An international perspective on the marijuana reform momentum (and its regulatory challenges) via The Economist

A terrific student in my marijuana seminar alerted me to this lengthy new article in The Economist headlined “Reeferegulatory challenge: A growing number of countries are deciding to ditch prohibition. What comes next?”. The article merits a full read, and here are excerpts:

Since California’s voters legalised the sale of marijuana for medical use in 1996, 22 more states, plus the District of Columbia, have followed suit; in a year’s time the number is likely to be nearer 30. Sales to cannabis “patients” whose conditions range from the serious to the notional are also legal elsewhere in the Americas (Colombia is among the latest to license the drug) and in much of Europe. On February 10th Australia announced similar plans.

Now a growing number of jurisdictions are legalising the sale of cannabis for pure pleasure—or impure, if you prefer. In 2014 the American states of Colorado and Washington began sales of recreational weed; Oregon followed suit last October and Alaska will soon join them. They are all places where the drug is already popular (see chart 1). Jamaica has legalised ganja for broadly defined religious purposes. Spain allows users to grow and buy weed through small collectives. Uruguay expects to begin non-medicinal sales through pharmacies by August.

Canada’s government plans to legalise cannabis next year, making it the first G7 country to do so. But it may not be the largest pot economy for long; California is one of several states where ballot initiatives to legalise cannabis could well pass in America’s November elections….

Setting the right level for the tax … is challenging. Go too low and you encourage use. Aim too high and you lose one of the other benefits of legalisation: closing down a criminal black market.

Comparing Colorado and Washington illustrates the trade-off. Colorado has set its pot taxes fairly low, at 28% (including an existing sales tax). It has also taken a relaxed approach to licensing sellers; marijuana dispensaries outnumber Starbucks. Washington initially set its taxes higher, at an effective rate of 44%, and was much more conservative with licences for growers and vendors. That meant that when its legalisation effort got under way in 2014, the average retail price was about $25 per gram, compared with Colorado’s $15. The price of black-market weed (mostly an inferior product) in both states was around $10.

The effect on crime seems to have been as one would predict. Colorado’s authorities reckon licensed sales—about 90 tonnes a year—now meet 70% of total estimated demand, with much of the rest covered by a “grey” market of legally home-grown pot illegally sold. In Washington licensed sales accounted for only about 30% of the market in 2014, according to Roger Roffman of the University of Washington. Washington’s large, untaxed and rather wild-west “medical” marijuana market accounts for a lot of the rest. Still, most agree that Colorado’s lower prices have done more to make life hard for organised crime.

Uruguay also plans to set prices comparable to those that illegal dealers offer. “We intend to compete with the illicit market in price, quality and safety,” says Milton Romani, secretary-general of the National Drug Board. To avoid this competitively priced supply encouraging more use, the country will limit the amount that can be sold to any particular person over a month. In America, where such restrictions (along with the register of consumers needed to police them) would probably be rejected, it will be harder to stop prices for legal grass low enough to shut down the black market from also encouraging greater use. Indeed, since legalisation consumption in Colorado appears to have edged up a few percentage points among both adults and under-21s, who in theory shouldn’t be able to get hold of it at all; that said, a similar trend was apparent before legalisation, and the data are sparse….

Different places will legalise in different ways; some may never legalise at all; some will make mistakes they later think better of. But those that legalise early may prove to have a lasting influence well beyond their borders, establishing norms that last for a long while. It behoves them to think through what needs regulating, and what does not, with care. Over-regulation risks losing some of the main benefits of liberalisation. But as alcohol and tobacco show, tightening regimes at a later date can be very difficult indeed.