UA Football Team Captain Arrest for Capitalism
Marijuana Prohibition Cost Analysis
Supply/Demand Economics Led to UA Football Team Captain Arrest for Marijuana
Drug Policy Reform Group Analyzes Marijuana Market in Arkansas; Estimates Arkansas’ Cost for Marijuana Prohibition
November
5, 2002, Fayetteville, AR: Perhaps we should not be surprised when
intelligent and ambitious young entrepreneurs such as UA football team
captain Jermaine Brooks are discovered selling marijuana. We are, after
all, a nation proud of our free enterprise economic system; making
money is a highly respected goal in life. Mr. Brooks, like thousands
before and – as long as marijuana prohibition lasts – after him, finds
it difficult to ignore the enormous profits available in the
supply/demand cycle of the marijuana marketplace. It was the same with
alcohol prohibition.
Based on the U. S. Department of Health and
Human Services’ 2001 National Household Survey on Drug Abuse, 55.6% of
Mr. Brooks’ peer group (ages 18-24) have experimented with drugs, the
majority of which used marijuana (50% of the peer group; only 5.6%
bothered to mess with other drugs). One out of four has used marijuana
in the last month.
The actual population numbers for Arkansas
show that for the 262,738 people in Mr. Brooks’ peer group, at a use
rate of one-quarter ounce per month for the one in four who use at
least monthly, approximately 16,400 ounces of marijuana, or 1026
pounds, would be required to meet the monthly demand for marijuana.
Those
who have been shocked by the seven and one-half pounds of marijuana
found in Mr. Brooks’ home may wish to place that quantity into the
context of the actual demand. Mr. Brooks’ stash was about seven percent
of the market share for a month. Considering that the UA-F campus is
the largest collection of 18-24 year old people in the state, it is
likely that at least 750 pounds of marijuana are marketed in this area
on a regular, per-monthly basis.
Beyond his peer group, nearly
10% (9.3%) of the adult population use marijuana at least monthly,
according to the 2001 HHS survey. Observers agree that this official
estimate is no doubt quite conservative, considering that many adults
will not answer "yes" to a telephone survey asking about their use of
marijuana. This estimate alone, however, shows an additional Arkansas
market for 2705 pounds per month, bringing total monthly demand in this
illegal marketplace to 3455 pounds.
Let’s talk about supply:
Like the moonshiners of yore, marijuana growers are a furtive lot.
Sweating out the lengthy, somewhat conspicuous process of production,
growers sell at prices that reflect the quality of their goods. On
average, for street grade marijuana generally imported from Mexico, a
wholesale pound brings a farmer less than $100. For above average
marijuana produced in Arkansas, growers expect to receive up to $1200
per pound. For purposes of our economic analysis, let’s say that
farmers in a legal market could expect to earn $200 per pound.
A
healthy marijuana plant of good genetic stock will flourish in four
square yards of growing space. At that spacing, a small Arkansas Delta
farmer could expect to grow 440 plants per acre. Each plant would yield
a minimum of one pound, assuming adequate sunlight, nutrients, and
water. At $200 per pound, the farmer’s one-acre crop would be worth
$88,000, from which he would subtract his costs. In order to meet in
state demand conservatively estimated at 41,460 pounds per year,
approximately 200 farmers producing one-half acre plots of marijuana
each could generate this annual crop, each farmer grossing $44,000 and
creating a total of $8,800,000 in new farm income for the most
depressed region of the state.
But the real money in marijuana,
like moonshine, is not so much in production but rather in
distribution. Current marijuana markets inflate the base price of $200
per pound up to as much as $2500 per pound at the point of sale, when
customers buy quarter-ounce portions at $40 per bag. At every exchange
along the way, handlers expect to at least double their investment.
Like
alcohol prohibition, marijuana prohibition places this marketplace
outside the regulatory processes of commerce and law. And like the
times of alcohol prohibition, persons wishing to take advantage of this
lucrative market must become a law unto themselves. Guns, gang turf,
and unsavory violence often become a part of the marketplace.
Like
the repeal of alcohol prohibition, a regulated market for marijuana
would bring this commerce within the framework of state and federal
control. Marijuana-related guns and violence would disappear. Quality
standards would control purity, grade, and packaging. Sellers would
conduct regular business hours and expect protection by local law
enforcement. Buyers would be checked by identification to regulate the
product’s distribution to appropriate age groups.
Along with
regulation would come taxation. If we look only at the
Arkansas-age-25-and-older market for marijuana, at 2705 pounds per
month, at approximately $2500 per pound retail, the gross monthly trade
is $6,762,500. While not all this is profit by any means (farming,
harvesting, processing, packaging, transportation, retailing), it can
be used to estimate what a 20% state tax on marijuana might produce:
$1,352,500 monthly.
A market comparable to alcohol, allowing
sales to persons aged 21 and older, would produce an additional
$250,000 in monthly tax revenue. Overall, yearly taxes could be
conservatively estimated at $19.2 million.
We know from multiple
studies that less than one person in a hundred who tries marijuana will
ever move on to use harder drugs. We know that for many marijuana
users, marketing by drug dealers is the most likely means by which
marijuana users become exposed to more dangerous drugs. We know that
about 5% of all drug use is hard drugs, meaning that 95% of our current
drug war is actually a marijuana war. By ending marijuana prohibition,
resources could be focused on the dangerous drugs and substance addicts
who most need our attention.
By ending marijuana prohibition, we
could expect to see an enormous reduction in our national drug war
costs, currently estimated at $40 billion per year. Take away 95% and
you don’t have much cost left. We know that marijuana arrests account
for over half of Arkansas’ total annual drug arrests. Ending marijuana
prohibition would result in enormous taxpayer cost reductions for law
enforcement, prosecutors, jails, prisons, probation, and other direct
services.
In the case of Mr. Brooks, if sentenced to the
possible 40 years his offense can carry, the State of Arkansas will
spend at least $740,000 for his prison costs alone, based on a very
conservative current estimate of $18,500 per year for Arkansas
incarceration. Roughly, we could estimate lost wages at $35,000 per
year, including state tax of $2000 per year. The average marijuana
prisoner leaves a job and a family; we could assume that social support
for a wife and two children would cost the state another $20,000 per
year. Other costs: loss of economic activity supported by his earnings;
long-term lost productivity/economic benefit due to having a prison
record; psycho-social damage caused by arrest and prison time. It would
be reasonable to estimate these "hidden" costs at $60,000 per year for
each year a marijuana prisoner is incarcerated. Overall, we can safely
estimate that jailing a marijuana prisoner costs the state between
$25,000 and $75,000 per year.
If only 20% (1394) of the
persons arrested on marijuana charges (6974) end up spending one year
in jail, marijuana prohibition costs $25,789,000 in prison costs alone.
Averaging the socio-economic costs at $50,000 per year, we can add an
additional $69,700,000 expense to our tally. If we conservatively
estimate that the state loses another $3,000 per arrested person in the
costs of law enforcement salaries and equipment, building jails, hiring
prosecutors, paying public defenders, maintaining courthouses, and
multiple other expenses, we can add another $20,922,000 to our tally.
Grand total conservatively estimated cost of Arkansas’ marijuana
prohibition per year: $116,411,000.
And let’s not forget to
consider the lost tax revenue and lost productivity that would become
part of Arkansas economy with marijuana regulation. We estimated a
rough monthly gross commerce of $6,762,500, so one year would come to
$81,144,000, including taxes generated. Added to saved costs, the grand
total of Arkansas’ potential fiscal benefit from ending marijuana
prohibition: $197,555,000 per year.
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