Patel

Eeshaan Patel
Jane Blakelock
English 2100-31
9 February 2016
The Economics of Legal Marijuana
Introduction:
Cannabis, also known as marijuana is considered a schedule 1 substance to the United
States Government which also makes it an illegal substance. The subject of marijuana and
legalizing it has been a long debated topic in the United States and goes as far back as the 1900s.
Dissatisfaction with current drug policy measures has led to a push for the regulation of drugs,
especially marijuana (Caputo, Michael R., and Brian J. Ostrom). As of now there are 23 states
and the District of Columbia that have legalized marijuana, and out of those 23 states, four states
plus the District of Columbia have legalized it for recreational use. The other nineteen states
have legalized it for just medicinal purposes. SINCE THE EARLY 1960s, the use of marijuana
by a sizable proportion of the U.S. population is resulting in an issue of increasing national
interest (Caputo, Michael R., and Brian J. Ostrom). This is where the 23 states come into play,
since there has been an increased national interest state after state have tried to put a marijuana
bill into their general elections. For example, just this year Ohio had an issue (issue 3) in the
elections to make marijuana state legal. There are several aspects that can be talked about on the
subject of legalizing marijuana such as the legal, economical, medicinal, recreational, and social
aspects. I am going to take a look at the different economical aspects of legalizing marijuana
such as the economical advantages and disadvantages, as well as the economical speculations
that can be made from past research.

Patel

Economics Introduction:
There can be two broad standpoints taken on the economical aspect of legalizing
marijuana and they are, first, the economical advantages, and second, the disadvantages. There
are several subtopics under each broad topic that can be described into further detail. The first
question that comes up in the topic of marijuana and the economy is that would the growth rate
of the marijuana industry be able to sustain itself?

Economic Advantages/Speculations:
The previous question is the main concern when looking at the economics of legalizing
marijuana because if the industry cannot sustain itself in the economy, then the entire argument
of legalizing the marijuana is invalid. In the Marijuana Industry by William Wanlund, if
legislative barriers continue to fall, and cannabis becomes legal for recreational and medical use
nationwide, marijuana could be a 35 billion dollar market by 2020, according to the industry
research firm Green Wave Advisors, which tracks cannabis sales in the states where recreational
marijuana is legal (Walund). Green Wave Advisors is a firm that specializes in comprehensive
independent research and financial analysis of the emerging legalized cannabis industry more
information about this firm can be found on their website. The same article later goes on to say
that even if the economy as a whole goes sour, the industry of marijuana could still thrive.
Walund states, that in July Colorado took about 73 million dollars in taxes and fees from the

Patel

sales of marijuana, which then gets allotted to new school construction, and drug
treatment/prevention programs.
As of now there are taxpayer dollars going towards the arrests of people over marijuana
charges, approximately 700,000 people per year is the statistic. Fully 88% of those arrested in
2014 were arrested for possession of marijuana, often in small amounts (Maranjian). The
paragraph goes on to explain that a total of 40% of all drug related arrests are marijuana related.
With the legalization of marijuana, instead of taxpayer money going to the penal system, money
could be given back to the citizens. For example, In 2014, Colorado collected $76 million in
total marijuana-related taxes, and it had collected an additional $87 million from January through
August of 2015 and much of that revenue went to schools (Maranjian).
This proves helpful to the states citizens. In an era of school budget cuts being the norm,
this could push money back into the schools and bring back the programs that are being cut on a
yearly basis. Having a first hand experience in schooling through budget cuts, basic school
necessities were cut. These include, but not limiting to, school buses, art/music programs,
increase cost of athletics, and the mass layoff of teachers. This made for a tougher school
experience not only for me, but for my fellow peers as well. When buses get cut, transportation is
limited, when teachers are fired, it limits the number of classes that are offered, as well as class
sizes grow twice the size they were. Students were receiving less attention from faculty and the
grades/test scores reflected. More states could reap the benefits from the money that could be
generated from taxing legal marijuana. This same article projects that a nationwide legalization
could bring in about 3 billion dollars in taxes for the country. On paper this could mean about 60
million dollars in tax revenue for each state, of course this being in a perfect world. The

Patel

following graph can show a speculation on how much tax revenue can be made in state and local
economies where marijuana is legalized.

This bar graph from Marijuana Business Daily shows the total sales made already by
dispensaries as well as the the economic value created by these businesses. Not only does it show
the money that has already been generated, it shows the estimate and speculation till 2019, and it
is doing nothing but increasing.
According to whitehouse.gov, the middle class of the United States spent between 21.6 to
40 billion dollars in between the years of 2000 and 2014 respectively. These sales all occurred
illegally, and are considered black market sales. These numbers are significantly higher as of
now, but this is a good representation of the illegal sales because the study is done over a full ten
years, which is enough time to make estimates after each year. This table shows the lower and
upper class expenditures, but I chose to talk about the middle class because the majority of the
United States population is considered to be in the middle class. The prediction for legalizing

Patel

marijuana is that, once marijuana is legalized, the amount sold on the black market is going to
decrease significantly. This means that the money that was once spent on illegal marijuana can
now be taxed and used for government usage. This money can be put directly into the economy
and used for helpful causes as such stated in the earlier paragraph.

Figure5.6.EstimatesofMarijuanaExpenditures,20002010(inbillionsof2010dollars)

LOWER
CLASS
MIDDLE
CLASS
HIGHER
CLASS

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

$13.9

$16.1

$21.3

$21.8

$22.7

$21.8

$29.8

$22.1

$22.9

$29.9

$21.6

$24.2

$29.6

$29.8

$31.5

$29.5

$29.8

$30.2

$31.7

$27.8

$32.3

$42.7

$43.6

$45.5

$43.6

$43.6

$43.6

$44.2

$26.
3
$35.
4
$52.
6

$40.8
$59.7

This table shows the amounts of money spent on illegal marijuana by each earning class
in the united states. It shows a couple trends, the first being, the expenditure is generally
increasing as time goes on by year. The second trend being that as the earning class increases, so
does the total expenditure on marijuana. This time period shows the range for 10 years, it is now
2016 and is now estimated to be even higher than these numbers. This table is a mere
representation on how much money could be spent in the future.

Economical Disadvantages:
On the other hand, there is a side that opposes the legalization of marijuana on the
economical stand point. Legalizing pot- facts, fables and avoiding follies has a different take on
legalizing marijuana, or pot as the article calls it. The article states, And, as we tobacco,
premium and tax payers will pay for the negative consequence of such promotion and use (West

Patel

Virginia State Medical Association). This commentary from this particular medical journal
compares the industry of marijuana with big tobacco and big government. The article is trying
to say that the marijuana industry will be taxing to the tax payers because they are the ones who
will pay for the production of promotions and usage of marijuana.
Though this article makes some valid points on the reasons why the legalization of
marijuana should be more scrutinized the way the article is written gives this piece of writing a
harsh even a condescending tone. I say this because it uses words that are subjective towards
marijuana. In the article at multiple times refers to marijuana as pot, which is a nickname for
marijuana. It uses the word in such a way that it gives marijuana a condescending outlook. Its
almost trying to persuade the reader into not legalizing marijuana, instead of just trying to
provide facts to the reader.
Conclusion:
There are several aspects that could have been talked about on the subject of legalizing
marijuana such as the legal, economical, medicinal, recreational, and social aspects. I researched
on the economical aspect of the issue. The economics of legal marijuana is a very vast topic so I
narrowed down on the two main subtopics of economic advantages/speculations and economic
disadvantages. According to the research, there were more advantages for the legalization of
marijuana then disadvantages, and the disadvantages I did find sounded very opinionated
whereas the sources that were used for the advantages mainly dealt with charts, numbers and
facts.

Patel

Works Cited
Wanlund, William. "Marijuana Industry." CQ Researcher 16 Oct. 2015: 865-88. Web. 3 Feb.
2016.
"Legalizing Pot--Facts, Fables And Avoiding Follies." The West Virginia Medical Journal 111.2
(2015): 6. MEDLINE with Full Text. Web. 10 Feb. 2016.
Johnson, Michelle. "Legalizing Marijuana." CQ Researcher 25 Mar. 2014. Web. 4 Feb.
2016.
Caputo, Michael R., and Brian J. Ostrom. "Potential Tax Revenue From A Regulated Marijuana
Market. A Meaningful Revenue Resource." American Journal Of Economics & Sociology
53.4 (1994): 475-490. Food Science Source. Web. 19 Apr. 2016.
Maranjian, Selena. "4 Marijuana Stats That Will Blow You Away -- The Motley Fool." The
Motley Fool. N.p., 23 Feb. 2016. Web. 19 Apr. 2016.
<http://www.fool.com/investing/general/2016/02/23/4-marijuana-stats-that-will-blowyou-away.aspx>.
United States. Executive Office of the President of the United States. What America's Users
Spend on Illegal Drugs: 2000-2010. By B. Kilmer, S. Everingham, J. Caulkins, G.
Midgette, R. Pacula, R. Burns, B. Han, and R. Lundberg. N.p.: n.p., n.d. Print.
Olson, Becky. "Exclusive Chart: Marijuana Industry to Create $10B+ Economic Impact in 2015,
$30B By 2019 - Marijuana Business Daily." Marijuana Business Daily. N.p., 04 May
2015. Web. 19 Apr. 2016. <https://mjbizdaily.com/exclusive-chart-marijuana-industrycreate-10b-economic-value-2015-30b-2019/>.