Marijuana Economics The debate over the legalization of recreational Marijuana is a big one, and the economic impacts are all too large to ignore


Criminalize - To make a normally civil offense a criminal offense.

Private Sector - A smaller part of the economy that is not completely controlled by the national or state government.

Cash Crop - A crop that provides great economic value for the area in which it is grown.

Eradicate - To completely destroy or eliminate something.

Dispensary - A distribution site for marijuana.

Question: How does the marijuana private sector impact the state and nationwide economy as a whole?

Although many believe that legalizing a street drug that is often associated with crime may sound like it would have some negative consequences, researchers show that recreational use of marijuana could be extremely beneficial to our economy as a whole. In fact, according to economic development director Danielle O’Leary, the city of San Rafael, California could bring in nearly $200,000 solely in taxes off the cash crop due to a tax rate that will be higher than nearly any other product. Despite this statistic, many citizens believe that the tax money will go to industries that are not beneficial to themselves. However, recent studies show that much of the tax from the marijuana economy may go to the children in the K-12 school system. Economic policy editor Alan Pyke stated that, “Arizona’s measure mandates that the bulk of the new money would go to schools, a provision copied from Colorado’s referendum. Aside from the new job creation and economic activity, the state’s K-12 system would get an $86 million cash infusion over two years from legalization, according to the state fiscal analysis.” These recent studies have revealed the economic possibilities that could be expected from legalization of marijuana, leading more and more states around the nation to follow in Colorado and California’s footsteps.

Question: What must occur to eliminate the marijuana black market?

Although many believe that legalizing recreational marijuana will have an immediate positive impact on the economy, new studies have shown that the cannabis is not easily profitable. One major opponent of the legal recreational marijuana economy is the black market. Colorado Governor John Hickenlooper mentioned that the legal marijuana sod, in dispensaries must be taxed at a lower rate to eliminate the black market because of lower prices in the illegal industry. If taxes must be lowered to eliminate competitors, than the economy as a whole will be less profitable than intended. According to, “the incentive to hit the black market is greatest in California. By our estimates, buying marijuana on the black market saves consumers 27%...” This data collected from sources around the nation indicate that the nation must find the fine line between profit and illegal opposition.

Question: How might the marijuana industry grow to become similar or different to the tobacco industry?

With the more and more states legalizing recreational marijuana use, more and more people are becoming concerned with the future of the industry and how it might fall into the same footsteps as the cash crop tobacco industry - profitable for the private sector and detrimental to the users. In Kentucky, more than $1.6 B in marijuana plants have been eradicated by the Drug Enforcement Agency. This includes less than half the assumed total plants and more than the $853 M tobacco plant profit, says Joe Davidson of the Globe and Mail. Some firm supporters of the legalization refer to health effects to prove their point. It is possible that the marijuana will become bigger on the national scale than will tobacco products because of the lack of research tying cannabis to serious health issues, and in some cases the research tying it to health benefits. According to Business Insider's Jennifer Welsh and Kevin Loria, “There are at least two active chemicals in marijuana that researchers think have medicinal applications. Those are CBD...and THC - which has pain relieving properties.” This is different than nicotine, the addictive substance in tobacco, which can stimulate the reward center leading to an artificial pleasure sensation that has no positive health effects. The difference between the health effects in the two major cash crops is leading to marijuana gaining popularity and losing opposition.

Question - How might the legalization of marijuana affect the cost of law enforcement?

One of the major downsides to illegal marijuana use is the amount of money that drug enforcement uses to protect the laws put in place. According to, in 2010, the United States national and state governments spent a combined $35 Billion or more in drug enforcement. This is not all marijuana related, but it does constitute for the highest percentage because it is the most used illegal drug in the united states. If marijuana was legal, the government could save a lot of money because they would not need to criminalize and incarcerate marijuana users. In fact, this money could go to other advantageous organizations. Emily Gray Brosious on the extract said that, “Money funneled into drug enforcement has meant less funding for more serious crime and has left essential education, health, social service and public safety programs struggling to operate on meager funding.” Most of the people who oppose the war on drugs do so because it comes out of their pocket and they believe that it could be used on more beneficial programs like healthcare and education. If recreational marijuana was legalized, we may ultimately see a bump in our standard of living.

Question: How might the legalization of marijuana impact the local job market?

Before recreational marijuana use was legalized in any state, some people wondered what economic benefits, if any, would result from the new law. According to Christopher Ingraham or the Washington Post, “In 2015, the legal marijuana industry in Colorado created more than 18,000 new full-time jobs and generated $2.4 billion in economic activity.” In only one year, the economy of Colorado has been positively influenced on a large scale as a direct result of newly legal marijuana use, and individuals seeking job opportunities have found openings. In addition to creating jobs in the marijuana industry, legalization can stimulate the surrounding economy. Sean Williams of the Motley Fool mentioned that legalization can bring in tourists from out of state and that nearly half of all marijuana sales are from out-of-state customers. The increasing amount of tourists to marijuana legal states has led to an economic growth and therefore an increase in jobs.


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