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Legal Weed: A Pot Of Gold? The Economics of the Marijuana Industry

Smokin Moose

Fallen Cannabis Warrior
The Economic Benefits Of Legalization

The answer to that question has been partly provided by economics professor Jeffrey Miron, whose recent report on the fiscal impact of marijuana prohibition was endorsed by 550 of the world's leading economists, including Nobel Prize-winner Milton Friedman.

Miron attempts to evaluate how much it costs US federal, state and local governments to enforce marijuana laws, how much revenue would be generated if marijuana was taxed like most products, and how much would be generated if it was taxed like alcohol or tobacco.

The economist's report is based on an envisioned level of legality far exceeding that of decriminalization, but the report is not based on a calculation of the economic benefits that marijuana had from the 1600's until the plant was outlawed in the early 1900's. During that multi-century period, marijuana was not subject to any prohibitive legal rules (although for a while, the King of England required colonist farmers to grow hemp) and was an extremely valuable industrial crop in the USA.

US Founding Fathers Thomas Jefferson and George Washington grew hemp, as did thousands of other farmers. Before cotton replaced hemp as the primary source for fiber and seed oil in the 1840's, cannabis was among the most important agricultural sectors of the American economy, and could also be grown in anyone's personal garden.

The Miron report postulates that marijuana production and sales in a legalized environment would operate somewhat like the Dutch cannabis market. Miron acknowledges this is not at all an exact comparison. But it's the closest analogy he can find, and so he glosses over key issues and questions in what is otherwise a courageous, valuable document that usefully challenges prohibition.

These center on exactly how a legal marijuana marketplace would function economically: a) what percentage of total marijuana transactions would continue in the black market and involve people who grow, purchase or barter cannabis rather than buying it in stores as they would buy other products; b) what percentage of transactions would involve marijuana burdened by "sin taxes," as are cigarettes and alcohol; c) what percentage of marijuana transactions would be subject to taxation and regulation at all; d) what are likely fiscal impacts of legalization? The report contains two different estimates of tax revenues marijuana could generate if it was legal. Both calculations assume a decrease in the price of cannabis due to removal of risks associated with growing during prohibition.

Starting with an estimate of an $8 billion-per-year US pot expenditure, Miron says marijuana could generate $2.4 billion in taxes if cannabis is taxed at a normal tax rate, and could generate $6.2 billion yearly if taxed like booze or tobacco.

The report predicts major savings if cannabis is legalized. The drug war creates lots of costs for courts, police, jails and prisons. At the state and local level, legalization could save at least $5.3 billion yearly in taxpayer-funded drug war expenses. At the federal level, legalization could save at least $2.4 billion in drug war expenses.

By taking the amount of money governments would not have to spend arresting, judicially processing and incarcerating people, and adding it to the amount of tax revenue possibly generated by legal pot, Miron estimates as much as $14 billion per year in savings and new revenue could be generated if marijuana was made legal.


There are subtle nuances and unfathomables to Miron's calculations, and he acknowledges some of them. For example, one reason the drug war exists is so governments can seize drug defendant's property and keep it, but Miron says the value of seized assets is a tiny fraction of what it costs to run the drug war.

Police promote asset forfeiture and court-ordered fines/restitution as a way of making criminals pay for their crimes, but in many cases, asset forfeiture and fines hurt defendants but don't significantly reimburse taxpayers for the cost of the drug war. The police keep what they seize and use it themselves; taxpayers pay more and more for the drug war each year. Also left unanswered is whether people would buy taxed marijuana if the purchase price were inflated significantly by a sin tax, as is the price of alcohol and tobacco.

Legalization would cause significant job losses that Miron fails to mention. One of my favorite attorneys says criminal defense lawyers refer to marijuana laws as "The Full Employment Act for the Criminal Defense Bar."

My lawyer friend notes that 800,000 people are arrested in the US for marijuana every year. Some are arrested for other crimes and just happen to have marijuana with them at the time of their arrest; judicial statisticians still count this as a pot bust. Miron estimates that 50% of all listed marijuana arrests are just for marijuana and nothing else; my lawyer friend stipulated that at least 400,000 marijuana-only arrests are made per year.

If you calculate profits for lawyers generated by these hundreds of thousands of pot busts, my friend says wryly, "you begin to see why most criminal defense lawyers don't want marijuana legalized — ever."

Here's how lawyers benefit tremendously from prohibition: Some cannabis arrests are ticketable offenses, and others are arrestable offenses: some felonies, some misdemeanors. A few defendants are represented by public defenders, but that system is so underfunded and understaffed that most defendants are forced to hire private lawyers, and pot lawyers rarely work for free, even in medpot cases where defendants are dying and destitute. My friend calls it "cash register justice."

Noting that marijuana philanthropist Marc Emery has paid hundreds of thousands of dollars in legal fees for other people's cannabis criminal cases and Supreme Court challenges, the lawyer said that if those defendants had had to pay for their lawyers themselves, they would have never been able to get beyond the first appellate court, if that far. Justice is expensive, and lawyer's fees are the reason why.

Assuming a conservative estimate of 50% of those 400,000 pot-only arrestees hiring a lawyer for an average of at least $2500 per case, lawyers are making a minimum half a billion dollars a year off marijuana prohibition! And it must be remembered that many marijuana cases, especially felony cultivation and felony trafficking cases, generate lawyer fees in the tens of thousands of dollars — and that defendants also have to pay for private investigators, court reporters, transcripts, filing fees, and other costs of their defense.

I have known felony cultivation defendants who spent $40,000 trying to get acquittal, but in the end were advised to plea bargain to a felony and probation, and shut up. Marijuana defendants must also pay for other "services," including bail bondsman, urine testers, court-ordered fines and restitutions, incarceration fees, and drug counseling.

The drug testing industry, which focuses primarily on cannabis, is a $7 billion annual industry. The anti-drug counseling industry is also burgeoning, with counselors paid an average $42,000 per year, working in all sectors of American society from elementary schools to prisons to corporations.

Most drug counselors are in business because courts offer marijuana convicts a "choice" of punitive sentences: pay thousands of dollars for mandatory drug testing, probation, and counseling... or go to jail. If people can afford it, they usually choose the counseling route.

If marijuana were legal, another big loser would probably be the hydroponics industry. This industry, which includes manufacturers of high intensity lights, air exchangers, electrical grids, heatingcooling units, odor removers, irrigation tubing, timers and pumps, monitoring sensors, carbon dioxide gas, generators and tanks, rockwool, fertilizers, and other grow media, is estimated to be selling at least $2.5 billion worth of gear to American indoor pot growers per year. There might be an increase in large-scale commercial indoor production if pot is legalized, but it's doubtful that as much money overall would be spent on expensive indoor hydro gear if people could legally grow kind bud trees in the back yard.

And as Miron says, it's probable that prices for marijuana will drop if cannabis is legal, thus depriving some black market growers the currently huge mark-up that allows them to pay off mortgages, buy monster trucks, and otherwise live large by growing a plant that is worth more than its weight in gold.

In 1970, an ounce of high grade seeded Colombian buds cost $20, and gasoline cost 50 cents a gallon. Today gas is $2.50 a gallon and bud is $400 an ounce. Does prohibition have anything to do with that? Go figure!

Would ten high quality cannabis seeds still sell for $200 if pot were legal? Would legal pot still sell for $400 per ounce? Probably not. Even if demand skyrockets and most people choose not to grow their own after legalization, it's likely the wholesale and retail prices of cannabis — if removed from the black market of risks and rippers — would go down.

Others who stand to lose lots of money when cannabis is legal are police, prison guards, prison builders, drug dog companies, and governmental drug warriors like the Office of National Drug Control Policy in the White House, the DEA, and others who make their living oppressing drug culture and people.

Drug warriors claim if marijuana is legal, society will suffer financially due to alleged health problems, car accidents, insanity, babies, lost employee efficiency, and lost work hours. But there's never been a reliable study that proves expensive societal marijuana damage, or that marijuana use reduces the efficiency of the work force. Indeed, workplace drug testing has proven that most marijuana users are exemplary employees who never attracted negative attention from their employers until their employers randomly tested them for drugs. That urine tests are required is proof that no flaw was detectable in a cannabis using person's performance, otherwise they would have been fired for incompetence.

Bigger Picture

Miron focused his calculations and estimates on marijuana as an intoxicant being grown, bought and sold by individuals and businesses, but he forgot to calculate the potential revenues of eventual cannabis coffeeshops, cannatourism, natural medpot products, industrial hemp products, and canna-entertainment industries.

As Vancouver's Da Kine cannabis shop revealed, if you sell quality cannabis, pot edibles, and hashish, thousands of people will show up and give you lots of money. It's likely that marijuana "bars" and music clubs would be a serious rival to the alcohol bar industry within a few years of legalization. If the value of the Dutch cannabis shop industry is any indication, American pot entertainment could generate $7 billion a year in revenues beyond the profits Miron has estimated for the regular retail market.

Marijuana-related entertainment is just now beginning to take off, pioneered by Marc Emery's revolutionary reality television shows on his very own television network Pot-TV.net, in which he features real people casually breaking the law, and enjoying the freedom and liberation cannabis legalization can permit. Just think of the money waiting to be made from authentic pot-related television and movies in a legal marijuana America! And what about industrial hemp? If the marijuana plant is legalized, hemp can again be grown in the US, where it would compete with cotton, nylon, animal fats, forest products, petrochemicals, petroleum, food oils, and other profitable products, which will generate many billions of dollars in commerce.

As Jack Herer proves in his book, The Emperor Wears No Clothes, the value of a free market hemp industry would be tremendous, because hemp can replace so many other commercial products and processes and do so with far less ecological damage.

Numbers Talk

Traditional economists don't take into account ethics, value systems, Mother Earth, or human spirit factors. They are professional automatons; it's part of their creed to only care about numbers and economic theory. That's why economists are eagerly responsible for International Monetary Fund and World Bank economic policies that destroy the environment, civil society, and human rights.

Miron admits his evaluation of marijuana legality focuses only on economics. It doesn't take into account how much prohibition costs in terms of freedom, fascism, loss of civil liberties, harm to families, and creation of a police state.

Still, Miron has done the marijuana community a sweet favor by showing in cold, hard, ruthless economic language that pot prohibition is as needlessly expensive as it is morally repugnant. "The fact that marijuana prohibition has these budgetary impacts does not by itself mean prohibition is bad policy," he says in his report, which was sent to the White House and Congress.

"Existing evidence, however, suggests prohibition has minimal benef its and may itself cause substantial harm. We therefore urge the country to commence an open and honest debate about marijuana prohibition. We believe such a debate will favor a regime in which marijuana is legal but taxed and regulated like other goods. At a minimum, this debate will force advocates of current [drug war] policy to show that prohibition has benef its sufficient to justify the cost to taxpayers, foregone tax revenues, and numerous ancillary consequences that result from marijuana prohibition."

by Ray Boyd


New Member
It is obvious that, when there is a product that some people really like, you can't have it legal in one way(medicinal) and illegal in another way(recreational) You can't please everyone. The lawyers make money because marijuana is illegal, growers can make money legally and illegally, compassion clubs give it away. Marijuana is one of the best plants ever and it has been discriminated against in every way. Most of all, how does someone transport pot, let's say, to a cancer patient across the country? If you send the medicina marijuana via air mail for instance, how do the drug sniffing dogs know if the pot they found is for legal or illegal purposes?

Jim Finnel

Fallen Cannabis Warrior & Ex News Moderator
............If you send the medicina marijuana via air mail for instance, how do the drug sniffing dogs know if the pot they found is for legal or illegal purposes?

any cannabis sent through the mail is illegal. the mail is federal.


New Member
This article has very clear ideas in it. First it says prohibition does cause harm. It also looks at the fact that things like freedom and family values were NOT part of the calculations. It goes on to say that the savings + revenue gained in taxes would be a big chunk of change, too big to pass up? It also points out that Cannabis consumer workers make great workers, which ONLY a urine test could prove they had consumed Cannabis. There is lots of good stuff to take from in this article. Thanks


Grow Journal of the Month: May 2017
I really do not see putting $30.00 worth of expenses into a 1 pound plant over a growing season if it's grown outdoors. If it were legal there's no way it would sell at the extortionate price it sells for now. $1.00 for a cigarette sized doob MIGHT put some money in people's pockets if legalization occurs, but I'm not paying it.


New Member
This is a big problem. With all the incarcerated people after a change in the law being released With a shitty job market. It would have to be a big flip and make a need from the new industries of marijuana production to fill the gap. In my option it would fix our country finical issues in the end but be a bumpy road. Lets hope common sense becomes popular soon, And people stop fearing the change. This is history repeating its self. Remember Prohibition, same shit. (The drunks where more violent) but we were in need of money at that time also, and I think that's what brought the right to drink(money)! Money moves the world.
One element not mentioned in this article is revenue the US Postal Service is making from cannabis sales. Any grower in California or Colorado knows not to ship via UPS. The company has the right to open and search any suspicious package. Because the USPS is run by the Feds, a warrant is required to open a package. Unless the package weighs several pounds, they don't bother. And since the USPS is losing money, why arrest customers? The US Postal Service is making millions of dollars each year from cannabis shipments.
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