PRELIMINARY AND INCOMPLETE: NOT FOR CITATION

Economic Aspects of a Post-Prohibition Regime for Marijuana

Jeffrey A. Miron

DepArtment of Economics

Boston University

Boston, MA 02215

781-856-0086

jmiron@bu.edu

I. Introduction

For many years opponents of marijuana prohibition have fought a seemingly hopeless battle against the accepted wisdom that government should outlaw the production, distribution and use of marijuana. In recent years, however, the climate has changed substantially in numerous countries (with the glaring exception of the United States), and the opportunity for eliminating or at least scaling back marijuana prohibition seems within grasp.

With this progress, however, comes a set of questions that has not been fully addressed. First, what exactly is the best alternative to current prohibition. Second, what are the economic implications of this alternative policy regime?

Regarding the first question, the presumption of many prohibition critics is that a post-prohibition regime should have substantial amounts of government involvement in the market for marijuana. For example, many reformers push for medicalization of marijuana, or decriminalization, or government provision, rather than outright legalization. Even amongst those who advocate legalization, the assumption is usually that legalized marijuana would be subject to substantial regulation in the form of sin taxation, age restrictions, advertising prohibitions, or bans on drug-testing.

This paper argues that full legalization, in which policy treats marijuana like any other good, makes better economic sense than the “half-way houses” frequently endorsed by opponents of marijuana prohibition. This does not mean partial measures have no value; they are better than the current policy of prohibition. But full legalization is better yet.

Regarding the economic impacts of marijuana legalization, the conventional wisdom amongst prohibition critics is that legalization will produce large-scale economic benefits in the form of reduced government expenditure for prohibition enforcement and increased tax revenue from legalized production and sale.

This paper suggests, however, that the impact of marijuana legalization on government budgets is probably modest. Hard data on the size of current marijuana markets are difficult to obtain, and the change that would occur under legalization is uncertain. Available evidence indicates, however, that these impacts, while not trivial, are an order of magnitude lower than claimed in many recent accounts. In and of themselves, the budgetary impacts are minor issues in the debate over marijuana legalization.

II. What is the Ideal Policy Toward Marijuana?

There is widespread agreement in the marijuana reform movement that current policy is, at a minimum, excessive. In particular, virtually everyone in this movement opposes arresting and incarcerating people whose only “crime” is marijuana use. Beyond this proposition, however, there is substantial diversity in the views over the best alternative to current prohibition. I present here the argument for minimal government intervention other than that directed at all legal goods.

Legalization or Decriminalization

A first issue that arises in discussing alternatives to marijuana prohibition is whether policy should legalize or merely decriminalize marijuana. Under full legalization, the production, distribution, sale and possession of marijuana are all legal; the law treats marijuana like any other commodity. Under decriminalization, marijuana possession is not subject to criminal sanctions, but penalties against production, distribution and sale remain. Thus, marijuana is not a legal commodity.

Decriminalization is difficult to defend from the perspective of economics. To begin, every transaction must have both a seller and a buyer, so it makes little sense to criminalize one side of the market but not the other. Even more importantly, decriminalization does little to reduce prohibition-generated ills other than those directly related to the adverse legal treatment of marijuana users. Decriminalization maintains the illegal status of production, distribution and sale of marijuana, so the industry still operates underground. This means the negatives side effects of prohibition (crime, corruption, infringements on civil liberties, poor quality control, wealth transfers to criminals, disruption of other countries) all continue under decriminalization. It also means the state cannot tax the production and sale, nor can it regulate the marijuana industry The only benefit of decriminalization relative to prohibition is that marijuana users face limited legal penalties from drug use.

A possible response to this perspective is that several countries have diminished the harm from marijuana prohibition by decriminalizing without legalizing. This conclusion is unwarranted, however, because it confounds the effect of prohibition per se with the degree to which prohibition is enforced. Countries that have decriminalized are, by and large, countries with minimal enforcement of marijuana laws generally, including those directed at production and sale. This low level of enforcement mitigates the effects of prohibition on crime, corruption, and other prohibition-generated ills, even though marijuana is still prohibited.

The economically sensible policy, therefore, is legalization rather than decriminalization. Decriminalization is better than prohibition, but full legalization is better still.

Medicalization

A different alternative to marijuana prohibition, often termed medicalization, is to put control over marijuana in the hands of physicians, with only modest oversight from law enforcement. Specifically, physicians would be legally permitted to prescribe marijuana for a range of conditions or treatments, and pharmacies would be legally allowed to sell marijuana to persons holding a valid prescription. These pharmacies would obtain the marijuana, again legally, from licensed private or government suppliers, as occurs now with other prescription medications.

The critical effect of medicalization is to provide many marijuana users with a legal supply, thereby reducing the black market. Since the range of conditions for which marijuana appears efficacious is broad, physicians would have enormous scope to prescribe marijuana. Thus, the magnitude of the black market might shrink substantially if prescription marijuana were legal. Thus, from the perspective of eliminating the negative effects of a prohibition-induced black market, medicalization is beneficial.

There are, however, important limitations of the medical marijuana approach relative to legalization. First, it does not necessarily eliminate the black market for marijuana; that depends on how strict or lax the rules on prescribing are. Second, the quality of marijuana provided to pharmacies might be low, which again means continuation of the black market. Third, medicalization encourages users to request, and physicians to supply, marijuana for the treatment of questionable medical conditions; this charade breeds disrespect for the law. Fourth, medicalization accepts the notion that using marijuana is “bad” and only allowable to medical reasons; there is no justification for this perspective, and if allowed it persist, the perspective spills over to other arenas.

As with decriminalization, therefore, medicalization is better than current policy but less desirable than legalization.

The Regulation and Taxation of Legal Marijuana

Given a legal regime for marijuana, a number of additional issues arise.

The first question is whether to impose to tax marijuana more heavily than other goods. Most societies currently impose “sin” taxes on alcohol, tobacco, gasoline, and a few other goods.

There are two standard rationales for sin taxes. There are two main rationales. One is that drug use imposes negative effects on innocent third parties (e.g., by causing traffic accidents). The other is that many users make irrational decisions to consume drugs.[1]

Neither of these rationales applies in a convincing way to marijuana. Marijuana use potentially imposes externalities in certain situations, such as driving under the influence, but existing evidence does not support a strong effect in this direction, and in any case such evidence suggests laws against DUI, not a sin tax. The consumption of marijuana does not have substantial potential for addiction or negative health consequences, so myopia justification is not valid either.

In addition, the sin tax approach is problematic. First, it perpetuates the notion that marijuana use is a sin. Second, sin taxes often reflect political influences rather than valid economics. Third, it is difficult to determine which goods generate the biggest externalities. And sin taxation can increase to the point where it drives the drug market underground, which generates the same negatives as prohibition.

A second policy issue that arises in a legalized regime for marijuana is whether to prohibit advertising. Many critics of prohibition assume a post-prohibition regime should prohibit advertising of legalized marijuana. This outcome is perhaps likely from a political perspective, but it makes little sense from an economic perspective.

To begin, there is little evidence that advertising substantially increases demand for a mature product. Instead, advertising appears to mainly shift demand for a given product between different brands. If marijuana were legalized, it would be a newly legal product, but it would still be mature from the perspective of most consumers. The natural assumption therefore is that a marijuana market would resemble the markets for cigarettes, alcohol, soft drinks, and many other consumers goods for which differences in quality are often not dramatic but advertising promotes brand differentiation.

Assuming this is an accurate description, the fear that advertising would entice additional persons to consume marijuana is unfounded. Thus, the principle negative that some attach to advertising of legalized marijuana would not arise.

In addition, advertising potentially has an important benefit. Advertising gives the manufacturer of a high quality or improved products the ability to attract and retain customers. This spurs innovation and means cheaper, safer products for consumers.[2]

Still a third policy issue that arises under marijuana legalization is whether to impose age restrictions on the purchase of marijuana, as currently occurs now for alcohol and tobacco. The standard rationale for age restrictions is that minors are not ready to make informed decisions about whether or under what circumstances to use certain commodities.

Whatever the validity of this assumption, however, age restrictions are imperfect at preventing underage consumption of restricted commodities. Minors often evade these restrictions, which breeds contempt for the law. Further, minimum purchase ages can encourage parents to supervise their children less diligently, under the mistaken assumption that the law has addressed the problem. Thus, it is not obvious that age restrictions do more harm than good.

One issue that exists already but that would acquire renewed discussed under legalization is how policy should regard marijuana testing. Many opponents of marijuana prohibition also oppose marijuana testing by employers or others and endorse government policies to prohibit or limit marijuana testing.

Economic analysis gives little justification for governments to restrict private drug testing, however. In the absence of government pressure to engage in drug testing, private employers will test their employees only if the benefits in terms of increased productivity exceed the costs. This is exactly what should occur to achieve economic efficiency.

At the same time, there is no economic reason for the government to require drug testing by private companies. It might make sense for the federal government to test some of its own employees (e.g., military pilots), but there is no reason to compel such testing by private employers. Thus, the incidence of testing would likely decline in any case.

A second issue that arises under prohibition or legalization, but that deserves renewed discussion in the context of legalization, is whether governments should subsidize marijuana “abuse” treatment. Many critics of prohibition believe the funds currently expended on marijuana prohibition should be transferred to subsidizing treatment.

The case for government-subsidized marijuana treatment is weak, however. First, no evidence that treatment generates benefits in excess of costs. Second, having the government subsidize treatment accepts the view that marijuana use is somehow “wrong” and the marijuana use is something that needs to be eliminated. Third, demand for treatment would fall under legalization, both because there would be less government coercion and because there would be less social pressure to abstain from drug use, so the issue would be less important in any event.

III. Economic Implications of Marijuana Legalization

The legalization of marijuana, were it to occur, would have a number of economic and social effects. Prominent amongst these are any impacts on government budgets. Legalization means government would no longer expend resources enforcing prohibition and that governments could collect tax revenue on legalized marijuana. These section provides some educated guesses about the magnitude of these impacts in Canada.

The Size of the Canadian Marijuana Market

Estimation of the budgetary impacts of marijuana legalization requires information on the size of the market that would exist under legalization. A first step in determining this magnitude is estimation of the size of the current market. Existing accounts suggest this market is substantial in size; for example, many observers believe that marijuana production in British Columbia is roughly $10 billion per year relative to overall GDP of roughly $114 billion. This estimate seems excessive by a substantial magnitude, however, for several reasons.

The first reason to doubt the magnitude of existing “estimates” is that they are simply too large on their face to be plausible. In developed economies, total expenditure on food as a fraction of GDP is roughly 9%. The data in the previous paragraph suggest that marijuana production in British Columbia is also about 9% of GDP. This makes no sense.

A second reason to doubt the magnitude of current estimates is that available data put the size the of U.S. marijuana industry at roughly $10 billion.[3] Since the U.S. economy is about 10 ten times the size of the Canadian economy, whether measured in GDP or in population, either the U.S. figure is substantially too low or the Canadian figure is substantially too large (or some combination of both). Since the methodology used in the U.S. estimates appears reasonable, the sensible conclusion is that the Canadian estimates are too high by a factor of 10.

This paper therefore assumes that the size of the Canadian marijuana market is currently about $1 billion per year.

Expenditure on Marijuana under Legalization

The second step in estimating the tax revenue that would occur under legalization is to determine how expenditure on marijuana would change as the result of legalization. A simple framework in which to consider various assumptions is the standard supply and demand model. To use this model to assess legalization’s impact on marijuana expenditure, it is necessary to state what effect legalization would have on the demand and supply curves for marijuana.

This paper assumes there would be no change in the demand for marijuana.[4] This assumption likely errs in the direction of understating the tax revenue from legalized marijuana, since the penalties for possession potentially deter some persons from consuming. But any increase in demand from legalization would plausibly come from casual users, whose marijuana use would likely be modest. Any increase in use might also come from decreased consumption of alcohol, tobacco or other goods, so increased tax revenue from legal marijuana would be partially offset by decreased tax revenue from other goods. And there might be a forbidden fruit effect from prohibition that tends to offset the demand decreasing effects of penalties for possession. Thus, the assumption of no change in demand is plausible, and it likely biases the estimated tax revenue downward.

Under the assumption that demand does not shift due to legalization, any change in the quantity and price would result from changes in supply conditions. There are two main effects that would operate (Miron 2003a). On the one hand, marijuana suppliers in a legal market would not incur the costs imposed by prohibition, such as the threat of arrest, incarceration, fines, asset seizure, and the like. This means, other things equal, that costs and therefore prices would be lower under legalization. On the other hand, marijuana suppliers in a legal market would bear the costs of tax and regulatory policies that apply to legal goods but that black market suppliers normally avoid.[5] This implies an offset to the cost reductions resulting from legalization. Further, changes in competition and advertising under legalization can potentially yield higher prices than under prohibition.

It is thus an empirical question as to how prices under legalization would compare to prices under current prohibition. The best evidence available on this question comes from comparisons of marijuana prices between the U.S. and the Netherlands. Although marijuana is still technically illegal in the Netherlands, the degree of enforcement is substantially below that in the U.S., and the sale of marijuana in coffee shops is officially tolerated. The regime thus approximates de facto legalization. Existing data suggest that retail prices in the Netherlands are roughly 50-100 percent of U.S. prices.[6] [7] Canadian prices are plausibly already lower than those in the U.S. because the degree of prohibition enforcement is also lower.

The effect of any price decline that occurs due to legalization depends on the elasticity of demand for marijuana. Evidence on this elasticity is limited because appropriate data on marijuana price and consumption are not readily available. Existing estimates, however, suggest an elasticity of at least -0.5 and plausibly more than -1.0 (Nisbet and Vakil 1972).[8] [9]

If the price decline under legalization is minimal, then expenditure will not change regardless of the demand elasticity. If the price decline is noticeable but the demand elasticity is greater than or equal to 1.0 in absolute value, then expenditure will remain constant or increase. If the price decline is noticeable and the demand elasticity is less than one, then expenditure will decline. Since the decline in price is unlikely to exceed 50% and the demand elasticity is likely at least -0.5, the plausible decline in expenditure is at most 25%. Given the estimate of $1 billion in expenditure on marijuana under current prohibition, this implies expenditure under legalization of at least $0.75 billion.[10]

Tax Revenue from Legalized Marijuana

To estimate the tax revenue that would result from marijuana legalization, it is necessary to assume a particular tax rate. This report considers two assumptions that plausibly bracket the range of reasonable possibilities.

The first assumption is that tax policy treats legalized marijuana market identically to other goods. In that case tax revenue as a fraction of expenditure would be approximately 35%, implying tax revenue from legalized marijuana of $263 million.[11] The amount of revenue would be lower if substantial home production occurred under legalization.[12] The evidence suggests, however, that the magnitude of such production would be minimal. In particular, alcohol production switched mostly from the black market to the licit market after repeal of prohibition in 1933.

The second assumption is that tax policy treats legalized marijuana similarly to alcohol or marijuana, imposing a “sin tax” in excess of any tax applicable to other goods. Imposing a high sin tax can force a market underground, thereby reducing rather than increasing tax revenue. Existing evidence, however, suggests that relatively high rates of sin taxation are possible without generation of a black market. For example, cigarette taxes in many European countries account for 75–85 percent of the price (US Department of Health and Human Services 2000).

One benchmark, therefore, is to assume that an excise tax on legalized marijuana doubles the price. If general taxation accounts for 30% of the price, this additional tax would then make tax revenue account for 80% of the price. This doubling of the price, given an elasticity of -0.5, would produce a 50% decline in quantity consumed, but since the price has doubled, it would cause a 50% increase in revenue, implying total expenditure on marijuana would be $1.125 billion (=$750 x 1.5). Tax revenue would equal 80% of this total, or $900 billion. This includes any standard taxation applied to marijuana income as well as the excise tax on marijuana sales.

The $900 million figure is not necessarily attainable given the characteristics of marijuana production. Small scale, efficient production is possible and occurs widely now, so the imposition of a substantial tax wedge would probably drive a significant component of the market underground. The assumption of a constant demand elasticity in response to a price change of this magnitude is also debatable; more plausibly, the elasticity would increase as the price rose, implying a larger decline in consumption and thus less revenue from excise taxation. The $900 million figure should therefore be considered an upper bound.

These calculations nevertheless indicate the potential for substantial revenue from marijuana taxation. A more modest excise tax, for example, might produce revenue on legalized marijuana of, say, $400-$500 million per year.

Savings in Government Expenditure from Marijuana Legalization

If marijuana were legal, federal, provincial and local government would save the resources currently being used to arrest, prosecute, and incarcerate marijuana offenders. The magnitude of this saving is probably modest, however.

Existing estimates for the U.S. (Miron 2004) indicate that that marijuana legalization would save $7.7 billion per year in government expenditure on enforcement of prohibition ($5.3 billion of this saving would accrue to state and local governments, while $2.4 billion would accrue to the federal government). Assuming a ratio of 10 to 1 to adjust of the difference between the U.S. and Canada implies a savings for Canada for $0.77 billion.

This estimate is probably too large, however. Office of the Auditor General of Canada (2001) states that federal expenditure for control of illicit drugs is $500 million per year, of which roughly 95% is for enforcement. In the U.S., Miron (2003) estimates that federal expenditure for enforcement was $13.6 billion in 2002. The ratio is more than 25 to 1, rather than just 10 to 1. Using the higher ratio implies that savings in Canadian enforcement costs would be roughly $308 million.

References

Caputo, Michael R. and Brian J. Ostrom (1994), “Potential Tax Revenue from a Regulated Marijuana Market: A Meaningful Revenue Source,” American Journal of Economics and Sociology, 53, 475-490.

Clements, Kenneth W. and Mert Daryal (1999), “The Economics of Marijuana Consumption,” manuscript, Economic Research Centre,” Department of Economics, The University of Western Australia.

Clements, Kenneth W. and Mert Daryal (2001), “Marijuana Prices in Australia in 1990s,” manuscript, Economic Research Centre,” Department of Economics, The University of Western Australia.

Durose, Matthew and Patrick A. Langan (2003), Felony Sentences in State Courts, 2000, Bureau of Justice Statistics, Office of Justices Programs, U.S. Department of Justice, NCJ 198821.

European Monitoring Centre for Drugs and Drug Addiction (2002), Annual Report 2002, available at (http://annualreport.emcdda.eu.int/pdfs/2002_0458_EN.pdf).

Harrison, Lana D., Michael Backenheimer, and James A. Inciardi (1995), “Cannabis use in the United States: Implications for Policy,” in Peter Cohen and Arjan Sas, eds., Cannabisbeleid in Duitsland, Frankrijk en do Verenigde Staten, Amerstdamn: Centrum voor Drugsonderzoek, Universiteit van Amsterdamn, 231-236.

MacCoun, Robert and Peter Reuter (1997), “Interpreting Dutch Cannabis Policy: Reasoning by Analogy in the Legalization Debate,” Science, 278, 47-52.

Massachusetts Department of Corrections (2001), New Court Commitments to Massachusetts County Correctional Facilities During 2000, Concord, MA: Research and Planning Division, Massachusetts Department of Corrections.

Massachusetts Department of Corrections (2002), January 1, 2001 Inmate Statistics, Concord, MA: Research and Planning Division, Massachusetts Department of Corrections.

Miron, Jeffrey A. (2002a), “The Effect of Marijuana Decriminalization on the Budgets of Massachusetts Governments, With a Discussion of Decriminalization’s Effect on Marijuana Use,” Report to the Drug Policy Forum of Massachusetts, October.

Miron, Jeffrey A. (2003a), “Do Prohibitions Raise Prices? Evidence from the Markets for Cocaine and Heroin,” Review of Economics and Statistics, 85(3), 522-530.

Miron, Jeffrey A. (2003b), “A Critique of Estimates of the Economic Costs of Drug Abuse,” Report to the Drug Policy Alliance, July.

Miron, Jeffrey A. (2003c), “The Budgetary Implications of Marijuana Legalization in Massachusetts,” Report to Change the Climate, August.

Nisbet, Charles T. and Firouz Vakil (1972), “Some Estimates of Price and Expenditure Elasticites of Demand for Marijuana Among U.C.L.A. Students,” Review of Economics and Statistics, 54, 473-475.

Office of the Auditor General of Canada (2001), “Illicit Drugs – The Federal Government’s Role,” News Release, Ottawa, December 4.

Office of National Drug Control Policy (2001a), What America’s Users Spend on Illegal Drugs, Cambridge, MA: Abt Associates.

Office of National Drug Control Policy (2001b), The Price of Illicit Drugs: 1981 through Second Quarter of 2000, Washington, D.C: Abt Associates.

Pacula, Rosalie Liccardo, Michael Grossman, Frank J. Chaloupka, Patrick M. O’Malley, Lloyd D. Johnston, and Matthew C. Farrelly (2000), “Marijuana and Youth,” NBER WP #7703.

Reuter, Peter, Paul Hirschfield, and Curt Davies (2001), “Assessing the Crack-Down on Marijuana in Maryland,” manuscript, University of Maryland.

Saltonstall, Polly and David Rising (1999), “Drug Loot Fuels Drug War,” Standard Times, August 8. Accessed http://www.s-t.com/daily/08-99/08-08-99/a01lo010.htm on 8/2/03.

U.S. Department of Justice (2001), Crime in the United States 2001, Washington, D.C.: Federal Bureau of Investigation, U.S. Department of Justice.

U.S. Department of Justice (2003), Prisoners in 2002, NCJ Bulletin 200248, Office of Justice Programs, Bureau of Justice Statistics.

Wright, D. (2002), State Estimates of Substance Use from the 2000 National Household Survey on Drug Abuse: Volume I, Findings (DHHS Publication No. SMA 02-3731, NHSDA Series H-15), Rockville, MD: Substance Abuse and Mental Health Services Administration, Office of Applied Statistics.

US Department of Health and Humans Services. 2000. Reducing Tobacco Use: A Report of the Surgeon General, Tobacco Taxation Fact Sheet. Accessed at

http://www.cdc.gov/tobacco/sgr/sgr_2000/factsheets/factsheets_taxation.htm.

---

[1] A third possible rationale might be that marijuana demand is price inelastic, so that taxation has a small distortionary impact. Current evidence does not indicate that marijuana demand is price inelastic, however.

[2] And since advertising potentially raises costs, allowing advertising can lead to a higher equilibrium price which is a positive to those persons who think marijuana use should be discouraged even though legalized.

[3] ONDCP (2001a, Table 1, p.3) estimates that in 2000 U.S. residents spent $10.5 billion on marijuana.

[4] To be explicit, the assumption is that there is no shift in the demand curve. If the supply curve shifts, there will be a change in the quantity demanded in the new equilibrium.

[5] The underlying assumption is that the marginal costs of evading tax and regulatory costs is zero for black market suppliers who are already conducting their activities in secret.

[6] MacCoun and Reuter (1997) report gram prices of $2.50-$12.50 in the Netherlands and $1.50 - $15.00 in the U.S. They speculate that the surprisingly high prices in the Netherlands might reflect enforcement aimed at large-scale trafficking. Harrison, Backenheimer, and Inciardi (1995) note that ONDCP data on drug prices in the U.S. are very similar to prices charged in Dutch coffeeshops. ONDCP (2001b) reports a price per gram for small-scale purchases of roughly $9 per gram in the second quarter of 2000, while EMCDDA (2002) suggests a price of 2-8 Euros per gram, which is roughly $6 on average. Various web sites that discuss the coffee shops in Amsterdam suggest prices of $5 - $11 per gram in recent years. These comparisons do not adjust for potency or other dimensions of quality.

[7] Clements and Daryal (2001) report marijuana prices for Australia that are similar to or higher than those in the United States. Since Australian marijuana policy is noticeably less strict than U.S. policy, this observation is consistent with the view that legalization would not produce a dramatic fall in price.

[8] The Nisbet and Vakil estimates that use survey data imply price elasticities of -0.365 or -0.51 in the log and linear specifications, respectively, while the purchase data implies price elasticities of -1.013 and -1.51. The estimates based on purchase data are plausibly more reliable. Moreover, as they note, these estimates are likely biased downward by standard simultaneous equations bias. Clemens and Daryal (1999) estimate a price elasticity of -0.5 for marijuana using Australian data. Estimates of the demand for “similar” goods (such as alcohol, cocaine, heroin, or tobacco) suggest similar elasticities.

[9] Pacula, Grossman, Chaloupka, O’Malley, Johnston and Farrelly (2000) summarize the literature on the relation between marijuana use and factors that can affect use, such as legal penalties. They conclude the evidence is mixed but overall indicates a moderate response of marijuana consumption to “price.” The papers summarized do not provide measures of the price elasticity. The results reported by Pacula et al. suggest an elasticity of marijuana participation between 0.0 and -0.5; this understates the total elasticity, which includes any change in consumption conditional on participation. The literature since Nisbet and Vakil is thus consistent with the elasticity estimate assumed above.

[10] This calculation assumes the demand elasticity is constant over the relevant range, which does not hold for all demand curves. So long as the price change is not dramatic, however, it provides a reasonable approximation.

[11] In 2001, total government receipts divided by GDP equaled 29.7%. See the 2003 Economic Report of the President on-line, http://w3.access.gpo.gov/usbudget/fy2004/pdf/2003_erp.pdf, Tables B-1 and B-92, pp. 276 and 373. Canadian taxes are higher as a percentage of GDP.

[12] Whether such production is illicit depends on the details of a legalization law. Plausibly, growing small amounts for personal use would not be subject to taxation or regulation, just as growing small amounts of vegetables or herbs is not subject to taxation or regulation.