Marijuana IV: The Case of Portugal

As reported in a recent article in Time, the Cato Institute has made another striking claim in the debate over what to do with marijuana. Here's the juicy conclusion to the article:

The Cato report's author, Greenwald, hews to the first point: that the data shows that decriminalization does not result in increased drug use. Since that is what concerns the public and policymakers most about decriminalization, he says, "that is the central concession that will transform the debate."

The claim that decriminalizing marijuana does not increase use appears to run contrary to the prediction I made last week's post on this topic. In that post, I predicted that legalizing marijuana in the United States will lead to more use. Given that I used economic theory to generate my predictions, this finding by Cato puzzled me.

In giving my prediction, I did not use fancy logic. For you who missed it, here's my logic in two steps:

Step 1: Legalizing pot will surely decrease the price for everyone (even teens who now have more willing suppliers).
Step 2: When the price of marijuana goes down, people consume more of it. That's just the law of demand, and it holds for every good.

Regarding this finding that decriminalizing decreased use in Portugal, I trust that Cato did the statistics correctly. After all, they are the most reputable libertarian think tank around. I am left puzzling over what happened to the law of demand. The law of demand is, after all, a law for a reason. The key to understand what we learn from Portugal is to understand how decriminalization in Portugal differs from current proposals for legalization of marijuana in the United States.

What did Portugal do? Back in 2001 when Portugal decriminalized, the National Organization for the Reform of Marijuana Laws (NORML) applauded Portugal for their new policy. In addition, they described a key element of the policy. That is, "Any pot or narcotics found by police will be confiscated. (link)" Given this strategy of intervention, decriminalization in Portugal did not mean encouraging drug use. This is an important point that cannot go understated.

As the NORML article describes, Portugal had the ingenious reason to decriminalize marijuana: it made the drug easier to control. Because Portugal decriminalized the drug, they were able to deal with the problem of marijuana squarely as a medical malady, rather than criminal misconduct. As the Cato report details, this strategy appears to have been more successful than arresting pot users. This statistical association is compelling just so long as we look past the large year-to-year fluctuations in drug use and the fact that marijuana use among 16-18 year olds actually increased (Catos findings, not mine).

What do we take away? Aside from the obvious quibbles, Portugal's story looks like success. The question becomes, "What do we learn from Portugal about legalization of marijuana in the United States?" I think the answer to this question depends on our objective. From what I can tell, there are two prominent views policymakers have on why we should legalize marijuana

1. Legalization allows policymakers to treat the problem more respectfully and directly.
2. Legalization will yield a tax windfall.

The first view is the one that policymakers in Portugal took when they decided to legalize. The second view is the prevailing view coming from lawmakers and academics in support of U.S. legalization.

When it comes to policy, what's the difference? In view 1, policymakers unambiguously attempt to reduce use. The whole point of decriminalization in Portugal was to address drug problems more sensibly. Decriminalization is a misleading word because law enforcement in Portugal does not do nothing when someone is found with marijuana. As the Time article says,

[...] people found guilty of possessing small amounts of drugs are sent to a panel consisting of a psychologist, social worker and legal adviser for appropriate treatment (which may be refused without criminal punishment), instead of jail.

For Portugal, this was not a scheme to raise taxes. Indeed, these counseling services cost money. That does not mean the money is not well spent. It probably is. This just suggests there is likely no costless policy to deal with marijuana, or drug use more generally.

With that in mind, let's examine view 2. Policymakers who are motivated by tax revenues have a conflict of interest when it comes to making good drug policy. More drug use means more tax revenue. Especially for California, there is a huge demand for sources of tax revenue. The potential for a marijuana tax is the number one reason cited by California lawmakers who are considering considering legalization.

Most of us want policy to address the problems of drug use, but if more marijuana use means more marijuana taxes, there's a strong incentive for policymakers to inact bad drug policy (i.e., policy that encourages use).

What's my point? The reasons lawmakers put forth for legalization suggest that legalization in the United States will be very different than those offered for decriminalization in Portugal. Our lawmakers are currently treating legalization like a business, whereas Portugal used decriminalization to address the problem more effectively. Given our current fiscal stresses, we have good reason to doubt that U.S. drug policy will follow that Portugal's path if we embark on legalization.

That's not to say that Portugal is not a good model. But, I think it is worth asking ourselves why we're getting into the legalization debate in the first place.