Conseil d'Analyse Economique calls for urgent legalization of cannabis

The distinguished Economic Analysis Council (CAE), an independent body composed of recognized professional economists who advise the prime minister on policy, has just published a report in support of the legalization of cannabis in France.

« »The time has come for France to adopt, with pragmatism and resolve, a policy that will allow it to regain control,« write economists Emmanuelle Auriol and Pierre-Yves Geoffard, who have taken it upon themselves to address the issue and for whom reform has become a national »emergency.’”.

Truths That Hurt

The two economists have harsh words for the French cannabis ban portrayed as an outdated policy, a bitter failure, and a waste of money and resources: «The prohibition system promoted by France for the past 50 years has failed: not only is it incapable of protecting the most vulnerable, particularly young people, but it also places a heavy burden on public spending and benefits criminal organizations.» They further point out that:

• «Far from curbing its use, prohibition has encouraged experimentation with cannabis due to its widespread availability, despite massive investments in law enforcement.»
• «Incidents related to recreational cannabis use accounted for more than one million hours of law enforcement work in 2016.»
• «The social cost of cannabis is 919 million euros. These costs are not offset by any tax revenue.»

Debunking the Myth of Legalization

With reference to foreign experiences, CAE analysts sought to verify certain assumptions and concerns related to the legalization of cannabis. According to their observations:

• the Legalization would lead to a decrease in crime thanks to the weakening of organized crime and the refocusing of police efforts on actual criminal activities
• Legalization may lead to an increase in demand, but one that is intensive rather than extensive—that is, those who already use the drug consume more, but there aren’t necessarily any new users. They note that studies on the subject are sometimes contradictory. However, it appears that legalization leads to a decrease in consumption among adolescents, who face greater difficulty in obtaining the drug.
• no evidence of a gateway effect of cannabis to hard drugs does not exist at this time, except for the dealer who offers several products
• Legalization and decriminalization policies have a positive impact on public finances as part of a cost-benefit analysis. In other words, despite the cost of regulating the market, the ongoing crackdown on the illegal sector, and the potential impact of cannabis users on the public health system, these policies are more cost-effective than prohibition which costs more than 500 million euros each year.

«Economic analysis, combined with a review of recent experiences abroad, shows that the legalization of recreational cannabis—under strict regulation—makes it possible to combat organized crime, restrict access to the product for young people, and develop an economic sector that creating jobs and generating tax revenue,» the economists conclude.

«Take Back Control»

The analysts then propose a cannabis legalization model which should enable the government to regain control of the market while prioritizing the protection of minors (who are the population most at risk) and the eradication of trafficking. To this end, they make several recommendations:

• Establish a state monopoly on production and recreational cannabis distribution operated under the supervision of an independent regulatory authority.
• Ensure the quantity and quality of products and initially set moderate prices in order to dry up the illegal market. Redirect police resources toward combating major traffickers and enforcing the ban on sales to minors.
• Use a portion of cannabis tax revenue to fund prevention and education initiatives, particularly in schools, among families, and among healthcare workers, in order to detect addictive behaviors more quickly.
• Allocate a portion of the cannabis tax revenue urban policy and educational programs targeting drug trafficking areas. Support the reintegration of low-level drug traffickers into the legal workforce. Step up enforcement against the leaders of drug trafficking networks.
• Strengthen the statistical tracking of consumptionand production in order to better adapt to potential market changes.

Replace the black market with the legal market

For effectively combat the black market While developing a French supply chain, economists suggest initially setting prices high enough for producers but low enough for consumers. «Prices could then be raised once the illegal market has been eradicated,» they explain.

Using a four-variable quantification model, economists have attempted to estimate possible changes in demand following legalization and to determine a price that would drive dealers out of business. This price is estimated at 9.05 euros per gram. That said, it could lead to a 36% increase in demand. An upward adjustment of the displacement price—along with other public policy tools—could curb this increase.

Economists emphasize that «legalization and enforcement are complementary public policies.» Legalization should provide consumers with a guarantee of quality and reduce the risks associated with purchasing, thereby naturally steering them toward legal sources. At the same time, the crackdown on drug dealers should lead to an increase in the risks associated with illicit production and a rise in its marginal cost, and thus in the black-market price.

A French cannabis industry

Without going into the details of a specific production model, analysts have nevertheless assessed the’Economic Impact of Creation of a French recreational cannabis industry. They developed three scenarios based on how demand might change following legalization. In total, tax revenues are estimated at between 2 and 2.8 billion euros, jobs created at between 27,000 and 80,000, and social security contributions collected at between 250 and 740 million euros.

Furthermore, analysts point out that it is «imperative to begin the legalization process early, in a clear and transparent manner, and without underestimating demand, in order to allow legal producers to prepare and avoid any shortages that would benefit the illegal sector, as is the case in Uruguay.» Furthermore, they believe that production—which they estimate at between 500 and 700 metric tons per year—should not be limited initially in order to avoid shortages.

Along with the release of this report, about 15 members of Congress are submitting a proposal to legalize recreational cannabis. The bill provides for the establishment of a French tobacco distribution system through the creation of a state-owned company that would have exclusive rights to the product. Sales would be handled by tobacco retailers operating under contracts with the government.

For their part, CAE analysts did not specify the desirable scope of the monopoly. They simply mention the establishment of a government agency that would work with private entities, as is the case in Canada or in the U.S. states that have legalized it.

While political changes often take time to take effect, it seems, however, that a shift in direction has already taken place at the societal level. The number of voices supporting legalization is growing steadily. Yesterday, a forum in favor of legalization The article, co-signed by 70 prominent figures, made the front page of *L’Obs*. All of them denounce the futility of current policies, echoing the views of the CAE economists: «To effectively combat the informal sector, the most effective tools are neither fines nor crackdowns on consumers.».