Does Cannabis Contribute $6 Billion to Canada’s Economy?

One of the numerous reasons countries have put forth, over the years, for legalizing Cannabis, has been simply it was a massive source of economic activity that wasn’t taxed. While you have to pay sales tax on everything, from shoes to a beer, the money being handed to drug dealers was not contributing to the government’s finances. So when Canada was getting ready to legalize, (More on that here) the Director general of Statistics Canada had to figure out, while it was still illegal, how much this was contributing to Canada’s Gross Domestic Product (GDP).

NPR’s excellent planet money podcast, the indicator, did a great interview back in January with James Tebrake, the director general of Statistics Canada, asking him how he went about it which is worth listening to in its entirety. What’s interesting more than anything is where they got their information from initially.

1. Health studies: These have been done for years on how many people smoke weed. The Canadian government has been running them for years and the most recent study says that around 4.6 million people aged 15 years or older have used weed in the previous 3 months. Which is around 15% of the population. Canada has close to 36 million people. The same studies showed the amount of cannabis consumed and places the number at around 700 tons annually.

2. Priceofweed.com: How much are they paying for that weed? Well that was taken from a variety of sources but the most interesting was priceofweed.com, which is a fun website where people self report how much they paid for weed and in what area of the world. It’s clearly not as good data as say sales receipts generated by credit card companies, but it’s what they had to work with. Also it’s worth spending time on that website, it’s fascinating.

3. Law Enforcement data. The reason this mattered more than anything was simply to figure out how much of that weed was grown in Canada. When you are doing economic analysis and forecasting you need to know if these goods are made locally or coming from out the Canada. From the sample size of drug busts, specifically those along the border, they were able to say that Canada is a net exporter of Cannabis.

All in all saying that the illegal market for Cannabis is around $6 Billion. Now that legalization has taken place in Canada, only the second country to do so, we will find out how accurate that forecast was. Of course Canada regulates everything heavily so Cannabis wont be any different. The current plan will involve a heavy excise tax and only be sold in designed stores owned by the same company that owns Canada’s liquor distribution companies. Which is a state owned government monopoly on the sale of liquor. Which means their will be a significant amount of people who will probably opt to buy the cheaper weed that will be sold outside of the system.

Over the next year we will find out how accurate these estimates proved to be will be shown over the next year. Which will be a signifigant argument one way or the other if the United States should follow suit.