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Licensing and regulation of the cannabis market in England and Wales: Towards a cost-benefit analysis

Stephen Pudney, Mark Bryan () and Emilia DelBono

MPRA Paper from University Library of Munich, Germany

Abstract: This study sets out the potential costs and benefits of a move to a licensed, taxed and regulated cannabis market in England and Wales. It identifies at least 17 sources of social cost/benefit and gives indicative estimates of annual net external benefit for 13 of them. We stress the important role of product regulation as a means of controlling the chemical properties of the cannabis product. Research in neuroscience has demonstrated the harmful effects of one cannabis constituent (THC) and the protective role of another (CBD). Given the strong upward trend in THC and downward trend in CBD in the illegal cannabis market, the possibility of product regulation is a potential advantage of a licensed and regulated system of supply. Three alternative scenarios are used, based on different assumptions about the responsiveness of demand to the policy change. We find that net benefits are likely to be positive and modest in size, except in the case of highly responsive demand (where, however, there is a great deal of uncertainty associated with the estimates). By far the largest effect is projected to be the net budgetary improvement for government, from new tax revenue and reduced policing and criminal justice costs.

Keywords: cannabis; regulation; legalization (search for similar items in EconPapers)
JEL-codes: H20 I18 K42 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-reg
Date: 2013-09-15
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