Public policy is about trade-offs. There are few instances where a policy has no disadvantages, even if it is extremely beneficial on balance. A failure to recognize this makes us prey to simplistic and symbolic policy measures that seem sensible at first glance, but have terrible consequences. Perhaps the most egregious example of this is the prohibition of marijuana. The cost of prosecuting the war on marijuana is immense, as are the forgone tax revenues.
A recent arrest in Winnipeg provides a typical example. Police arrested two men for trafficking 196 pounds of marijuana. The men could serve two-year prison sentences. While it’s easy to cheer when the cops get the bad guys, the reality is this arrest, like most marijuana-related arrests, will do more harm than good.
First, consider the revenue that is foregone since these drugs are not being sold legally (don’t kid yourself — the prospective buyers will find other sellers).
According to one estimate, an ounce of high-quality marijuana on average sells for $229.03 in Manitoba. The same survey found an ounce of low-quality marijuana sells for $183. Using that lower cost, a pound of marijuana is worth $2,900 That would put the total value of the seized marijuana at $575,000. Were that amount sold on the open market, it would have generated $29,000 for the federal government through the GST and $46,000 for the provincial government through the PST. This excludes forgone corporate and income taxes from production.
In addition to the forgone revenue, there are staggering costs to the penal system. Based on University of Ottawa figures, the cost of each marijuana-related arrest works out to about $7,000 for courts and police. The costs are obviously much higher for large drug busts than for simple possession arrests.
The cost of incarcerating a prisoner per year in Canada is $113,880. Assuming each offender gets a two-year sentence, the total cost should be $455,520.
Adding up all the costs from this one arrest, we come to a minimum cost of $544,300. For the price of this one bust, we could have sent $1,000 cheques to the 544 poorest families in Manitoba.
The nationwide costs of marijuana prohibition are immense. Estimates claim Canadian governments lose $7.5 billion per year in tax revenue because marijuana is illegal, and spend $500 million annually on enforcement.
Assuming those estimates are correct, legalization would be a massive boon to the economy. For instance, governments could return tax savings of roughly $563 to every Canadian household annually, while doubling federal arts funding and student-loan forgiveness and still have enough left over to provide food, clothing, housing, and mental-health services to each unsheltered homeless person in the country.
Alternatively, we could pay off the entire projected federal budget deficits for 2014-15 and 2015-16 with several hundred million dollars to spare.
Lest anyone think legalizing marijuana is a fringe cause, 65 per cent of Canadians support either legalization or decriminalization. A recent Gallup poll found even 58 per cent of Americans support legalization. In 2005, 530 economists signed an open letter to U.S. President Barack Obama advocating the legalization and taxation of marijuana. Three Nobel laureates, including Milton Friedman, were signatories.
Even the Canadian Association of Chiefs of Police, while not supportive of outright legalization, is advocating moving toward fines rather than criminal charges.
Failing to recognize trade-offs allows us to ignore the unintended costs of ill-conceived government policies. Cracking down on one dealer will only mean another dealer will spring up to take his place. Marijuana is easier for kids to get than alcohol despite the fact alcohol is legal.
We can either spend money throwing people in jail without reducing the availability of marijuana to minors, or we can legalize it, tax it and regulate it. That would also free up a lot of cash to actually improve people’s lives.
Even if that leads to a tiny uptick in usage — usage actually went down in Portugal, the one country that has completely decriminalized recreational drug use — that trade-off would be worthwhile, given what we can do with an additional $8 billion.