Numbers for Marijuana’s Externalities

A private group in Canada estimated $79 per cannabis consumer per year in societal costs for 2014.

That may be less than a lot of states are taxing.  But are that private group’s numbers to be trusted?  And there’s the list of reasons to tax cannabis posted earlier and below. (The Canadian numbers too presumably count DUI.)  But trying  to tax measurable externalities seems like something even the tomato model folks might understand and even go along with.


The overall economic cost of SU in Canada in 2014 was estimated to be $38.4 billion.7 This estimate represents a cost of approximately $1,100 for every Canadian regardless of age. In 2014, the legally available and most widely used psychoactive substances, alcohol and tobacco, contributed almost 70% of these costs. Alcohol accounted for about $14.6 billion (38.1%), tobacco accounted for about $12.0 billion (31.2%) and other substances accounted for about $11.8 billion (30.7%) of these costs (see Figure 1 and Table 1). Among the currently illegal substances, opioids were responsible for slightly higher costs than cannabis in 2014.

  • The four substances associated with the largest costs were (in order):
  • Alcohol, contributing $14.6 billion or 38.1% of the total costs;
  • Tobacco, contributing $12.0 billion or 31.2% of the total costs;
  • Opioids, contributing $3.5 billion or 9.1% of the total costs; and
  • Cannabis, contributing $2.8 billion or 7.3% of the total costs.


  • Per-person costs increased 19.1% for cannabis ($67 to $79) and 6.8% for tobacco ($315 to $337).


Seven reasons to tax cannabis:

  1. To Legalize.  That’s the deal – voters and elected officials insist on taxation.
  2. For revenue.  But that argument would apply equally well to an excise tax on socks or bicycles.  That argument is purely pragmatic; it’s not theory-based.
  3. To keep it away from Kids, who are notoriously price-sensitive (“pocket change” won’t be enough).
  4. SUD — To keep it away from Cannaholics (people with “Substance Use Disorder”).
  5. Driving (at least a perception problem).
  6. Jerry Brown’s argument: “I don’t know if everybody’s going to pot that that’s going to be a positive path forward.”  This “Nation of Stoners” argument needs more analysis.  It seems like an opportunity cost for society, and seems extremely difficult to measure or estimate.  In some sense, though, maybe it’s like the quasi-quantifiable cost of alcohol-caused absenteeism.
  7. To reduce the risk of SUD for those who don’t have it yet.  That’s hardly quantifiable.

What else?





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