What are the Economics of Legalizing Weed?

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One of the most controversial topics out there –at least that used to be out there– is the legalization of cannabis indica, sativa, and ruderalis, better known as marijuana. This particular breed of plant has been hotly debated on whether or not its use and allowance in the US as a legal and commercial property should be permitted to be used.

Below is a breakdown our American history of marijuana, as well as a look into what the economical upside of commercializing weed here in the United States would be.


A brief history of hemp.

Ever since the early 1900’s, cannabis in any form was required to be clearly marked and presented as “present” if it were to be contained inside any product sold commercially in any way or amount. It was required to be so pronounced because even back then, the public was torn on how they felt about the natural hemp substance. It used to be used quite a bit throughout history, and still is used (albeit less so) today. Products such as lotions and oils for topical uses and also mechanical, as well as fibrous fabrications such as rope, cloth and clothing and even paper were mass created as a by-product of cannabis undergoing different refining processes.

Hemp products were used quite a bit due to its natural ability to be stronger and more resilient to withering and breaking when put under pressure and strain. The oil produced from it, a sticky and viscous fluid, is what is commercially still used today in shampoos and lotions and even some vitamins due to its concentrated and plentiful amounts of omega and essential oils found within.

The early and mid-1900’s produced several laws in the US that came about due to a rampant and uncontrolled burst of narcotics and other state declared “drugs” that were all going untaxed but still sold and distributed uncontrollably. The laws that were passed lumped a long list of state declared drugs and mind altering substances such as cocaine (which was found in a lot more commercial products than you would think), opium, heroin (which was found in high amounts in morphine and other related products), and also added to the list marijuana (cannabis sativa and indica).

U.S. Weed Policy then and now.

A lot has changed since the laws that were passed over 50, 60, and 80 years ago. Although the reasons as to why the anti-drug and narcotics laws were passed through legislation and into practice those years ago may have been good intentioned, more and more studies were and are conducted that aim to disprove the logic that was used back then and overturn the decisions made. The reasons back then that were used, at least in the case of marijuana usage, was that if smoked and inhaled, temporary insanity would consume the smoker for a period of time (does anyone else remember being forced to watch “Reefer Madness” in high school?).

This claim that temporary insanity would ensue upon consumption of marijuana was disproved, and many other studies were conducted in the hopes of putting a friendly face back on the once very popular cannabis plant with the goal of putting it and its sticky leaves back on the market –legally this time.

What can weed do if it’s made legal?

In November of 2012, a bill was passed in Colorado that made marijuana and its ability to be sold and smoked legal within the state. This was the first bill of its kind to be brought onto the state legislative floor and win, and it set a precedent of thinking that spread throughout the US: maybe weed isn’t so dangerous if we legalize it.

As the bill passed, the state kept a close eye on the business aspect of its distribution and consumption, and learned that there was in fact a large amount of money to be made just from taxation and control alone. The numbers they were collecting were in fact astronomically higher than what they ever would have guessed, even higher than the numbers collected from alcohol taxes.

In 2015 alone, the state of Colorado raked in not $10 million, not $50 million, but $70 million from marijuana taxation alone. That huge number was collected within the fiscal period of July 1, 2014 to the next summer ending on June 30, according to the Colorado Springs Business Journal. All that money is generated from taxation from marijuana sales alone.


Reefer madness and how it made the economy boom.

You might be wondering why on earth that earnings number from weed taxing is so high. The reason is because each individual unit of sellable marijuana is priced pretty high. Ask any occasional green smoker, and they will tell you that it isn’t cheap to feed this particular habit (whether it be a medicinal habit or recreational).

The average price per weed, if it’s considered to be high quality, is about $10 for a single gram depending on the variety of weed purchased and the location of the dispensary, which according to an occasional marijuana user, is more or less one single dosage. The average smoker however, will more than likely buy enough for multiple uses and doses and therefore will probably buy in bulk in some form or another, which will equal closer to either multiple grams or even a full ounce.

What do all these measurements and costs mean? It means this: the average cannabis smoker is going to buy a lot of weed, and also be willing to pay whatever the price is, which if you’ve been tracking with me so far, is pretty high.

The state adds a tax to whatever the cannabis purchase equals, which is a percent of the sale, and the bigger the sale, the bigger the taxable number. All these large tax amounts that are being made each and every day off of marijuana smokers adds up to a huge dollar sign at the end of every fiscal season, and all that money is going straight back as useable funds for the state of Colorado.

So why should other states consider legalization?

Granted, the state of Colorado permits marijuana usage as both medicinal as well as recreational, which is what leads to the taxation earnings be as astronomically high as they are, but regardless, even half of the earnings of that $70 million takeaway is a huge boost to state funding. The money can go into whatever project or needs the state may have, and not to mention the fact that the money being made off of the marijuana users is also going into the entrepreneurs who own and operate the dispensaries. The money being made off of this industry creates opportunities for business owners to become successful and use their earnings to stimulate local economies, as well as provide more opportunities for individuals looking for work and job opportunities as store employees, delivery drivers, or to even start up their own cannabis business with the knowledge they gain from their previous employment.


We have a long and complicated history with weed in the US. From its practical uses as paper, clothing, and oils, to its banning from public consumption on accounts that it caused insanity, we as a country are pretty torn about how we really feel about it being used. The bottom line is that if it is made legal, whether it be strictly for “medicinal” purposes or as recreational, the amount of money that can be made off it as a cash crop could be astronomically helpful in supplying a surplus of funding, whether it be on a local level or a state wide or national scale. Like it or not, there is a lot of cash to be made off of cannabis.


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