The Economics of Marijuana Legalization

Since entering office in 2015, Prime Minister Justin Trudeau has successfully followed through on many of his campaign promises. He made gender identity a prohibited ground of discrimination under the Canadian Human Rights Act, he rolled out a universal child care benefit to better support the needs of Canadian families, he put a price on carbon, and now in the second half of his term, Trudeau is working eagerly with the provinces and territories to legalize, regulate, and restrict access to recreational marijuana across Canada.

The clock is ticking. By July 2018, Trudeau hopes to fully legalize recreational cannabis at the national level, landing Canada the second country in the world to do so after Uruguay.

This past November, Bill C-45, also known as the Cannabis Act, received final approval in the House of Commons. The three pillars of the act—legalization, regulation, and restriction—are intended to address three distinct, albeit complementary, issues surrounding recreational marijuana.

The first, legalization, ultimately seeks to curtail criminal activity vis-a-vis the illicit cannabis market and to reduce the burden on the criminal justice system. Every year, there are tens of thousands of marijuana-related arrests made across Canada. And of all police reported drug offences, cannabis possession accounts for over half.

The second pillar of the act, regulation, is arguably about generating tax revenue. The market for illicit marijuana is a lucrative one. By regulating the production, distribution, and retail sale of cannabis, all levels of government will be able to exploit the marijuana market throughout the supply chain.

The third pillar, restriction, is about protecting the health and safety of Canadian youth through restricting their access to marijuana. According to the Cannabis Act, the minimum legal age for consuming marijuana in any form is 18 years old.

Trudeau’s plan to bring the marijuana market above ground has emerged as a point of contention among political actors and stakeholders. Concerns around public health and safety have dominated the headlines, and according to polls, the split between those in support and those opposed to Trudeau’s plan is about 50/50.

While the health and social implications are important, indeed these form the backbone of Bill C-45, we’re going to take a different, more objective approach to analyzing the potential impact of the cannabis legislation.

In today’s episode, we explore the economic implications of legalizing recreational marijuana.

“The important thing is to manage expectations […] I don’t think that most people are ready for this […] Based on recent trends in public policy in Ontario, in particular over the last decade, there is good reason to be apprehensive that they could bungle this one.” – Dr. Pierre-Pascal Gendron, Professor of Economics, Program Coordinator, Humber College Business School

Pierre-Pascal Gendron is Professor of Economics and Program Coordinator, Bachelor of Commerce Healthcare Management and Bachelor of Commerce International Business, with the Business School at Humber College in Toronto. Prof. Gendron regularly advises international organizations on indirect tax matters, focusing on the value-added tax and excise taxes. He graduated with a PhD in Economics from the University of Toronto. [Interview at 4.12]

“Legalization of marijuana is a small step, but it’s an important step down a bigger road towards greater liberalization of all our decision making […] the net effect of that on our societies and economies could be much bigger than what we’re just seeing with marijuana” – Dr. Peter Dungan, Adjunct Associate Professor of Economics, University of Toronto

Peter Dungan is Adjunct Associate Professor of Economics at the University of Toronto, with cross appointments to the Department of Economics, Rotman School of Management, and the School of Public Policy and Governance. He is also the Director of Rotman’s Policy and Economic Analysis Program. Peter received both his Master of Arts and PhD in Economics from Princeton University.

His research focuses on computer simulation models of the Canadian and Ontario economies developed with regression techniques. The models are used to measure the economic impact of possible policy changes, and they also form the backbone of an ongoing program developing both short- and long-term economic forecasts for Ontario and Canada at large. Peter is a widely regarded business and macroeconomist, and was appointed a member of the “Ontario Economic Forecast Council” by the Ontario Finance Minister in 2006. [Interview at 33.38]


Julia Chan, Host, Senior Producer, Technical Producer
Tom Piekarski, Technical Producer
Peter Huycke,
 Technical Producer
Mitchell Thibault, Lead Social Media Director
Ian T. D. Thomson, Executive Producer

Music Credits
by Sigur Ros
Not Dead 
by Fine Times
by Wolf Parade
I Get Lifted 
by KC and the Sunshine Band

Listen/Subscribe on iTunes 



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