Later On

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Designing Cannabis Supply to Promote Temperance

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Mark Kleiman has an interesting post at The Reality-Based Community:

Today I had the pleasure and honor of testifying before the Foreign Affairs Committee of the Canadian Senate. It really was a pleasure; the Senators asked precise and perceptive questions and avoided speechifying.

In my oral presentation, I stressed the idea that cannabis prohibition is no longer operationally feasible in the U.S. or Canada, and that we can get the drug under better control if we recognize that fact and create a well-designed system of legal availability, where by “well-designed” I mean a system crafted to provide convenient access to safe and properly labeled cannabis for moderate use by adults, without creating either a commercial industry or a revenue-hungry public enterprise.  Any entity devoted to making money from cannabis sales will by its nature be devoted to the spread of cannabis use disorder, since temperate majority of cannabis users are of little commercial value compared to the minority of very heavy users, who account for more than 80% of sales.

Testimony of Mark A.R. Kleiman
Professor of Public Policy
Director of the Crime and Justice Program
Marron Institute of Urban Management
New York University

Committee on Foreign Affairs and International Trade
Senate of Canada
March 22, 2018

It is an honor to be allowed to offer my views on the design of a legal market for cannabis, a topic that has absorbed a substantial part of my attention throughout my career in government and in academia. Since the topic is complex and time is limited, what follows cannot be a full exposition of all the complexities and uncertainties, and it omits the credit due to the many colleagues whose work it reflects. To be complete and properly sourced, each numbered point below would need to be a chapter.

1. The great gains from legalizing cannabis sales (for non-medical use) are the resulting shrinkage in illicit commerce and the provision of legal supply to adults who wish to use the drug and can do so temperately.

2. The great potential loss from legalizing cannabis is increased intemperate use. (A large increase in use by minors is substantial in terms of potential harm but modest in terms of probability.) While the drug is often represented as “non-addictive,” in fact quite substantial percentages of current users report having difficulty controlling their own behavior around the drug. (Rates of problem use in total use are roughly comparable to those for alcohol, for example.) In the United States, problematic cannabis use has increased very markedly, both absolutely and compared to the total number of users, over the past quarter-century. Of all U.S. persons who report in surveys having used cannabis in the past month, four in ten report having used it every day or almost every day during that month. Of those daily/near-daily users, approximately half self-report the symptoms of cannabis use disorder. That figure amounts to approximately 4 million people nationwide. I’m not familiar with comparable statistics for Canada, but the patterns of use in the two countries seem sufficiently similar that the U.S. statistics constitute a reason for Canadian concern.

3. Insofar as cannabis substitutes (in the economic sense) for other, more harmful intoxicants – including alcohol – legalization might lead to significant gains in public health and public safety. There is some – though not yet definitive – evidence that greater cannabis availability tends to lead to less opiate use (medical and non-medical) and less opiate-related harm. Evidence on substitution for – or, alternatively, complementarity with – alcohol, remains scattered and mixed.

4. Cannabis is, as a legal product, quite cheap to produce. “Farm-gate” costs can be expected to fall below $1/gram, and perhaps quite substantially below that level. Even with normal processing costs and retail markups, pre-tax prices once the licit market is mature should be expected to be a small fraction of illicit-market prices, or even current dispensary prices.

5. Very low prices encourage intemperate consumption.

6. The rapid growth in the estimated number of daily/near-daily users in the United States accompanied a marked decline in the price of cannabis (adjusted for inflation and THC content). The precise causal relationships remain unclear, but there is no assurance that further price declines – already marked in the U.S. states, which first legalized cannabis – will not fuel further growth in daily/near-daily use and in cannabis use disorder.

7. At current prices, a daily/near-daily user can easily spend thousands of dollars per year on cannabis. That fact alone suggests that heavy use is likely to be price-sensitive. On the other hand, price is of little concern to ordinary cannabis consumers. The current cost of cannabis use for someone who has not built up a tolerance is (very approximately) 50 cents per intoxicated hour.

8. Therefore, the social gains from lower prices are unlikely to be significant, while the risks are substantial. This suggests that preventing further price decreases ought to be among the design elements of a prevention-oriented cannabis policy. Preventing the growth of cannabis use disorder requires preventing the collapse of cannabis prices.

9. In Washington and Colorado, post-legalization prices have been falling at the rate of approximately 20% per year, with no bottom in sight. Everyday discounts make high-potency cannabis available at less than $100 per ounce, equivalent to less than $3.50 per gram or about 15 cents per intoxicated hour. “Bargain” prices – still for 16%-THC flower – are now down to $15 per quarter-ounce, or about $2/gram, with no floor in sight.

10. The most direct means of managing prices would be state-monopoly retail distribution, after the pattern of alcohol monopolies in some provinces.

11. However, equivalent results could be achieved by taxation (or by limiting production rights and conducting periodic rights auctions).

12. . .

Continue reading.

Written by LeisureGuy

23 March 2018 at 12:47 pm

Posted in Drug laws, Government

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