more states room legalizing marijuana for medical or entertain use, and also this activity has produced a patchwork of laws and policies on how the medicine is treated. Among the says that allow the medical use of marijuana, laws have the right to vary significantly in regards to the medical conditions that can be cure by the drug. Political decision-makers face complicated decisions on exactly how to manage marijuana. Because that example, the goal of maximizing revenue may problem with the score of reduce recreational use.

The object of marijuana (cannabis) legalization moved into headlines adhering to Colorado’s and Washington’s decision to permit recreational use of the medicine in 2012. Yet, these alters reflect virtually 50 years of development in drug policy.As the January 2020, eleven states and also Washington, D.C., allow the revenue of marijuana for adult to chat use. Marijuana sale and use stay illegal under commonwealth law.

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The be sure of state legislations on the possession and also use that marijuana can be traced earlier to 1973, when Oregon came to be the first state to decriminalize the possession the modest quantities of marijuana, with a maximum penalty of a $100 fine. Then, in 1996, California authorized marijuana usage for medical purposes. As of January 2020, about half of the states and also numerous regional jurisdictions have actually decriminalized possession to varying degrees, and also 33 states currently have plans that allow patients to usage marijuana if they qualify based on their medical diagnosis.See NORML webpage for a present list.

Data because that recreational-use states perform indicate expansion in legal sales and also use. For example, in Colorado, monthly to chat sales were between $10 million and also $20 million in early 2012; this sales have actually stabilized to approximately $90 million per month in 2018, or approximately $1 billion per year (just under $200 per human being per year).See Felix and also Chapman for an analysis on Colorado. That is crucial to keep in mind that a part of this sales can be come nonresidents. Reported marijuana consumption by adult in Colorado climbed from 10.4% in 2011-12 to 18.1% through 2017-18.This is identified as use over the previous month. See nationwide Survey on medicine Use and also Health, State Estimates.

Notable increases in usage after legalization are likewise evident in Washington and Oregon; in fact, Oregon had actually the 2nd highest intake rate in the country in 2017-18, through 20% of adults utilizing marijuana at least one time in the past month. In contrast, national consumption has been only gradually increasing, increase from 7.1% in 2011-12 come 9.8% in 2017-18. Longer-term trends show that daily marijuana usage by every adults has remained reasonably stable and also at low levels because 2000; part subgroupings put everyday rates at below 3%.

A Closer Look in ~ the Eighth district States

Marijuana is cure differently amongst the seven states that are component of the Eighth federal Reserve District:Headquartered in St. Louis, the Eighth commonwealth Reserve ar includes every one of Arkansas and also parts the Illinois, Indiana, Kentucky, Mississippi, Missouri and also Tennessee.

Three claims (Illinois, Missouri and also Mississippi) have decriminalized an individual possession that marijuana to part degree. Three states (Arkansas, Illinois and also Missouri) at this time have or will have medical marijuana program in 2020. Illinois has permitted sales of marijuana because that recreational use. Three claims (Indiana, Kentucky and Tennessee) continue to criminalize every possession that marijuana.

Adult marijuana use across these seven claims is near or below the nationwide average, v 2016-17 approximates ranging indigenous 7.9% in Kentucky come 9.6% in Indiana.

On Jan. 1, 2020, Illinois came to be the first state in the Eighth ar to permit the sale of marijuana for recreational use. January sales reached just under $41 million. Assuming no growth in sales, yearly this is $480 million, or about $12 every capita. The Colorado experience suggests sales are likely to exceed this amount, assuming adequate supply.

The year 2020 also significant the addition of Missouri together a state allowing sales of medical marijuana. The table below summarizes vital statistics the the medical markets in the three District says that permit these sales; it gives a snapshot of the supply and also demand in the sector in each particular state. Assuming comparable demographics and also medical demands in these states, differing state policies explain the various outcomes.

StateFirst Year of clinical MarijuanaInitial number of PatientsCurrent variety of PatientsNumber of licensed Dispensaries in OperationAverage variety of Patients per Dispensary in OperationIllinoisArkansasMissouri (estimate)
2015 2,663 76,939 55 1,399
2017 5,459 15,466 6 2,578
2020 21,000* <46,319; 128,070**> 192 <241; 667>
* Reported number of preregistered patients
** The lower-bound calculation is based upon the mean share of population registered as patients (0.8%) across all U.S. Says where clinical marijuana is legal, and also the higher-bound estimate is based on the maximum re-publishing in any kind of state, i m sorry is Colorado in ~ 2.1%.
NOTES: Arkansas has 32 license is granted dispensaries, however only six are operating. The Missouri number for license is granted dispensaries in operation assumes every approved license applicant will run a dispensary.
SOURCES: Arkansas department of Health, 2019; Illinois department of public Health, 2019; Haslag, Crader and also Balossi; and author’s calculations.

Initial patience enrollment in Illinois (2,663) and also Arkansas (5,459) has actually steadily enhanced over time and at similar growth rates. Back Arkansas’ population is only a 4 minutes 1 of the populace of Illinois, initial enrollment was more than twice as high. In contrast, early reports for Missouri (with a population around fifty percent of Illinois’) indicated that end 21,000 patience cards were issued in 2019, well before the routine came right into effect.See Edwards.

One factor for different enrollment prices is the differences in qualifying medical conditions amongst these states. Because that example, post-traumatic stress and anxiety disorder (PTSD) to be the top problem of qualifying patients for clinical marijuana in Illinois at end 20% in 2019. In Arkansas, intractable pain, i beg your pardon is not included in the Illinois program, is the top qualifying problem at over 30%, vice versa, PTSD was reported by just 12% of qualifying patients. In Missouri, the list of qualifying conditions shows up to be broader than for both Illinois and Arkansas by including:

“a chronic medical condition that is normally treated through prescription medication that can lead to physical or emotional dependence” and

State federal governments are likewise responsible because that determining the supply in the market and also approving facilities to grow, produce and also dispense marijuana to patients. Missouri has actually licensed many an ext dispensaries 보다 both Illinois and also Arkansas, an interpretation Missouri will preserve a device with the fewest patients per dispensary once they start operating this year. Under patients every dispensary could an outcome in smaller facilities with lower revenue per keep or, if fixed expenses are high enough, part licensed dispensaries deciding no to operate. For example, in Arkansas, only six that the 32 licensed dispensaries space in operation since of a selection of regulatory and also market challenges.

Do policies Align with economic Theory?

While publicly discourse bordering the legalization the marijuana frequently revolves around perceptions toward recreational medicine use, one economic discussion supporting (or opposing) legalization can be made nevertheless of one’s moral standing on use.

The clinical use that marijuana raises the concern of potential clinical benefits and also costs. One could view any kind of drug indigenous the exact same lens through asking, carry out the potential services from proper use the the drug outweigh the costs or risk of abuse? What provides the medical marijuana market distinct to those of other drugs (e.g., prescription narcotics) is just how it is treated by policymakers. For example, states generally do not subject prescription drugs to state sales taxes, while clinical marijuana has been subjected to both state sales and excise taxes. Therefore, medical marijuana is taxed more like alcohol or tobacco 보다 a clinical drug.

The recreational use of any kind of drug may create social costs, such as long-term health and wellness problems, injuries, accidents, unemployment, vagrancy and also crime.See Becker, Murphy and also Grossman. The design is draft to apply to any illegal drug, so this assumption way there is no socially useful (i.e., medical) case for use. Even with this assumption, the authors find taxation is the desired policy the enforcement. Together a an outcome of this social costs, the free-market price is most likely too low and also therefore usage is too high. Policymakers can attempt to fix this trouble in two ways: first is criminal enforcement, which boosts the expense of offering drugs, reducing it is provided in the market and also subsequently pushing up prices. 2nd is taxation on purchases, i m sorry reduces the quantity demanded in the market by raising the price. In theory, both policies could achieve the exact same outcome of reducing drug use to a socially optimal level.

Policymakers challenge the complicated task of acquisition this theory to practice. Enforcement needs determining the most effective techniques and the severity of penalization. Policy makers must likewise account for the adverse consequences of incarceration. ~ above the various other hand, taxation needs determining the optimal taxes rate, which may vary for different species of consumers. Again, there may be a expense of obtrude this taxes on those who seek to protect against payment.When determining which market outcome is the most efficient, critical consideration is the elasticity of supply and demand because that drugs. If need is inelastic (i.e., because the medicine is highly addictive), enforcement may be optimal due to the fact that consumers will still acquisition close to the very same amount even with greater taxes. Watch Becker, Murphy and Grossman for a complete discussion. For both policies, the main challenge is identify the social expense of drug use, which ultimately determines the degree of important enforcement or taxation.


Research is still needed to understand the economic affect of recent state policy changes, and differences across states carry out researchers with plenty of real-world “experiments” come study. However, v marijuana remaining illegal at the commonwealth level, these firms face extr challenges in operating their businesses, such as absence of accessibility to bank networks or developing interstate supply chains.

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While legit marijuana has actually been touted as a means for improving the fiscal place of states through lowering enforcement expenditures and also generating added tax revenue, the truth is much more complex. First, taxation on clinical marijuana usage is inconsistent v tax plans on various other drugs supplied in clinical treatment. Over time one would suppose these policies to converge if a agreement emerges top top acceptable medical use. Second, rises in taxation revenue native recreational sales likely overstate the fiscal affect or could be short-lived. Consumers are likely to invest a better share the their earnings on marijuana and less on other taxable goods, such as alcohol.See Anderson. Furthermore, states may use the new tax revenue resource as a replacement because that existing revenue resources (or future revenue increases).See Dadayan because that a historic perspective and review of taxation policies. Third, together is the situation with many species of “sin taxes”—taxes on products such as alcohol, tobacco and the lottery—individuals in lower revenue brackets space generally much more likely to consume these products, thereby creating a regressive tax policy. Fourth, the dependency on sin taxes for revenue create an impetus for political decision-makers to set a tax price that maximizes revenue as opposed to a greater tax price that would minimize consumption.For example, in the extreme situation in i beg your pardon optimal intake is zero, the optimal tax rate would it is in excessively high, and also consumption (and taxes revenue) would certainly be close to zero.

Olivia Wilkinson, a study associate at the federal Reserve financial institution of St. Louis, provided research assistance.