In 2012, Colorado and Washington became the first states to legalize marijuana for recreational use, and have since been joined by Oregon, Alaska and Washington, D.C. In 2014, Colorado is reported to have received more than $50 million in tax revenue from the sale of recreational marijuana, much of which was slated to be used for school construction. The potential for increased tax revenues and the benefits these revenues can provide has a number of other states contemplating the possible legalization of recreational-use marijuana.
a. Recall that efficiency means producing what people want at the least cost. Can you make an efficiency argument in favor of states allowing the recreational use of marijuana?
b. What nonmonetary costs might be associated with legalizing marijuana use? Would these costs have an impact on the efficiency argument you presented in part a?
c. Using the concept of equity, argue for or against the legalization of recreational-use marijuana.
d. What do you think would happen to the flow of tax revenue to state governments if all 50 states legalized marijuana?