Magazine | December 8, 2014, Issue

Cannabis, Conservatively

(Luba Myts)
There’s a middle ground between prohibition and commercial production

The election results suggest that the country is well on the way to fully legalizing not only the possession of cannabis for personal use but also its commercial production and sale. The voters seem to have concluded—decisively, though not enthusiastically—that, after trying marijuana prohibition for 80 years, it’s time to move to Plan B.

It’s not hard to see why: The illegal cannabis trade (and federal law makes it illegal everywhere in the country, whatever some states might choose to do) now generates about $40 billion a year in revenue for lawbreakers, about twice as much as the revenue from cocaine, the second-largest illicit-drug market. No one seems to have either a plan to cap that gusher of illicit cash or much enthusiasm for the massive enforcement effort that would be required to carry out such a plan. Resources aside, the human and social burden of making more than half a million arrests each year for marijuana possession for personal use, and keeping something like 30,000 people behind bars at any one time for cannabis dealing, seems a heavy price to pay for an effort—only partly successful—to reduce the number of people whose cannabis habit damages their lives.

Still, the fact that change is necessary offers no guarantee that all the results of change will be benign. This is a case where we should listen to the counsel of Edmund Burke and Michael Oakeshott, who would advise us to adapt to new circumstances by making only as much institutional change as we need to, moving no faster than the situation requires, and making as few irreversible changes as possible.

Burke and Oakeshott would also warn us to beware of unintended consequences. Cannabis legalization will indeed provide a solution to the manifold ills of prohibition, but, as James Q. Wilson once observed, the chief cause of problems is solutions. We seem to be about to lurch all the way from making the cannabis trade a felony to making it an industry, as we did with alcohol and gambling. There are stopping places in between, and finding one of them might prevent a good deal of avoidable misery.

What happened on Election Night? Oregon and Alaska voters chose to legalize growing and selling cannabis without any medical pretext. In Washington, D.C., a new law will allow production for personal use and free distribution (“grow and give”). In Florida, a medical-marijuana law won a thumping 58 percent “yes” vote but fell short of the 60 percent required to pass. All of this happened in a midterm election, with an electorate tilted toward older voters, who view cannabis less favorably than do the younger people who vote in presidential years.

There’s more to come, including proposals in California and some other states in 2016. Vermont, where the legislature last year asked the governor for a set of legalization options, might become the first state to fully legalize cannabis through the normal legislative process rather than by voter initiative. At some point, even Congress might wake up and adjust the federal law to the new realities on the ground. More than 90 percent of cannabis-dealing cases are brought by state and local police and prosecutors; without their assistance, there’s no way 4,000 DEA agents can effectively get between a million or so pot-sellers and many millions of buyers.

None of this year’s results were unexpected: National polls show that a majority of Americans support cannabis legalization. But the change in public opinion that made the election results unsurprising was itself a surprise. The obvious comparison is to the rapid shift in opinion on same-sex marriage, but there are contrasts as well: Opinion about cannabis is less polarized along partisan and cultural lines, and the two issues differ radically in terms of why people want change. Support for marriage equality mostly reflects the affirmative belief that couples in which the partners are willing to commit to each other ought to have legal recognition for that commitment. Support for legalizing cannabis reflects not so much an enthusiasm about having people light up as unwillingness to keep paying the costs of the “war on weed.”

But if what the voters want is to shrink the illicit market and respect the liberty of adults to alter their own mood without asking permission, full commercialization of cannabis would overshoot the mark. Competitive, profit-driven enterprise has no equal in giving consumers what they want at the right price while also generating product innovation and deploying ingenious marketing to get people to buy what they didn’t know they wanted. That makes it a remarkably ill-designed mechanism for organizing the supply of goods and services whose primary market consists of those whose consumption is out of control.

Between 80 and 90 percent of cannabis consumption and revenues comes from about one-sixth of cannabis users: those who light up 21 or more times a month. As Jonathan Caulkins and Maria Cuellar of Carnegie Mellon University have calculated, that group has grown sevenfold over the past 20 years. About half of them, by their own report, meet clinical criteria for cannabis-use disorder: Their cannabis use is interfering with the rest of their lives.

#page#An occasional, responsible cannabis consumer is of only negligible economic interest to a cannabis seller unless he has the prospect of developing into a near-daily user. That may be why the cannabis available in the quasi-medical market and the commercial markets in Washington and Colorado is much more potent than many casual users prefer: several times as potent, measured by its content of THC, as it was in 1979, the previous peak for heavy use. The people who buy most of the cannabis use so much so frequently that they have built up a tolerance and need super-strength material to get the effects they seek.

Is that really a consumer habit we want to see encouraged by Super Bowl advertising? The federal government, once it made cannabis legal, might find itself unable to restrict marketing, other than banning false claims and explicit appeals to minors.

There are ways to end prohibition without putting the full force of entrepreneurial ingenuity behind the cultivation of cannabis-use disorder. The Washington, D.C., “grow and give” law is one such option. Alternatively, consumers could form cooperative enterprises of limited size. Or cannabis sales could be restricted to nonprofits or public-benefit corporations with charter obligations to simply serve demand rather than trying to cultivate it, and to help their customers avoid falling into the drug-abuse trap.

Even under a for-profit model, there are ways to limit the growth in heavy use, especially heavy use by minors. It’s easy to prohibit juveniles from buying directly from state-licensed stores, and relatively easy to enforce that ban, but preventing lawful adult buyers from reselling to minors is almost impossible. After all, prohibition isn’t keeping minors from getting access today, and legalization would make every adult a potential supplier.

The best way to minimize problem cannabis use would be to keep prices high, by taxation or limits on production. As an illegal drug, cannabis is somewhat expensive, though still cheaper than beer per intoxicated hour. As a legal drug, the cannabis in a joint—now typically about $4 worth—would instead cost pennies before tax, just like a teabag or a tobacco cigarette.

That makes taxation as a percentage of the market price—the approach adopted in Washington and Colorado—a bad long-term strategy. Taxes should be based on the THC content of the product and designed to rise as market prices fall in order to keep the cost to the consumer somewhere near the current illicit price. As long as the prices are comparable, the illicit market can’t compete on convenience or quality. High prices won’t matter much to casual users but will help limit the growth in heavy use, especially among cash-constrained adolescents.

Price will be a particular issue now that Oregon has joined neighboring Washington in legalizing cannabis. Under current laws, Oregon cannabis will enjoy a tax advantage of about $75 per ounce over the Washington product, a differential big enough to support substantial smuggling. Officials from those two states should put their heads together to avoid the sort of massive illicit traffic that now carries untaxed cigarettes from Virginia to New York City.

But price isn’t the only lever available. Point-of-sale and package-label information could be designed to educate consumers about the risks of problem use. Cannabis sales clerks could be trained in substance-abuse prevention. We could also adopt a “nudge” strategy by requiring every user to set a personal weekly or monthly limit and requiring vendors to refuse sales to people who have gone over the amount they set for themselves.

None of this is guaranteed to work. In the face of inevitable uncertainty, a conservative approach to cannabis legalization would be cautious, experimental, and incremental.

But that sort of conservatism seems to be in short supply. Right now, most cultural conservatives simply oppose any form of legal availability, which takes them out of the conversation about how to legalize responsibly. Libertarians reflexively favor low taxes and loose regulations. Thus advocates of full-on legalization have no incentive to compromise, since doing so would bring them no new support. Liberal voters tend to back legalization as a means of reducing the damage done by arrest and incarceration while increasing personal liberty, though there is dissent from some public-health paternalists. On both sides of the aisle, the debate is focused on whether to legalize rather than how to legalize.

As is usual in a polarized debate, neither legalizers nor prohibitionists are willing to acknowledge the disadvantages that go with the policies they prefer, and neither makes adequate allowance for the unknown and the unexpected. As a result, there is no politically potent organized backing for temperate cannabis policies. Such policies are easy to grasp and support widely shared values, but for now they lack a leader to put them on the political agenda. This means that we are likely to get locked in to alcohol-style legalization through a succession of disconnected state-level decisions.

Is there an Oakeshottian in the house?

– Mr. Kleiman is a professor of public policy at the UCLA Luskin School of Public Affairs and one of the authors of Marijuana Legalization: What Everyone Needs to Know. His firm, BOTEC Analysis, advised the Washington State Liquor Control Board on the implementation of Washington’s legal cannabis market.

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