’ve made: usage often moves independently of public policy, and there are some methods of drug control that do not invoke the tradeoff between criminality and usage. I pretty much have to agree with the latter point: I made it myself with trademark law. But the tradeoff is often there.
Matt Elrod says
“A key method of tobacco control is taxation. Increased taxation decreases smoking, but increases smuggling.”
Yes, but that doesn’t contradict my point that smoking rates have been declining despite tobacco being exceptionally addictive and available in corner stores and gas stations.
In addition to rising prices, due to taxation, education has certainly played a role, although not as large perhaps as social customs and mores. Tobacco has become less fashionable.
All else being equal, legalization might increase consumption, but all else will not be equal after legalization.
Yes, as we discovered with tobacco here in Canada, there is a Goldilocks taxation rate that balances discouraging consumption with encouraging a black market, and it takes some experimentation to find it.
Ebenezer Scrooge says
I think we’re now in agreement. At very least, I can’t disagree with anything you just said.
strayan says
A review by the World Bank argues that “the level of tobacco smuggling tends to rise in line with the degree of corruption in a country [not price]“. It is notable that countries with lower excise taxes tend to have a bigger black market for tobacco:
http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2000/08/02/000094946_99092312090116/Rendered/PDF/multi_page.pdf
CharleyCarp says
When state regulators learn of a black market seller, they can just turn his name over to the feds. The black market guys also have federal tax and gun violations so even if the feds aren’t that interested in weed, per se, they could probably be recruited to go after someone egregious.
Servetus says
“Reduced risk of arrest will make the black market less unappealing to customers…particularly as its prices will … likely be dropping at the same time.”
It’s clear some people have no idea how unappealing the black market is for marijuana consumers. Compare the experience of going to a local convenience store to that of buying drugs on the streets, or in some park, at some specific prearranged time, arranging a meeting that requires the use of cellphones or other government-tapped communications methods to contact illicit merchants.
It’s not always about the cost. The United States is a wealthy country. The commercial dynamics we know and understand says consumers will pay for convenience, which is why convenience stores’ prices are higher. It’s also about product quality assurance, purity, proper weights, product ID and proper labeling. All these things we pay for at the grocers, willingly.
claygooding says
It is also about laziness,,people would crap in the bed rather than get up and go to the bathroom if someone else had to clean up the mess,,it would boil down to which was easier to get what they want,,if an illegal dealer was closer than a licensed outlet he would get more customers than the outlet simply because of the decreased effort it takes.
The same is true on people growing their own marijuana,,when the cost of purchasing marijuana is too high people will grow their own regardless of legality,,just like now.
Mark Kleiman says
Whether or not creating a legal market complicates enforcement against illicit production and sale, the value of such enforcement goes way up when it helps drive consumers to the licit market rather than just driving them to another illegal dealer.
Alison Holcomb says
Of course, you first have to demonstrate that increased enforcement against illegal marijuana commerce has any impact on purchasing decisions. The dramatic escalation of enforcement from 1991 to recent years, when compared to use rates, suggests otherwise.
James Wimberley says
Huh? If policing is completely ineffective at the margin, then the legal suppliers in Washington will be crowded out, à la Gresham’s Law, by the tax-free illegals. Ergo, legalisation is a waste of time.
Be careful what debating points you take up, they may turn round and bite you.
Keith Humphreys says
Exactly James.
Alison Holcomb says
Really? You both assume the black market will continue to undercut legal prices. As I argued above, that’s highly unlikely. Again, I believe the migration of consumer demand will be much more effective than policing at shrinking the pool of black market supply.
Freeman says
Alison: Again, I believe the migration of consumer demand will be much more effective than policing at shrinking the pool of black market supply.
As you said, the history of alcohol prohibition and re-legalization supports this argument. I’ve seen no convincing historical evidence offered to support the rebuttal. Yes, moonshining didn’t disappear overnight and still exists to this day, but at what comparative proportion? Nobody has referenced any post re-legalization enforcement surge to support the implied argument that it was necessary to reduce the alcohol black market to more manageable proportions, and apparently consumer demand is irrelevant to those offering rebuttal to your point.
I want to thank you for educating me on the three 25% compounding taxes. I have been critical of that factor out of concern that it would force legal prices high enough to allow a high level (pun intended) of black market price competition. I had no idea that level of taxation was roughly equivalent to alcohol and lower than cigarettes.
James: If policing is completely ineffective at the margin, then the legal suppliers in Washington will be crowded out, à la Gresham’s Law, by the tax-free illegals. Ergo, legalisation is a waste of time.
Under prohibition usage rates are climbing while possession arrests continue to rise. Ergo, prohibition is a waste of time, no? You have not offered any facts to counter Alison’s point that “The dramatic escalation of enforcement from 1991 to recent years, when compared to use rates, suggests otherwise.”
I think one of the biggest reasons policing seems so “ineffective at the margin” is that up until now no legal alternative has been offered to consumers. You and Keith seem to argue that convenience, quality, and selection have no bearing on consumer decisions. If you want to argue that price is the only important factor that marijuana consumers consider, you need to explain why sensimilla is more popular than Mexican cartel weed, regardless of the huge price differential.
Matt Elrod says
Enjoying the economy of scale, regulated cannabis could be sold for a fraction of the current “street value” and still be profitable and raise tax revenue. For example, licensed medicinal growers in Canada end up paying less than $2.00 per gram, (electricity, equipment, fertilizer, labour, etc.) and being limited, they don’t enjoy the economy of scale. The “street value” is between $8.00 and $10.00 per gram, and has been for decades.
In order to “crowd out” the regulated market, illicit growers and sellers would need to drop their prices well below the regulated market price. If nothing else, this would make illicit cultivation and growing much less lucrative and hence less attractive. Note that no one is crowding out the taxed and regulated market for other therapeutic herbs.
The majority of cannabis consumers consume rarely and moderately, such that their cannabis budget is relatively insignificant. Even if the black market undercuts the regulated market, I suspect most consumers won’t mind paying more for the convenience and quality. Consider how much drinkers are willing to pay for drinks in clubs, bars and licensed restaurants, or how much patients are willing to pay for value-added products like Sativex.
Businesses making and selling cannabis-based products would surely prefer a regulated supply, and consumers would surely prefer regulated cannabis-based products, and regulated vapor lounges and “coffee shops.”
dridger says
Why does AH think she’s a policy analyst? She’s a hack for the ACLU. Debating Kleiman and Keith? C’mon.
Matt Elrod says
Alison is an attorney, which makes her qualified to address Keith’s speculation on post-prohibition enforcement and its consequences.
“Alison is a past vice-president of the Washington Association of Criminal Defense Lawyers and former chair of the Legal Frameworks Group of the King County Bar Association’s Drug Policy Project. She has served on the Seattle City Council’s I-75 Marijuana Policy Review Panel and its Jail Capacity Study Advisory Group, which examined the impact of alternative approaches to low-level drug offenses on jail use.”
Besides, an impressive CV does not make a good argument.
Pat Oglesby says
Alison,
Even if enforcement does not affect use rates, isn’t the relevant question the impact of enforcement on price? That is, demand of users may be inelastic with respect to various degrees of enforcement of possession laws (and inelastic with respect to price), but won’t sellers still demand a price that reflects a prohibition premium that depends on efforts to catch them?
That is, what if sellers (unlike users, reportedly) do react to enforcement? In that case, to the extent that sellers fear enforcement (say in the form of purchases by undercover agents) more, won’t the prohibition premium grow (and prices go up)? Maybe someone has studied this issue: I wish I knew.
Pat Oglesby
Center for New Revenue
Alison Holcomb says
Hello, Pat!
Yes, exactly — the prohibition premium remains high for sellers who continue to operate in the black market. However, it almost disappears for sellers who obtain licenses and comply with regulatory obligations, and therefore need not fear state and local law enforcement, the police agencies responsible for somewhere between 95 and 99+ percent of marijuana law enforcement. The result is that the black market becomes increasingly unattractive for sellers as legal prices are driven downward by law-abiding entrepreneurs now willing to enter the newly regulated market and compete for consumers.
All best,
Alison
Pat Oglesby says
In reply to the discussion below, here is some information from the most authoritative source on immediate post-Prohibition enforcement I have been able to find, Tun Yuan Hu, The Liquor Tax in the United States, 1791-1947: A History of the Internal Revenue Taxes Imposed on Distilled Spirits by the Federal Government (New York: Columbia University, Graduate School of Business 1950). I’d be glad to learn of other sources. Marijuana is very different from alcohol, but the history of Repeal may provide some useful information.
The bootlegging problem was serious. In 1934, as the Repeal era began, the Director of the Federal Alcohol Control Administration, Joseph H. Choate, Jr., said that “bootleggers are now turning out from their stills alone, not counting smuggling and alcohol divertings, a quantity of spirits which cannot be much less, and may be more than we drank before prohibition — that the government is losing more taxes than it gets, and that a colossal criminal industry, necessarily highly organized, still exists.” Hu at 85-86. (Hu did not believe Choate’s pessimistic estimate; Hu found that a “more reasonable estimate” for 1934 was 45,000,000 gallons of bootleg liquor versus tax paid consumption of 68,000,000 gallons. Id. at 86.)
This situation led to an “Enforcement Campaign against the Tax Evader.” Id. at 95. This campaign worked in tandem with a tax rate aimed in part at “stamping out the bootlegger.” Id. at 80.
In the end, “tremendously increased importations and the consequent reduction of the prices of legal liquor greatly aided the attack on the bootlegger, which was being vigorously pushed through law enforcement.” Id. at 95. “From repeal of Prohibition through 1937 the main efforts were directed toward the liquidation of organized bootlegging gangs, especially those operating in Northern metropolitan areas. This syndicated type of illicit operation was virtually destroyed by the end of 1937, and since that time the control of production and distribution of illegal distilled spirits became largely a problem of coping with relatively small violators.” Id.
Liquor bootlegging in America today seems marginal if not folkloric. http://bukowskisbasement.blogspot.com/2012/01/moonshiners-real-or-fake.html. Violation of the Federal limits on annual home production of beer and wine seems a non-problem. Marijuana production is so different from alcohol production that I don’t know for sure what conclusions to draw, but I appreciate this discussion.
Pat Oglesby
Center for New Revenue
Pat Oglesby says
Sounds like too much: Preparing for marijuana legalization, some officials in Denver are reportedly “proposing quadrupling the number of officers assigned to pot-related duties.” http://www.denverpost.com/carroll/ci_23672823/carroll-denvers-wish-list-marijuana-taxes
We’re still in the early days of figuring out how much is enough: taxation, enforcement, regulation, you name it.
Pat Oglesby
Center for New Revenue