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Hello and welcome to another episode of the Minor Issues Podcast. I'm Mark Thornton at the Mises
Institute. Well, an intrepid listener asked a very interesting and important question.
Is the black market economy immune from the Fed's inflation?
It would seem that the price of illegal pot or cannabis has been declining or at least steady
for several years now, while legal pot is higher in price. And of course, everything else has
increased in price. We've all been suffering from higher prices, lower quality, and poor service.
So is marijuana the magic elixir for economic performance and a potential cure
for the Fed's inflation? Might it help make America great again?
This excellent question does point to theory that can help sharpen our analysis,
but no, marijuana itself cannot cure the Fed's inflation. However, drug legalization
does reveal a potent force for restoring economic vigor in the economy and improving
our standard of living. America has suffered for more than 60 years from cannabis prohibition
highlighted by the so-called war on drugs in the 1970s and the 1980s.
This has been enormously costly in every respect, and it has been extremely ineffective
as any unbiased person will admit. Historians will no doubt consider this prohibition
one of man's biggest blunders in social policy. Fortunately, in recent years,
citizens have taken control from politicians and bureaucrats, mostly at the state and local
levels, as it has become abundantly clear that marijuana or cannabis does have legitimate uses
and that it is not inherently dangerous to everyone and should therefore not be prohibited
even according to the government's own policy guidelines. The Fed's inflation, of course,
causes prices to rise unevenly throughout the economy, but legalization causes production
and distribution costs to fall and for production to rise. This great expansion of opportunity and
entrepreneurship has put downward pressure on prices even as quality and product variety have
expanded. Of course, all of these businesses face higher costs of inputs due to the Fed's inflation,
plus all the red tape and costs mandated by governments. These superfluous costs and taxes
mean that illegal cannabis is still cheaper and is thriving in the underground economy.
Removing all of this government intervention would mean even lower prices, higher quality,
variety, availability, investment, jobs, profits. Before we get to the general point,
I know that many listeners will be uncomfortable with the idea of a growing and vibrant
cannabis industry running wild, but let's just remind ourselves that legalization has done
just what was promised. One, consumption and the number of consumers is up dramatically
and there is little doubt of increased consumption by the so-called problem consumers.
Two, recreational use has expanded and consumers are better off. Some of this recreational consumption
has siphoned off demand from dangerous products like alcohol and tobacco.
Three, medicinal use has expanded, siphoning off demand from dangerous pharmaceutical drugs,
dangerous pain and sleep drugs, but also for treating conditions associated with cancers
and other maladies. Four, legalization has stimulated an enormous increase
in CBD cannabis products. Those are the ones that don't contain the psychoactive
THC component and are used for a wide variety of conditions. In five, there is also a wide variety
of research projects in the public and private sectors to study the efficiency and safety of
these products. Now with the acknowledgement that there is a much bigger difference between
prohibition and free markets than there is between other interventions such as regulation
and free markets, removing any and all government interventions from an economy will expand
opportunity, production and jobs. Prices will fall and quality, variety and availability
will expand across the board. Some of these fruits were clearly experienced with the targeted
deregulation policies during the first term of President Trump. This clearly shows that the
benefits of legalization, deregulation, and other subtractions from government,
as well as the work of DOGE are virtually unlimited.
Stay tuned for a future episode that explores the cost of our failure to deliver on the promises
of more economic freedom using the historical case of the French Revolution.