How Much Would Legalizing Marijuana in One or More U.S. States Hurt Mexican Gangsters?

If voters approve marijuana legalization in Washington, Colorado, or both states today, what sort of impact might an above-board cannabis market have on Mexico's notoriously violent drug cartels? In a recent Quartz piece, Tim Fernholz reports that a new study from the Mexican Center for Competitiveness (IMCO) estimates legal marijuana in those states plus Oregon (where the reform is also on the ballot but polling poorly) would "cut the cartels' income by $1.37 billion, or about 23% of their revenue." Fernholz says that calculation is based on a 2010 RAND Corporation estimate that legalizing marijuana in California "could cut the income of Mexican drug dealers by 20%." That scemario, in turn, was based on the assumption that legal California pot would be exported to other states, displacing imported Mexican marijuana and "cutting DTOs' [drug trafficking organizations'] marijuana export revenues by more than 65 percent and probably by 85 percent or more." But "if legalization only affects revenues from supplying marijuana to California," RAND said, "DTO drug export revenue losses would be very small, perhaps 2–4 percent."     

Notably, the RAND report rejected a widely cited estimate that 60 percent of the cartels' income comes from marijuana, saying that number "should not be taken seriously." It traced the claim to the federal government's 2006 National Drug Control Strategy but said "there is no empirical justification for this figure that can be verified" and noted that the Office of National Drug Control Policy "publicly distanced itself from this figure" in 2010. RAND concluded that the 60-percent estimate "is truly a mythical number, one that appeared out of nowhere and that has acquired great authority"—especially among marijuana legalizers, who ordinarily are quick to question the government's empirically shaky claims about drugs.

RAND instead settled on a range of 15 percent to 26 percent, so IMCO's report (which is in Spanish) apparently assumes that legalizing marijuana in three states would wipe out almost all of the cartels' marijuana revenue. That's possible, assuming the states that legalize marijuana end up exporting a lot of it. But as Fernholz notes, such exports would make an aggressive federal response more likely. Marijuana Legalization: What Everyone Needs to Know, co-authored by two of the researchers who wrote the RAND report (Beau Kilmer and Jonathan Caulkins), concludes that "at least in the long run, marijuana legalization would make a meaningful, but not decisive, contribution to reducing the flow of funds to violent Mexican DTOs."