THE CHRONIC'S ECONOMICS

A new report on the B.C. marijuana industry indicates that there may
be economic benefits to legalizing pot.

First of all, think about the policing expenditures the government
could save if officers no longer had to arrest people for possession.
Based on the number of charges and subsequent jail time estimates
multiplied by the cost of jailing offenders, an estimated $1.9 million
in Ontario alone could be saved.

A "sin tax" added to the cost of producing weed would provide society
with enough money to combat the real issue with drugs -- addiction.

Stephen Easton, an economics professor at the Simon Fraser University,
released a report that was published by the Fraser Institute entitled
"Marijuana growth in British Columbia." It suggests that in the long
run, prohibition of marijuana "cannot be sustained with the present
technology, production and enforcement."

He undertook a cost-benefit analysis of a grow operation using an
average-size house with 100 plants. He determined that the return on
investment (ROI) is large enough that for every grow operation that
the police shut down, a new one starts up. With an ROI as great as 55
per cent, it sounds enticing to almost any investor, even with the off
chance you may be caught.

Easton estimates that at current prices a joint costs about $1.50 to
produce and sells on the street for around $8.60. He suggests that the
tax on marijuana should reflect the difference between these prices.
Essentially this would transfer the revenue from the producers and the
middlemen to the government. He further suggests that at current
consumption levels, this would produce around $2 billion in tax
revenues. After the release of his study it was found by the Canadian
Centre on Substance Abuse that Canadian pot consumption is twice the
amount that Easton thought it was, making this figure a very low esitmate.

Classical economic price theory states that when the price of a
product falls, demand for it will rise. The price of marijuana would
likely fall if it were legalized because there would no longer be a
risk factor associated with producing it. Taxing at this suggested
level would prevent an increase in demand by keeping the price constant.

In the report, Easton estimates that the marijuana industry is second
only to the forestry industry in British Columbia and thus it would
make good economic sense to legalize and tax marijuana, as it would be
taking the profits from organized crime and giving them back to the
tax payers.