Freakonomics Radio Episode 610: Who Wins and Who Loses Once the U.S. Legalizes Weed?

Release Date: November 7, 2024
Hosts: Stephen J. Dubner
Featuring: Jared Polis (Governor of Colorado), John Calkins (Drug Policy Researcher, Carnegie Mellon University), Yasmin Hurd (Addiction Researcher, Mount Sinai Health System), Ryan Stoeh (Law Professor, Louisiana State University)

Introduction

In the final installment of their four-part series on cannabis legalization, Stephen Dubner delves into the multifaceted impacts of legalizing weed across the United States. The discussion navigates through economic benefits, social costs, public health concerns, regulatory challenges, and the future landscape of the cannabis industry.

Economic Impact of Legalization

Governor Jared Polis provides a comprehensive overview of Colorado's decade-long experience with legalized recreational marijuana. He highlights significant economic advancements alongside emerging challenges:

• Revenue Generation: "There's been over $16 billion in revenue... $2.6 billion in state tax revenue funded everything from college scholarships... to youth recreation centers." [(07:56)]

• Job Creation: "The 31,000 people who work in the industry, whether it's retail, whether it's growing..." [(07:56)]

• Shift from Illegal to Legal Market: Legalization has diverted substantial funds from criminal enterprises to legitimate businesses.

However, Polis acknowledges a recent downturn in the market:

• Market Saturation and Decline: "Sales are down to about 1.5 billion. There have been some layoffs, some closures..." [(08:10)]

He attributes this to reduced cannabis tourism as more states legalize and an overbuilt market capacity.

John Calkins, drug policy researcher, underscores the broader economic implications:

• Coalition Efforts: Calkins speaks about efforts to reclassify cannabis, aiming to unlock economic potential and alleviate social stigmas. "Cannabis companies... unable to deduct their common and ordinary business expenses makes it really hard for them to operate." [(19:09)]

• Tax Benefits Post-Rescheduling: "Businesses can face an effective tax rate of 80 to 90%... that just will not apply anymore." [(19:55)]

Public Health Impact

The conversation explores the contrasting health effects of cannabis compared to alcohol:

• Governor Polis's View: He posits that cannabis is "far less negative to public health than smoking cigarettes or alcohol." He refers to reduced underage usage and controlled access as benefits of legalization. "Underage usage has gone down since legalization... it's harder for a kid to get marijuana in Colorado." [(09:13)]

• Contrasting Data: John Calkins references recent survey data indicating a rise in daily and near-daily cannabis use, challenging the notion of minimal health impacts. He states, "Of those daily and near daily users, about half report some evidence of having a substance use disorder." [(11:18)]

• Yasmin Hurd's Concerns: She emphasizes the need for more research into the high-concentration cannabis products prevalent today. "What we need to know... about the developing brain... addiction." [(23:38)]

• Cannabis Replacement Theory: Dubner introduces the idea that substituting alcohol with cannabis could yield societal benefits, a notion Polis supports by highlighting cannabis's lower addiction potential and reduced association with violent behavior. "Marijuana is not chemically addictive. Alcohol is." [(12:14)]

Legal Policies and Federal Rescheduling

The federal illegality of cannabis remains a central barrier:

• Governor Polis on Federal Regulation: He advocates for regulating cannabis like alcohol at the federal level, suggesting renaming the Bureau of Alcohol, Tobacco, Firearms to include Cannabis. "We should rename that the Bureau of Alcohol, Tobacco, Firearms and Cannabis." [(13:56)]

• Rescheduling Efforts: Although the Biden administration planned to shift cannabis from Schedule I to Schedule III, legal delays have pushed this decision to at least early 2025. Former President Trump has expressed support for rescheduling, potentially accelerating changes. "It's getting very, very close." [(14:56)]

• Impact of Rescheduling: John Calkins explains that rescheduling would reduce stigma, allow business expense deductions, and facilitate research by easing regulatory barriers. "Rescheduling alone would be important." [(20:38)]

Industry Structure and Future Landscape

The episode examines the potential trajectory of the cannabis industry post-legalization:

• Consolidation vs. Small Businesses: Ryan Stoeh expresses concern over large corporations dominating the market, drawing parallels to the craft beer industry's success in combating consolidation. "Let's create some conditions that allow other businesses, small businesses, to survive and thrive alongside that model." [(30:11)]

• Adam Gores's Vision: He envisions a regulated market supporting family farms and local producers, emphasizing sustainability and social equity. "I want at least a part of the cannabis economy to support essentially family farms, local producers." [(31:15)]

• Appellations and Product Differentiation: Gores advocates for a wine-like appellation system to enhance transparency and protect small businesses. "If a cannabis says it comes from Humboldt County, California, it really did." [(33:19)]

• Monopoly Model Proposal: John Calkins suggests a government-run monopoly similar to how alcohol is managed in some countries. This model would prioritize public health over profit. "Suppliers of that good to have as their mission displacing the illegal market... not pushing people to use more." [(37:12)]

• Yasmin Hurd on Market Dynamics: She predicts that national legalization will accelerate consolidation, with marketing prowess becoming a key determinant of success. "You'll see marketing savvy entities being the winners in the cannabis space." [(41:03)]

Research Barriers and Needs

The classification of cannabis as a Schedule I drug significantly hampers scientific research:

• Yasmin Hurd on Research Challenges: She highlights the extensive regulatory hurdles and the urgent need to study high-concentration products and their effects on different populations. "In order to do this research with a Schedule I drug, there are a lot of regulatory hurdles." [(21:33)]

• John Calkins on Research Pathways: Rescheduling cannabis would "open up new research pathways" and provide critical public health and safety benefits. "It's going to open up new research pathways." [(21:20)]

Global Perspectives and Models

The discussion touches upon international approaches to cannabis regulation:

• Canada's Model: Yasmin Hurd references Canada's coherent legalization framework, which mirrors alcohol regulation with a focus on public health. However, she notes that Canadian producers remain for-profit. "The Canadian cannabis regime starts out looking a lot like the alcohol regime." [(43:04)]

• Cannabis Clubs in Europe: She mentions Spain and Belgium's models, where communal growing permits allow groups to cultivate without commercial exploitation. This method undercuts illegal markets without fostering excessive commercialization. "It's going to be a hobby... just provide a legal alternative." [(43:27)]

Long-Term Societal Effects

The episode concludes with predictions on cannabis's broader impact:

• Yasmin Hurd's Optimism and Cautions: She believes cannabis legalization won't drastically alter prison populations or public health negatively compared to alcohol. However, she remains cautious about its addictive potential and emphasizes societal resilience. "We will adapt, we'll roll with it." [(45:25)]

• Dubner's Reflection: He poses critical questions regarding the differing expert opinions but ultimately leaves the audience to ponder the complex balance between economic benefits, public health, and regulatory frameworks surrounding cannabis legalization.

Notable Quotes

• Jared Polis: "Marijuana is not chemically addictive. Alcohol is. So is nicotine." [(12:14)]

• John Calkins: "Of those daily and near daily users, about half report some evidence of having a substance use disorder." [(11:18)]

• Ryan Stoeh: "Everybody wants to be that company. And eventually someone might be." [(30:02)]

• Yasmin Hurd: "We are a full generation in and we still haven't even legalized at the national level." [(47:38)]

Conclusion

This episode of Freakonomics Radio provides a nuanced exploration of cannabis legalization in the U.S., balancing economic incentives with social and health concerns. Through expert insights and empirical data, Dubner paints a comprehensive picture of a rapidly evolving landscape poised for further transformation as federal policies inch closer to reform.