Economics and Marijuana

Do marijuana users cut back on consumption when the price rises? To what degree is marijuana consumption related to drinking and tobacco usage? What would happen if marijuana were legalised and taxed in the same way as alcohol and tobacco? Is marijuana priced in a similar way to other goods? Economics and Marijuana deals with these and other questions by drawing on a rich set of data concerning the consumption and pricing of marijuana in Australia, a country where the drug has been decriminalised in some, but not all, states. The book applies the economic approach to drugs to analyse consumption, pricing and the economics of legalising the use of marijuana. The result is a fascinating analysis of this widely used, but little understood illicit drug that provides much needed information and policy advice for a wide range of readers, including economists, policy makers and health professionals.

'Ken Clements and Xueyan Zhao do a marvellous job in analysing and explaining the many factors that affect the demand for marijuana, the way it is priced, and the issues arising from legalising this illicit drug. If you were not convinced that economists can improve our understanding of the social problems arising from the use of marijuana, you will be convinced after reading this book.' Paul De Grauwe, Katholieke Universiteit Leuven, Belgium, 'This study applies serious economics to the analysis of alternative public marijuana policies. Notably, it carefully explores the option of taxing marijuana, which opens the whole range between absolute legal prohibition and outright legalisation without tax. It approaches the material with a high level of scientific objectivity and analytical rigor, and should become a central reference for future policy discussions.' Arnold C. Harberger, UCLA, Member of the National Academy of Sciences of the United States, and Past President of the American Economic Association, 'This volume reports on a highly comprehensive study of the Australian market for marijuana. The analysis is both very sophisticated and broad based, ranging from estimates of the price elasticity of demand, to the pricing model for marijuana in Australia, and to the consequences of legalising (but taxing) the drug. It is strongly recommended (if not required) reading for anyone interested in the workings of markets for illegal goods and services, and especially for anyone contemplating empirical research in this area.' Larry A. Sjaastad, University of Chicago, 'With the success of the recent voter-based initiatives to legalize and regulate marijuana in both Colorado and Washington, it is obvious to most that attitudes about this often maligned substance are shifting and policy is following suit. Provided this atmosphere, academics and policy makers alike need to be seriously examining the fundamental aspects of how marijuana functions in our society … Clements' and Zhao's rigorous treatment of the subject in the context of Australian society is an ideal starting point … [The book] is not the only treatment of the subject, but it is the most comprehensive to date. While providing many useful insights into the markets for marijuana, it stimulates even more questions for further research … Policy makers and academics should find this to be an enlightening and useful text when considering how to approach policy discussions and future research regarding marijuana.' Humboldt Journal of Social Relations

Kenneth W. Clements is Professor of Economics at the University of Western Australia Business School. Xueyan Zhao is Associate Professor of Econometrics in the Department of Econometrics and Business Statistics at Monash University, Australia.