In The Weed(s)

Speaker 2

and I'm Phil Magnus, The Economist.

Speaker 1

Also known as 420, it's a day of marijuana or cannabis celebration. It's not a national holiday, but still for those who celebrate, you might have to listen to this episode twice. There's no chance you'll remember it the first time through. And ⁓ it turns out 420... is also Adolf Hitler's birthday. So for you Nazi potheads out there, ⁓ you know those people who were born on Christmas and are always disappointed to get combination birthday Christmas presents? Do you think there are any Nazi potheads out there who are thinking that's the same thing today?

Speaker 2

in a while to, yeah.

Speaker 1

I mean, can we can we first just talk a little bit about the branding? mean, you know, choosing this day of all days to celebrate marijuana and cannabis. Do you know the history behind this? Phil, do know why 420?

Speaker 2

little bit. So I've some digging around and trying to figure out, you know, why did this date be settled on? like 420 was an old slang code. And the version I keep seeing is that back in the late 1960s, there was a group of potheads out in California that used it as slang to refer to when and where they were lighting up. And one of them was friends with Grateful Dead musician Phil Lesh. And know anything about the Grateful Dead and their concert experiences, cannabis was a major part of that culture and that's what popularized 420 as the slang.

Speaker 1

I find it interesting when it comes to marijuana and its representation in pop culture, because it's only fairly recently where you have legalization of either medical marijuana or marijuana for recreational use. But yet you had all these years, especially talking about like the 60s, that marijuana is so much a part of the culture and bringing up like the Grateful Dead. It's so much a part of music. So it's like, here you have a quote unquote, an illicit drug that is done so openly in so many different kind of like countercultures. It's like it's always been here.

Speaker 2

Right, right. That's one of the interesting things of what's kind of normalized it. And I think it's eroded some of the cultural aversion to the legalization of marijuana was the fact that, ⁓ you know, it was associated with certain ⁓ musical acts, ⁓ art, a bunch of counterculture events for decades upon decades. And that preceded this movement to legalize it that has kind of moved across several states and ⁓ is now. actually starting to shape federal policy. They're relaxing some of the rules and discussing of reclassifying marijuana as a different schedule. ⁓

Speaker 1

On the reclassification side, what will that do? Because I think currently ⁓ marijuana is sort of given the same classification as ⁓ heroin.

Speaker 2

Right, this is always one the oddities of the way that US drug laws evolved is it had really strict characteristics on it and basically said that this is of no medical value, ⁓ all use of it is illegal. So I'm not a... an attorney in the sense that I don't know the ins and outs of federal drug law, but it was always an oddity of the way that it was classified on this really heavy-handed approach going back decades. I think it's in the 1930s when they first started to do this. It got challenged in the late 60s because first they tried to regulate it through the tax system and there was a Supreme Court case in the 60s, I believe, that basically said, wait, you can't do this. You actually have to ban it outright. federal government classified marijuana along with other heavy drugs. Meanwhile, there are other things that are arguably much more dangerous that nonetheless have medical uses that are in different classification schemes. So the big push has been at the federal level is to reclassify this relatively benign by comparison to some of the other things that are out there drug and move it to a different schedule.

Speaker 1

So how did it become a schedule one drug in the first place? What's the history behind that?

Speaker 2

Well, the deep history is it goes back to federal bureaucrats. And there was this guy by the name of Harry Anslinger who headed up the government's federal bureau of narcotics from ⁓ basically about the mid 1930s and to the 60s. And, you know, there were scientific studies at the time trying to figure out this drug, marijuana, is it dangerous? Now there's drug use. around marijuana that goes back to probably antiquity. There isn't really like an official history of marijuana, but the hemp plant, for example, had been used ⁓ very extensively for all sorts of commercial reasons. They made rope and stuff out of it. ⁓ So have to figure someone along the way also discovered that, you could smoke this stuff and that made you high or whatever, all the effects of it. But Anslinger was kind of like this anti-drug crusader in the federal government. And back in the 1930s, when scientists are actually starting to break down these compounds and figuring out why this drug does what it does, well, the scientific evidence came back and said, you know, it's relatively benign. It makes people high, makes them act goofy and stuff. But ⁓ there don't seem to be any severe health repercussions from it. Anne Slinger did not like that. And he actually goes into a moralizing crusade that essentially fabricates the scientific evidence to counter some of the reports that were coming out of actual scientists. So they spin this drug into this crazy mind-altering thing that causes people to become degenerate and overly sexualized and potentially violent and all these horrible things, but not based in any scientific evidence. And one of the things that's come to light, you study the history of Anslinger, he was also a racist. And one of his major ⁓ arguments against marijuana is that this was a lower class drug that was used by African Americans and Hispanic people. This is in the segregation era. is ⁓ that. of American history, so he's trying to attach the moral stigma to marijuana is because, well says racial minorities use it. ⁓ This is something that is going to pollute and intrude upon proper culture by which he really meant white people. So you get this whole propaganda stream out of the federal government between him taking over the Bureau of Narcotics in really the 1960s where marijuana is just ⁓ exaggerated beyond belief into the most horrific and dangerous and ridiculous drug ever. You know, we all remember or have seen clips of this movie, Reefer Madness, which was like this apocalyptic sci-fi depiction of marijuana addiction that came out in the mid-century. And it really just comes down to propaganda.

Speaker 1

happening.

Speaker 2

weed when its roots in hell. But it certainly, the reputation of the drug defies the depiction of it that came out of the 1960s, under Anslinger and some of these other drug warrior types. Then again, we saw a resurgence of it in the 1980s. Remember Nancy Reagan, the war on drugs, just say no and all of that, which is an aggressive move to strike back against, you know, there were heavier and more serious drugs that became kind of epidemics in the 1980s.

Speaker 1

And I remember growing up. ⁓ in the 80s and 90s and seeing the ⁓ commercials that were anti-drug commercials. And there was one in particular, was, ⁓ this is your brain on drugs. And it was an egg frying in a pan. And the amount of people who I have talked to who have said that actually made them want to do drugs. think the best policy is just being honest about what is true and what is not true, as opposed to trying to sell someone a narrative based on whatever personal misgivings you might have.

Speaker 2

was the forbidden fruit effect. And we saw this in alcohol prohibition. You make something illegal, well then suddenly it has a mystique around it and the kids all want to do it. And ⁓ it really turns out to be a self-defeating policy. Whereas, you know, have they followed the science back in the 1930s and realized, you know, this is probably more benign than some other things that they were banning at the time. Let's not make it the same schedule as hard drugs.

Speaker 1

You know, in discussing what the impact of legalization has been, you you brought up Colorado and, you know, have dispensaries delivered kind of on their economic promises because one argument that we would always hear is legalize it and tax it and you're good to go.

Speaker 2

Well, several state governments have figured out that yes indeed this is a source of tax revenue. Local governments have done this as well. ⁓ I used to live in Great Barrington, Massachusetts, which is this tiny little town in the ⁓ southwestern corner of the state. And Great Barrington kind of became famous because Massachusetts was one of the other early states to ⁓ legalize recreational use. And I remember this because the town of Great Barrington basically put out a call. They were located five minutes from the New York border, 10 minutes from the Connecticut border, just interesting geography. And they put out a call that basically opened up the town and made it the weed capital of New England. All these Dispensaries filed for licenses and they opened. And I think for a while it might even still be true, it had more dispensaries in it per capita than any town in America. You know, you're talking a tiny little town of probably like less than 10,000 people, especially in the off season. And it has a dozen or more dispensaries that just pop up all over the place. The reason they did that is because they discovered, this is a lucrative source of tax revenue. The great irony though is when they were enacting all these measures to legalize marijuana and licensing dispensaries in town, the town was also cracking down on ⁓ liquor sales licenses at the local grocery store. because we couldn't have too much alcohol in town. would be, you know, would encourage sin and bias and all the things that New England Puritanism runs against. So it got to the point that of the two grocery stores in town, one of them didn't have a license to sell beer and wine, and they had to threaten to move out of town, to withdraw from the town in order to get... the local government to approve them for a beer and wine license. Meanwhile, it's handing out these marijuana licenses to everyone just left and right, all because of the tax revenue. I think what it shows is there's not really a consistency. in the rationales behind these licensure schemes for supposed SIN products or vice products, whether that's the old stuff, beer, wine, liquor, or the new or trendier thing to legalize, which is marijuana. And local governments really have a haphazard approach to the way that they regulated these things. Some of them saw it as a cash cow, but also really kind of ⁓ for too many eggs in that same basket, the pot basket was going to be like this perpetual source of revenue. And although it's delivered some, it seems like the industry grew faster than the demand that was out there for it. And it's contracted some in recent months, recent years in particular.

Speaker 1

So with all that tax revenue collected, did it deliver?

Speaker 2

It's a mixed bag. And you see this a lot with things that are considered syntaxes or revenue sources that are this nature. Probably the closest parallel was when state lottery systems started to open up and they really expanded those in the 1990s. A lot of states got into the powerball or the multi-millions or whatever they are, the scratch-offs. And the idea was, okay, we recognize that this is a public vice. but we're going to cordon off the revenue from it and direct it to education. Therefore, people are buying lottery tickets, but it's going to our schools, it's helping children. And that's part of the way that they sold it. Well, similar thing happened in ⁓ marijuana legalization. They said, all right, we're going to tax it, it's going to be local revenue, but we're going to devote it to education or to parks or to ⁓ things that are seen as ⁓ generally benign and supporting young people. Some states even put a portion of the revenue that they draw from these things into ⁓ educational programs that target prevention of drug use, environmental conservation. There's all sorts of things that are attached in strings to it. And yes, marijuana legalization in states that have done it have generated fairly substantial revenues to that. But what happens afterward is the government sees this revenue coming in, they're like, ⁓ we have a new tax. We're not going to cut taxes on other areas. It's like here's a new revenue stream and now marijuana taxes support our local schools so we can take the money we were raising for other things, for local schools from other sources and we can spend them on other things. We can get a bullet train to nowhere or we can get this local politician's cousin gets a contract for building a new parking lot at City Hall. So money becomes very fungible in the government sense. And it's like just a new tax has been assigned and no longer ⁓ are they operating under the constraints of the previous revenue system. They just end up spending more and more. So a lot of states that have legalized marijuana, ⁓ they've still nonetheless seen their budgets go up at a faster rate than the new revenue that's coming in. it just ends up being a, ⁓ know, governments are addicted to spending just as... ⁓ People get addicted to certain types of drugs. And when you're addicted to spending, ⁓ no amount of fix, no amount of new revenue coming in is going to cause you to rein that in.

Speaker 1

And I wonder how many people have been kind of caught up in the black market aspect of selling marijuana, because even with cigarettes, you'll have people who sell Lucy's illegally. So they'll sell like one or two cigarettes and cigarettes are supposed to be sold as a pack because of tax collection. And yeah, I wonder what the what the impact has been of the, you black market, because I mean, people are still being arrested, right? Yeah, yeah.

Speaker 2

Well, yeah, and you start to see this, I think we're in the infancy of it, but if it follows anything like alcohol regulation, you actually start to see big marijuana emerges. It's a major industry and these are ⁓ people that are well connected within the licensure scheme. They now have an interest in ramping up enforcement of the unlicensed guy who's selling drugs on the street the old fashioned black market way. ⁓ So, It's kind of a, I mean, quite literally, it's a bootleggers Baptist scenario playing out as you're transitioning from ⁓ illegal to legal or vice versa, legal to illegal. ⁓ You have a ⁓ public vice that is connected to enforcement, but there's also persons that are involved in the industry that are interested in ensuring enforcement keeps their potential competitors out of the market. So, yeah, the emergence of big marijuana will be interesting. It's kind of like a reversal of ⁓ Prohibition. You when Prohibition ended, it puts the mob out of business and now alcohol is legal again. When Prohibition started, it put legal alcohol out of business and then the mob moves in as a black market. So anytime you regulate, you always have that dynamic there and there's always a political incentive of whoever is the dominant provider of the product on the market, whether it's legal or illegal, to kind of be in a collusive arrangement with the government that is regulating it for ostensible reasons of stemming public buys.

Speaker 1

When I hear big marijuana, just think of ⁓ Steve Martin's bit about instead of getting high, getting small. Has use gone up because.

Speaker 2

Right.

Speaker 1

One of the things that we've been talking about is when you make a substance so illicit and controversial and people think like, ⁓ I'm kind of dangerous being willing to step over the line of the law and consume this. The idea of making it more mundane and less glamorous, fewer people will use it. But then on the other hand, if the idea is you want to tax it, well then the... you want to make money off of this for the state. So it's sort of there seems to be these tensions here where you want to exploit the use of something, but also tell people not to use it so much.

Speaker 2

It's the problem of sin taxes. They're very lucrative in revenue generation, you know, because people that drink alcohol are going to drink it whether you tax it at a dollar per bottle or $10 per bottle. Same thing with tobacco. You tax it at a very low amount per packet of cigarettes or very high amount. The cigarette smokers will smoke anyway. That's one of the reasons why it's seen as a lucrative cash cow. for revenue is that the ⁓ high tax does not really do much to make a dent in deterring use for those who really want to use it. But at the same time, you know, that there are arguments that there are other spillover effects from the fact that ⁓ people are using this. Vice, ⁓ excessive consumption of alcohol generally recognizes bad. Excessive consumption of tobacco generally recognizes bad. Excessive smoking of weed, well, what does it do? It makes people kind of lazy and sit around at home and they don't really do their jobs or ⁓ work anymore. So yes, in excess, most things of this nature are bad. And yet those that are going to use it are willing to pay the price, willing to pay the tax on it. So government is put into this conundrum where it has to ⁓ balance between, hey, this new source of tax revenue that's coming in and also the fact this thing that we're ⁓ taxing is indeed. connected to certain public vices and spillover effects. I tend in a libertarian direction. I don't think the government should be regulating much at all. I this really comes down to a personal choice, but it does have fiscal implications in that respect. And one of the things that's happened ⁓ when you move something from illegal to legal, Yes, use generally does increase, although it's really hard to get reliable statistics on marijuana use in the US because 20, 25 years ago, it's completely illegal. Who's going to admit that they use marijuana? So where do you get the accurate statistics of that? You have to infer it indirectly. Now that it's been legalized in many states for recreational use, people are more forthcoming and willing to say, ⁓ OK, yes, I bought marijuana, I used marijuana and the best estimates we have is, know, about 20 years ago, 25 years ago, it was 10 to 15 % of the population admitted to at some point using marijuana. And now with the legalization rates, it's basically doubled. It's about 20 to 25 % of the population. So that has definitely gone up because of the accessibility, but again, If you're a local government or state government in one of these areas that's legalized it, that also means new tax revenues coming in. So there's kind of an incentive to keep it in place.

Speaker 1

And when it comes to legalization, there is a cost benefit analysis there as well. What has the impact been for the public? something that I had heard, I don't know what the numbers are, but more people are, say, driving. Instead of intoxicated with alcohol, they're intoxicated with

Speaker 2

more high.

Speaker 1

while high, which as much as people will, you know, try to be like, no, man, you'd rather drive high than drive drunk. It's you shouldn't be driving.

Speaker 2

Under any substance in general. Yeah. Yeah. So there are spillover effects on that. You know, think of the high drivers ⁓ going 20 miles below the speed limit with the blinker on and the left lane is, ⁓ but yeah, that's a danger to other people in vehicle traffic. Just as if you go to the bar, over consume and hop behind the wheel, you're in danger to ⁓ other people out there. And one of the interesting things is we live in an era where technology is becoming ⁓ you more more rapidly a solution to this problem of inebriated ⁓ driving or driving under some sort of substance because it means that you go out to the bar or if someone's over at their friend's house and they get high or whatever, it's call an Uber or in some cities, call a Waymo, which these self-driving cars that'll come pick you up and take you home and you don't even have to worry about ⁓ putting other people at danger, let alone getting ⁓ pulled over and arrested, which will happen if you you're drunk driving, if you're driving high under a substance.

Speaker 1

Yeah, when my wife and I lived in Brooklyn before we got our car, we would use zip car every now and then. zip car was a ⁓ car sharing company. believe they're still around. The parking spaces are still there in Brooklyn. You're not allowed to park in those spaces, which as someone who then had a car in Brooklyn was so it was just so annoying having to not be able to take one of those spots. But there's obviously a transportation component to it. You get it to to go from point A to B or whatever. Then there was another thing that people used it for and that was hot boxing. So the amount of people that we would go and we would get a zip car, we would open the door, we would just be like, what the? Just a place to sit and smoke and that stench does not leave that car. Yeah. So that was a real pain in the ass.

Speaker 2

Just a place to sit there and eat. You think when you rent cars, know, they make you sign your life away and all these contracts. I will not smoke in this car or else I face a thousand dollar cleaning fee.

Speaker 1

Right, right, exactly. And I wonder how many people are actually getting hit with that fee. ⁓ know, because the, you know, what's the stop the company from saying, well, how do we know it wasn't you pregnant woman who was smoking up in this car? ⁓ You know, on the, the idea of, the stench, I think one thing that I've definitely noticed the most is whether it's in New York City or Los Angeles, ⁓ Any place that is basically decriminalized or legalized marijuana and has dispensaries is you can smell marijuana on the street and

Speaker 2

That's what it seems like.

Speaker 1

And I am not a fan of it and apparently I'm not alone Sagar and jetty is the host of breaking points He posted on X the smell of weed is the smell of death the pungent odor of civilizational decay Normalizing it is normalizing decline itself. And this was in response to a post saying quote smelling weed in public for me is like smelling the little baked pie on the windowsill in cartoons I can't lie. So talk about two completely responses to the same smell.

Speaker 2

in full display there. you're, ⁓ yeah, you know, I find the smell of weed on the streets pretty pungent and pretty awful. I was just in Las Vegas ⁓ a couple weeks ago and it's another area where they've legalized. You're walking down the strip, middle of downtown Las Vegas at like noon in the day and there's some guy just smoking and it smells. terrible, it stinks up the entire intersection, so there is a spillover effect. But I think there's an economic implication here. These happen in places that are the commons. One of the other interesting things is all of these states that have decriminalized or legalized recreational use, most of them generally do not permit smoking in public spaces. ⁓ But there's no real ownership of the public space other than the government kind of ineffectively policing it. So it basically becomes a de facto commons for bad smells. ⁓ Then it spills over onto the sidewalk, the public land, the public territory, precisely because there are no property ownership rights there. Notice that people are not lighting up ⁓ a joint in the middle of a restaurant. It's not like going to Outback Steakhouse and I'm going to go light up a joint and first off it would annoy all of the other customers. Second and more importantly, the property owner, the manager, the person that actually runs that restaurant would walk over to your table and say, excuse me, this is not permitted here. We're going to have to ask you to leave. They are enforcing their property rights over the jurisdiction of the restaurant.

Speaker 1

Yeah, exactly. And I think there is something real when it comes to, you know, social implications and taking responsibility and being considerate of those around you. I, not to sound like a school marm, but it doesn't bode well, I think, for your city when, say for example, like in New York. people are openly smoking marijuana on the subway. ⁓ They have been smoking other stuff too. I've seen footage of crack heads as well, which I'm like, wow, talk about a throwback to the 80s. got crackers back? That's amazing.

Speaker 2

Nancy Reagan, we need her again.

Speaker 1

But I you know, I bring this up because you know, this is I know I'm gonna anger a lot of libertarians out there my brethren, but in my town a proposition came up on whether or not we were going to allow the the building of head shops in in town and I voted no I do not want head shops to be to be in my town ⁓ for a number of reasons. One, the ones that are in towns nearby are complete eyesores. Like they just look terrible. They they kind of look like you know what you'd expect. There's a lot of like neon glow in the dark BS happening. A lot of bongs. It's not elegant. It doesn't look nice. It stinks for sure. It's very different from what you will find in say Las Vegas where there are dispensaries there you go where it looks like an Apple store. They are, you know, really just professionally run and I decided to exercise the little bit of local control I have a little bit of democracy, which I'm not always a fan of when I don't get my way. I'm not a fan of democracy and we we voted it down and you know, in this particular example. If you think it takes a village, you have to be very careful on who you allow into your village.

Speaker 2

So you're a head shop nimby.

Speaker 1

I am.

Speaker 2

That's, you know, it's interesting because we had kind of the other end of the spectrum when I lived in Great Barrington in Massachusetts, which it's a small ski resort type of a town that is very much a vacation community for wealthy people coming out of New York City and Connecticut and Boston. And the typical store there is like the ultra high end farm to table hipster gourmet restaurant or coffee shop. It's the ⁓ art studio that is selling ⁓ way, way overpriced, at least in my estimation, paintings and artistic things and crafts. It's ⁓ antique shops. And then you had marijuana dispensaries open up and the interesting that they've really blended into the business right next to them. On the street, you couldn't tell it was a difference. It was less an Apple Store vibe, but more like a ⁓ really high-end niche. hipster country store ⁓ type of a vibe. The difference you could tell is you'd have like a gourmet coffee place right next to a farm to table, ⁓ expensive restaurant right next to a dispensary. And the dispensary also had a yurt in the backyard where I guess they were doing their thing, testing their products. A yurt. That is one of those teepee things, I guess.

Speaker 1

Is that like a ⁓ TP?

Speaker 2

So instead of zip cars, they had yurts.

Speaker 1

That is a new business idea for any venture capitalists out there. A yurt, zip card, but it's a yurt. And you get to hotbox and go on a vision quest if you will. Tippies, we love you here over on Happy Hour Econ. We want to thank all you guys for listening to us on this 420. See you next week for a whole new episode of Happy Hour Econ.

Speaker 2

⁓ Rich hippies.