In the article "Marijunana Law" we are informed that nine states: Alaska, California, Colorado, Hawaii, Maine, Nevada, Oregon, Vermont, and Washington have all passed laws that allow patients to use marijuana for medical reasons.
What does this have to do with economics? Let me tell you. It has to do with the underground economy. There are two aspects to this: 1. the production and distribution of illegal goods and services; and 2. the nonreporting of legal economic activity. Drug sales generate huge amounts of money and this is the one I’d like to focus on. Since drug dealers could never explain where their money came from, to the IRS, they launder it. Laundering the money makes it appear legal. By legalizing marijuana it helps decrease some of the underground economy that is going on in the US.
As a whole, would legalizing all drugs (not just marijuana) help increase GPD? One way it could do this is by making drug dealing a legitimate business. The business would now have to pay taxes on the merchandise. The taxes then are spent by the Government which strengthens the economy.
By legitimizing drug dealing it would decrease the amount of money spent on housing drug dealers in jails and prisons. Not to mention the several other costs the Government incurs because of illegal drug sales. The money gained from the now legalized business of drug dealing, and the money that use to be spent on stopping drug sales could be put back into the economy. This act alone would increase GDP by a minimum of 10%.
The really question is would legalizing drugs such as marijuana be worth the increase in GDP? That question is the topic of a whole other blog!