Will Legalizing Pot Result in More or Less Drinking?

Among the eight
“enforcement priorities” that the Justice Department
expects states to address in exchange for prosecutorial
restraint vis-á-vis newly legal pot businesses is “preventing
drugged driving and the exacerbation of other adverse public health
consequences associated with marijuana use.” Last week I
noted an article in which two economists, D. Mark Anderson of
Montana State University and Daniel Rees of the University of
Colorado, predicted that, on balance, the “public health
consequences” of marijuana legalization in Colorado and Washington
will be positive, mainly because more pot smoking will be
accompanied by less drinking. The same issue of the Journal of
Policy Analysis and Management includes a less
sanguine take on the question by Rosalie Liccardo Pacula,
co-director of the RAND Corporation’s Drug Policy Research Center,
and University of South Carolina criminologist Eric Sevigny. Pacula
and Sevigny warn that research in this area is complicated by the
fact that legal restrictions on cannabis in states with medical
marijuana laws vary across states and over time within the same
state:

We find that states restricting broad access to medical
marijuana by requiring annual registration of patients have lower
marijuana prevalence rates among youth and adult[s] and lower
admissions to treatment than states without such requirements.
However, states allowing home cultivation and legal dispensaries
are both positively associated with recreational use and, in
particular, heavy use.

Pacula and Sevigny also note that states with legally protected
dispensaries tend to see statistically significant drops in price
and increases in potency—which strike me as benefits of
legalization but look like costs to analysts who worry that
cheaper, stronger pot will magnify the hazards associated with
marijuana consumption. 

On the question of whether marijuana and alcohol are substitutes
or complements, Anderson and Rees think the former is more likely,
while Pacula and Sevigny say the evidence “remains mixed.”
Although they acknowledge that the hazards associated with
marijuana itself pale beside the cost of treating its production,
sale, and use as crimes, Pacula and Sevigny worry that the cost of
increased alcohol consumption could swamp the benefits of
legalization if more pot smoking is accompanied by more
drinking:

Although there are small recognized health costs associated with
using marijuana and treating dependence, these costs are dwarfed in
comparison to the criminal justice savings associated with
legalizing and regulating the substance. Even if consumption were
assumed to rise by 100 percent, the savings of liberalizing
policies would dwarf the known health costs associated with using
marijuana. However, all potential savings associated with marijuana
legalization could be entirely erased, and tremendous losses
incurred, if alcohol and marijuana turn out to be economic
complements, particularly for young adults.

Notably, both Colorado and Washington plan to tax marijuana at

a much higher rate than alcohol, which is just the opposite of
what Anderson, Rees, Pacula, and Sevigny presumably would
recommend. Anderson and Rees note the disparity (citations
omitted):

The current excise tax on liquor sold in Colorado is 60.26
cents/l, which represents roughly 3 percent of the retail price of
Jim Beam Whiskey purchased by the bottle. In comparison, Colorado
is set to impose a 15 percent excise tax and a 10 percent special
sales tax on marijuana sales. Washington is considering taxing
producers, sellers, and buyers at a total rate of 75 percent.

Today Colorado voters are deciding whether to approve the
proposed excise and sales taxes, both of which can be raised as
high as 15 percent. Based on how those taxes will affect retail
prices, they are 10
times as high as the state tax on distilled spirits, by
far the most heavily taxed alcoholic beverage. And that’s before
considering local marijuana taxes, which in Denver (assuming voters
approve) will add another sales tax of up to 15 percent.

I am no fan of social engineering through taxation. But it’s
pretty clear that Colorado and Washington are not even trying to
set tax rates based on the relative hazards posed by these
products.