Licensing and regulation of the cannabis market in England and Wales: Towards a cost-benefit analysis
Among the radical options that are often proposed for a drug policy reform is the creation of a system of licensed cannabis supply subject to taxation and regulation of supply and demand sides of the market. In this study, we consider a hypothetical reform of this kind and identify a long list of possible sources of net social cost and benefit that could result. We attempt to quantify them, using the concept of net external benefit as an evaluation criterion. Net external benefit is the total value in cash-equivalent terms of the costs and benefits that cannabis use imposes on society outside the user him/herself, and it therefore excludes the potential net benefits (‘enjoyment’) accruing to cannabis users in a reformed market.
Our evaluation is consequently conservative in that it contains an inherent bias in favour of the prohibitionist status quo. In our view, it is impossible with available UK evidence to produce a credible estimate of net consumption benefits. Despite the bias this entails, it gives a far more reliable picture of the policy question than the many widely-cited estimates of the “social cost of drug use”, which include internal costs (potential harms to drug users) but ignore completely the internal benefits which are the reason that recreational drugs are used in the first place.
The estimates underpinning our evaluation should not be seen as predictions of what would happen if such a policy were to be introduced in some future period, since they relate to the market situation as it existed in England and Wales in 2009/10, and they abstract from any transitional adjustments (and any accompanying transitional cost). We have not attempted to extend the evaluation to cover Scotland or Northern Ireland, since most of the data resources available to us cover England and Wales only.
In constructing the estimates, we consider a wide range of evidence and the difficulties involved in drawing conclusions from that evidence. We provide simple, largely subjective, quantitative indications of the degree of uncertainty involved in our estimates, some of which should be regarded as illustrative calculations rather than formal estimates. Our aim is not to produce a definitive cost-benefit analysis of a licensed and regulated cannabis market – which we believe to be impossible in the present state of knowledge – but to set out clearly the range of considerations that need to be considered in forming a view about this policy, and to indicate which aspects of the evaluation are likely to be critical to the outcome of a full cost-benefit analysis.
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