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Legalize Pot To Save The Economy? Did Milton Friedman Own A Bong?

Several states are currently debating the legalization of marijuana, and given the current fiscal issues and relaxation of policies pertaining to medical marijuana use it looks quite feasible that we will see legal pot use in the next few years.

The Federal Government and almost every state in the union are frantically searching for new revenue sources, and as is always the case, the pros and cons of any new tax are heavily debated.  In Oregon there is a move to tax the rich and add corporate taxes.  Of course, corporations and the rich argue this will hurt business, and ultimately result in less tax revenue.  I suspect the truth is somewhere in the middle.  But all this makes the legalization and taxation of marijuana particularly appealing right now.  After all, it is already being sold, just not taxed, and most users would have no objection to a better distribution system that in all liklihood lowers prices and guarantees quality while feeding the economy.  Certainly anti-drug activists would have legitimate arguments against society essentially endorsing more drug use, but the numbers and the argument that “people would do it anyway” are too compelling to ignore, and there is certainly enough societal experience with marijuana to refute some of the “gateway drug” and the other “reefer madness” arguements.  Unlike most potential tax sources, there are few that would argue against taxing it, the issue is simply the legalization.

I was suprised to learn that there is a major effort by otherwise staid and conservative economists to legalize pot based purely on economic impact.  According to a study conducted by Professor Jeffrey Miron, legalizing marijuana would save $7.7 billion per year in state expenditures on prohibition, and if pot was taxed similar to tobacco it would generate $6.2 billion dollars in tax revenue.  We would also free up enormous space in prisons, and arguably free people that don’t really belong behind bars. Another possible positive impact pertains to the costs and hassles protecting our borders. Huge amounts of time and money are spent trying to stop pot smugglers on the Mexican border, and it is a constant source of crime.

The move to legalize is even endorsed by dozens of economists, including three Nobel Laureates; the late Milton Friedman, George Akerlof, and Vernon Smith.  I used to think that conventions for economists must be among the most boring gatherings imaginable, but now I must rethink that position.  Perhaps they have Cheech And Chong perform at the cocktail party?

In any case, a $13 billion dollar plus savings warrants some serious discussion.

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