In my last post, I concluded that a marijuana tax could not generate enough revenue to justify legalization solely on fiscal grounds, but that marijuana should nevertheless be legalized in the interest of preserving public respect for the law as an institution.
In response, some readers have expressed concern that the legalization of marijuana would result in decreased levels of societal productivity. I believe that their concerns are misplaced. Indeed, basic principles of economics indicate that U.S. gross domestic product (GDP) would increase, not decrease, in response to legalization.
Goods like marijuana that are illegally produced and distributed are not included in the annual calculation of GDP. If marijuana were legalized, domestic production of marijuana would be included in the calculation of GDP. In addition, with no incentive to smuggle the drug into the United States, more marijuana would be cultivated and distributed domestically, thereby further enhancing U.S. GDP. In this regard, it should also be noted that legalization would largely abate American cash flows to international drug cartels. This, in turn, could reduce marijuana-related gang violence both domestically and abroad.
Of course, any increase in GDP would be offset by any reduction in drug enforcement costs. Still, the increase in GDP would probably be substantially greater than the decrease in costs of enforcement, resulting in a net increase in overall GDP. In any event, governmental resources currently allocated to marijuana enforcement would likely be reallocated to other drug enforcement programs rather than eliminated altogether.