JOURNAL ARTICLE

Design considerations for legalizing cannabis: lessons inspired by analysis of California's Proposition 19

Jonathan P Caulkins, Beau Kilmer, Robert J MacCoun, Rosalie Liccardo Pacula, Peter Reuter
Addiction 2012, 107 (5): 865-71
21985069

AIMS: No modern jurisdiction has ever legalized commercial production, distribution and possession of cannabis for recreational purposes. This paper presents insights about the effect of legalization on production costs and consumption and highlights important design choices.

METHODS: Insights were uncovered through our analysis of recent legalization proposals in California. The effect on the cost of producing cannabis is largely based on existing estimates of current wholesale prices, current costs of producing cannabis and other legal agricultural goods, and the type(s) of production that will be permitted. The effect on consumption is based on production costs, regulatory regime, tax rate, price elasticity of demand, shape of the demand curve and non-price effects (e.g. change in stigma).

RESULTS: Removing prohibitions on producing and distributing cannabis will dramatically reduce wholesale prices. The effect on consumption and tax revenues will depend on many design choices, including: the tax level, whether there is an incentive for a continued black market, whether to tax and/or regulate cannabinoid levels, whether there are allowances for home cultivation, whether advertising is restricted, and how the regulatory system is designed and adjusted.

CONCLUSIONS: The legal production costs of cannabis will be dramatically below current wholesale prices, enough so that taxes and regulation will be insufficient to raise retail price to prohibition levels. We expect legalization will increase consumption substantially, but the size of the increase is uncertain since it depends on design choices and the unknown shape of the cannabis demand curve.

Full Text Links

Find Full Text Links for this Article

Discussion

You are not logged in. Sign Up or Log In to join the discussion.

Related Papers

Remove bar
Read by QxMD icon Read
21985069
×

Save your favorite articles in one place with a free QxMD account.

×

Search Tips

Use Boolean operators: AND/OR

diabetic AND foot
diabetes OR diabetic

Exclude a word using the 'minus' sign

Virchow -triad

Use Parentheses

water AND (cup OR glass)

Add an asterisk (*) at end of a word to include word stems

Neuro* will search for Neurology, Neuroscientist, Neurological, and so on

Use quotes to search for an exact phrase

"primary prevention of cancer"
(heart or cardiac or cardio*) AND arrest -"American Heart Association"