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Introduction
As Benzinga suggested first, new research suggests that cannabis prices in the United States could significantly decrease if the substance were legalized nationwide. Legalizing cannabis is expected to increase supply, reduce black market activity, and enable taxation, all of which would contribute to lower consumer prices.
Interstate commerece would be a huge benefits for consumers, think Amazon and overnight shipping, but while a boom for cannabis retailers bottom top line, their bottom line could take a beating as price competition and consumer access increases dramatically online and on smartphones. Full legalization, meaning not a criminal substance or requiring limited or no licensing, would allow new suppliers to come into the market from all over the world. Countries and states with low electricity, water, and labor costs could create a “rush to the bottom”; on pricing as they try and flood the market with products. For example, Colombia reports $0.06 a gram pricing on cannabis and is already exporting marijuana aroudn the world.
Currently in America, cannabis prices vary widely across states, influenced by local regulations and market dynamics. For instance, states with established legal markets, like Colorado and Washington, have seen prices decrease over time as competition increases and supply chains become more efficient. In contrast, illegal markets often drive prices up due to risks associated with law enforcement and limited supply.
The study highlights that legalization could also lead to economic benefits, such as increased tax revenue and job creation within the cannabis industry. As of 2024, 37 states and Washington, D.C., have legalized cannabis in some form, yet federal legalization remains a contentious issue. Advocates argue that legalizing cannabis would not only lower prices but also diminish the societal costs associated with prohibition, including law enforcement expenditures estimated at $3.6 billion annually.
Economic Benefits of Cannabis Legalization
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Tax Revenue: If cannabis were federally legal, it’s estimated the industry would amass $131.8 billion in federal tax revenue between 2017 and 2025[2]. This money could go toward programs that benefit communities, especially those disproportionately affected by the war on drugs.
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Job Creation: The cannabis industry is the fastest growing industry, doubling in size over the past four years and creating 121,000 full-time jobs[2]. It’s expected that legal cannabis jobs will grow by 250% over the next 10 years, more than any other industry.
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Savings from Prohibition Enforcement: The American Civil Liberties Union estimates that $7.7 billion is spent per year to enforce the war on drugs[2]. If taxed the same as tobacco and alcohol, cannabis could bring in as much as $6 billion per year.
State-Level Economic Impacts
A study examining state-level outcomes found that states that legalized recreational marijuana experienced statistically significant increases in their overall employment growth rate and average housing rents. The economic effects increased over time, with both employment growth rate and median rent growth becoming more statistically significant as more years passed after recreational legalization.
However, another study found that while there were moderate economic gains, these were accompanied by some social costs. Post-legalization, average state income grew by 3%, house prices by 6%, and population by 2%. But substance use disorders, chronic homelessness, and arrests increased by 17%, 35%, and 13%, respectively.
County-Level Analysis
The second analysis examined county-level data, investigating the economic impacts of legalizing recreational marijuana by exploiting the county/local options for whether recreational marijuana dispensaries are allowed. The study aimed to examine how the benefits are distributed between counties with and without recreational dispensaries and the types of local areas that especially benefit.
Colorado was used as a case study, as it was one of the earliest adopters of legalized recreational cannabis along with Washington[5]. The study looked at whether counties that allowed dispensaries had different outcomes than those who did not, such as the potential loss of young adults in communities that did not allow recreational sales.
Potential Negative Consequences
While the economic benefits of cannabis legalization are significant, there are also potential negative consequences to consider:
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Increased Substance Use: The legalization of cannabis has raised concerns about its potential impact on substance use, especially among young adults. Research indicates that legalization may lead to increased consumption in this demographic due to greater accessibility, enhanced social acceptance, and lower prices. As cannabis becomes more available, young adults may be more likely to experiment with it, which could result in higher rates of use and an increased risk of developing cannabis use disorders. Additionally, the introduction of potent products, such as edibles and concentrates, may further contribute to these trends. While legalization offers economic and social benefits, it is essential to consider its potential negative effects on substance use patterns among vulnerable populations like young adults.
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Healthcare Utilization: The legalization of cannabis has been linked to an increase in cannabis-related healthcare visits, raising important public health concerns. Studies from states like Colorado, the first to legalize recreational cannabis, have reported a significant rise in emergency department visits associated with cannabis use, with hospitalizations for cannabis abuse increasing by 27% compared to pre-legalization rates. This uptick includes not only cases of abuse but also acute effects such as psychosis and overdose. The increase in healthcare utilization may result from greater accessibility to cannabis, leading to higher consumption and more adverse health outcomes. While some research indicates that overall healthcare utilization may remain stable, the specific rise in cannabis-related visits underscores the need for ongoing monitoring and further research to understand the long-term health implications of legalization.
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Impaired Driving: The legalization of cannabis has raised concerns about its potential impact on public safety, particularly in relation to impaired driving. Several studies have found evidence of increased rates of driving under the influence of cannabis following legalization. For instance, research conducted in Colorado and Washington, two of the first states to legalize recreational cannabis, has shown a rise in the number of drivers involved in fatal crashes who tested positive for THC, the primary psychoactive compound in cannabis. This trend is particularly worrying given the well-established link between cannabis use and impaired cognitive and motor functions, which can significantly increase the risk of accidents. Furthermore, the legalization of cannabis may lead to a normalization of its use, potentially leading to more individuals driving while impaired. While the development of reliable roadside tests for cannabis impairment remains a challenge, the increase in impaired driving following legalization highlights the need for robust public education campaigns and the implementation of effective policies to address this critical issue.
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Mixed Findings on Attitudes: The literature on cannabis legalization reveals mixed findings regarding changes in public attitudes toward cannabis use. While some studies indicate increased acceptance and normalization, particularly among younger demographics, other research shows attitudes may not have shifted significantly or have become more polarized. Surveys in legalized states often report growing acceptance, viewing cannabis as a legitimate recreational option. However, certain segments, including older adults and those with prior negative experiences, may express more concern about potential societal impacts, such as youth use. The complexity of attitudes is influenced by personal experiences, cultural background, and ongoing media narratives. This mixed evidence underscores the need for continued research to understand how legalization affects perceptions and inform public policy and education efforts.
Conclusion
The potential legalization of cannabis nationwide in the United States presents an opportunity for significant reductions in cannabis prices, driven by increased supply, diminished black market activity, and the ability to impose taxation. While the economic benefits, such as enhanced tax revenue and job creation, are compelling, it is crucial to consider the associated negative consequences. These include increased substance use among young adults, a rise in cannabis-related healthcare visits, heightened instances of impaired driving, and mixed findings regarding public attitudes toward cannabis. Although the literature indicates various negative outcomes, the findings are often mixed and do not suggest large magnitude short-term impacts. Therefore, further research is essential to comprehensively understand the broader economic and social implications of cannabis legalization.