Caulkins v. Tvert: an analyst answers an advocate

One of the consequences of the somewhat inaccurate account of our AEI briefing on state-level marijuana legalization published in the LA Times was a secondary kerfuffle on the Denver page of the Huffington Post. A reporter there called Mason Tvert, the head of outfit pushing the Colorado legalization initiative, read him the LA Times piece, and got his comments on what we did (or didn’t say). His comments exemplify the “concede nothing” style of advocacy.

Jonathan Caulkins - on behalf of all four authors of the book - sent in a response, which has now at last been posted to that site, as an update to a story now well buried under tons and tons of Aurora. Tvert’s comments in red, and Caulkins’s responses indented, below.

On licensing and distribution after legalization:

Amendment 64 explicitly states that licensed marijuana cultivation facilities can only provide marijuana to licensed retail stores and product manufacturers. It is illegal to transport marijuana out of Colorado right now, and it will remain just as illegal to do so if Amendment 64 is adopted by the voters.

Correct. Our projections assume no change in the cost or risk of inter-state transport. The current wholesale price gradient – observed with increasing distance from Mexico, a dominant current source – is $400 per pound per thousand miles. We consider that same price gradient with increasing distance from the state that legalizes.

On tracking the growing and selling of marijuana under Amendment 64:

Under a prohibition model, the production and distribution of marijuana is entirely uncontrolled. Authorities do not know who is growing it, where, or when, and they certainly do not know where it goes from there. Under the system proposed by Amendment 64, regulators and law enforcement officials would be directly involved in the process, ensuring it is produced and distributed in accordance with the law.

We agree up to the word “ensuring.” That something would be banned does not in and of itself prevent the activity from happening, as the very existence of today’s illegal drug markets amply illustrates.

Amendment 64 would face two acute challenges for regulators, relative to the status quo. First, violations would be subject only to civil not criminal penalties until the marijuana was transported out of Colorado. Second, participation in the regulated system can provide cover for additional cultivation or transport above and beyond that which supplies Colorado residents, in the same way that it is easier for someone operating a legitimate cash-based business to launder money than it is for the average person to do so. The proprietor of a cash-based business has a ready explanation for making large cash deposits; a licensed cultivator would have a ready explanation for any given grow house’s production. Regulators would have to see the totality of an entity’s operations in order to ascertain that production volumes are excessive. So the errant cultivator could simply “forget” to notify the regulator of the locations producing for export; if by some misfortune, one of those undisclosed locations were discovered, they would pay the associated civil penalty. It would be difficult for law enforcement to prove that the production at those undisclosed locations was intended for export. (Indeed, an enterprising out of state dealer might even ask his or her couriers to acquire Colorado marijuana processing licensees, so the cultivator could honestly say the sales were to a licensed processor.)

On the likely level of diversion to out-of-state sales:

The Colorado Department of Revenue is currently implementing a system of medical marijuana regulation that entails tracking all marijuana from ‘seed to sale.’ The same agency will oversee the regulation of non-medical marijuana if Amendment 64 is adopted, and it will in all likelihood extend that strict process to all marijuana production and sales.

Time will tell. To its credit, Colorado’s Amendment 64 avoids the situation that would be created by Oregon’s Cannabis Tax Act or OCTA (another legalization proposal being voted on this November). Under OCTA, after the initial year, the growers themselves would select five of the seven members of the to-be-created Oregon Cannabis Commission, which is the very body OCTA charges with responsibility for constraining diversion. That is, OCTA builds in regulatory capture by the industry.

In Colorado the question may turn on whether DOR not only creates tough regulations, but also employs a policing staff that pursues field investigation with energy comparable to current state and local police efforts against the higher-levels of the trade, although even if they did, their ability to deter might still be hamstrung by sanctions being limited to civil penalties.

On marijuana prices plummeting and use of the drug increasing due to legalization:

Despite the price of marijuana decreasing in Colorado over the past couple years, there have been no reports of prices going down in other states as a result. There is no evidence to suggest that would change if Amendment 64 is adopted. As these college professors noted, our federal government’s strategy for limiting marijuana use is to keep the prices high. But this has done nothing to make marijuana less available, and it has made it more available to teens. Meanwhile, the federal government reports that the use of marijuana by high-school students in Colorado has decreased significantly since the state began regulating medical marijuana. This bucks the trend of increased use among students nationwide, where marijuana is entirely unregulated.

 We made no statement about availability, although plausibly availability would effectively be increased for “drug tourists” who live within driving distance (a much smaller issue for Colorado, given its relative isolation, than it would be for some eastern states).

With regard to medical marijuana’s effects on use, we’re confident Mr. Tvert knows that point is contested in the literature, with claims on either side. We would say that debate is somewhat beside the point, both because medical marijuana has modest effects on price and because a central thesis of our book is that legalization is entirely different than medical marijuana. Outcomes from medical marijuana and decriminalization cannot be assumed to apply to legalization of commercial production.

On marijuana being more widely available after legalization:

Marijuana is currently universally available, and it will remain that way regardless of whether Amendment 64 is adopted. The question is whether we would prefer marijuana be strictly controlled and sold by licensed businesses in a tightly regulated market, or whether we want to continue with the current system in which it is strictly uncontrolled and sold by criminal enterprises in the underground market. I would prefer the former, and I think Colorado voters will demonstrate this November that they do, too.

It wasn’t our purpose to sway people’s votes, one way or the other. Our goal is simply to inform voters. To the best of our ability we limited the first 15 chapters of the book to objective analysis that targets with equal enthusiasm the myths and mistruths fostered by advocates on both sides of the debate. In a final chapter we briefly discuss our own views, and it turns out that the four authors cover a fairly broad spectrum of opinion. But despite our differences about the desirability of legalization, we all agree on that legalization in one state would greatly reduce the price of marijuana nationwide. That’s not an issue of what’s good or bad; that’s a factual issue about how the world works.