An economic analysis of different cannabis decriminalization scenarios

Cannabis is the most widely used illegal drug in European countries. In countries with repressive cannabis policies, prevalence is not lower than in those with tolerant laws. Repressive policies not only have uncertain benefits but they are also expensive. Economists tend to believe that good public policies minimize social costs; that is, they help to improve collective wellbeing at a lower cost.

The paper draws on a review of international literature on cannabis legislative models around the world. After a description of some of the fundamental concepts of a market economy, several existing policy scenarios will be presented and analyzed from an economic perspective. Strength and weaknesses will be summarized for each alternative.

In addition to consumption tolerance in countries such as the Netherlands, recent decriminalization of domestic markets in the Unites States and Uruguay present alternatives to reduce the negative impact of cannabis on society. Earlier initiation age and rise in consumption are unintended potential consequences of decriminalization that need to be addressed by public authorities when designing a liberalized cannabis policy environment. Price is a key variable that needs to be addressed to prevent a rise in consumption.

Repressive cannabis policies are expensive and have limited impact on consumption. Consumption legalization significantly reduces expenses for repression and law enforcement, allowing for the allocation of more resources to other targets such as education and prevention. With legalization of supply along with consumption, repression and law enforcement costs are reduced even further. Moreover, a legal market would create employment and generate tax revenues that could be allocated to the prevention of increased consumption. Legalizing cannabis would not lead to a sudden rise in consumption, providing the duty imposed by the state kept the product at its current price.