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.