The long and winding road to cannabis legalisation

Jan van Ours

06 December 2011



Although some countries have quasi-legalised cannabis use (the Netherlands), made cannabis available for medical purposes (California), or allowed the growing of a small number of cannabis plants for personal use (Australia), in most countries – the Netherlands included – cannabis supply, distribution, and use is prohibited (Reuter 2010). Nevertheless, in 2009, between 2.8% and 4.5% of the world population aged 15-64, corresponding to between 125 million and 203 million people had used cannabis at least once in the past year (United Nations Office on Drugs and Crime 2011).

Table 1 presents cannabis use statistics for a number of countries, distinguishing between lifetime use (ever), recent use (last year) and current use (last month). The range in lifetime use is substantial from a low 21% in Sweden to a high 42% in the United States. The range in recent cannabis use is also substantial from a low 1% in Sweden to a high 14% in Italy. Finally, current use ranges from 1% in Sweden to 7% in Spain and the United States. What is also striking is the big difference between lifetime use and recent use. In the Netherlands for example 25% of the population aged 15 to 64 has ever used cannabis but only 7% has done so in the last year. Apparently, for a substantial part of the users, cannabis is not very addictive (see also Van Ours 2006 for details).

Table 1. Cannabis use: various countries and various measures (percentages)








Use ever

Use last year

Use last month























































United States






Source: Van Laar (2011)

Clearly, prohibition does not work. Cannabis is the most popular illicit drug. The debate on legalisation of cannabis is gaining momentum. Caulkins et al (2012) mention seven motivations for creating a legal cannabis market:

  • Raising tax revenues,

  • Eliminating arrests,

  • Undercutting black markets and associated harms from corruption and violence,

  • Redirecting criminal justice resources,

  • Assuring product quality,

  • Increasing choices for those seeking intoxication, and

  • Limiting youth access by better control.

The legalisation debate is often emotional with strong views on both sides. Those who support legalisation tend to ignore the negative health effects of cannabis use. Those opposed ignore the fact that legal substances such as alcohol and tobacco also have bad health effects (Hall and Lynskey 2009).

The Dutch example

The Netherlands has a cannabis policy that is closest to being legal although cannabis supply and distribution are prohibited; though using cannabis is not legal, it is decriminalised. The main aim of Dutch drug policy is to protect the health of individual users, the people around them, and society as a whole. Regulations on drugs are laid down in the Opium Act, which draws a distinction between hard drugs and soft drugs. Hard drugs are those substances which can seriously harm the health of the user and include heroin, cocaine, and synthetic drugs such as ecstasy. Soft drugs – ie the cannabis derivatives, marijuana and hashish – cause far fewer health problems. The possession of hard drugs is a crime. However, since 1976, the possession of a small quantity of soft drugs for personal use is a minor offence.

The expediency principle is applied to the sale of cannabis in ‘coffee shops’ in order to separate the users' market for hard and soft drugs and to keep young people who experiment with cannabis away from hard drugs. The sale of small quantities of soft drugs in coffee shops is therefore technically an offence, but prosecution proceedings are only instituted if the operator or owner of the shop does not meet certain criteria. These criteria are that no more than five grammes per person may be sold in any one transaction, no hard drugs may be sold, drugs may not be advertised, the coffee shop must not cause any nuisance, no drugs may be sold to people under 18, and under-18s are not allowed into the premises. Moreover, the mayor may order a coffee shop to be closed.

According to MacCoun (2011) the Dutch coffee shop system may have been responsible for separating the soft and hard drug markets and rather than increasing the gateway from soft to hard drug use may have reduced this gateway (see also Van Ours 2003). According to Reuter (2010) commercialisation of sale in the Netherlands may have led to an increase in consumption but the increased access has not led to the Dutch population showing higher-than-average rates of cannabis use or longer cannabis-use careers. Korf (2002) indicates that the use of cannabis in the Netherlands shows trends that are very similar to those in other European countries that have not decriminalised cannabis.

Until the middle of the 1970s, coffee shops were largely absent from the Netherlands. Then their number increased rapidly to reach a maximum of about 1500 across the country in the early 1990s. From 2000 to 2009 the number of coffee shops decreased – in the four big cities (Amsterdam, Rotterdam, Utrecht, and The Hague) by 74, and in the rest of the Netherlands by 73. In 2009 in 101 of the Dutch municipalities out of the total of 441 municipalities there were one or more coffee shops (Bieleman and Nijkamp 2010). The reduction of the number of coffee shops has to do with closings near schools and a stricter policy against coffee shops that did not stick to the rules and regulations. In Amsterdam, for example, the number of coffee shops went from 283 in 2000 to 225 in 2009. In some municipalities close to the border all coffee shops have been closed to avoid ‘drug tourism’ from Belgium, France, and Germany, ie to ban foreign customers who buy cannabis in the Netherlands and take this across the border. According to Wouters et al (2010) there has been a shift in policy from a health perspective to a law-and-order perspective. They find that the presence of coffee shops in a municipality is more likely in large municipalities and municipalities with a left-wing local government while the number of coffee shops in a municipality is mainly determined by its population size.

Because supply and distribution of cannabis is still prohibited, policy in the Netherlands is in a twilight zone. Recently, measures have been implemented to reduce access to coffee shops. The plan is to transform the coffee shops to clubs for which one needs a permit to enter. The main idea of these permits is that they will prevent tourists from entering, thus making coffee shops local shops for local people.

California Proposition 19

According to Kilmer et al (2010) California has always been on the cutting edge of cannabis-policy reform. In 1975, California reduced the maximum sentence for possessing less than an ounce (28.35 grammes) of cannabis from incarceration to a small fine. In 1996, California allowed cannabis to be grown and consumed for medical purposes. California currently has over 1000 medical marijuana shops. In November 2010 California voted on whether cannabis should be legalised and taxed. The Californian Proposition on the 2010 ballot – the Regulate, Control, and Tax Cannabis Act, also known as Proposition 19 – would have fully legalised cannabis with respect to the Californian state law. It would not have prevented federal prohibition action. In theory, federal agents can take over low-level enforcement but in practice federal prosecutors would probably only deal with large quantities of cannabis.

Rosalie Pacula (2010) argues that the debate on cannabis legalisation in California is dominated by worries about health consequences as one fifth of all treatment admissions in the state is due to marijuana use. An increase in cannabis use may also cause an increase in health expenditures paid through taxes. So a priori it is not clear that there will be a net tax reduction if cannabis is legalised. However, she concludes that it is unlikely that a rise in the known health harms would lead to a large enough cost to taxpayers to offset the revenue gain from legalising and taxing – assuming that taxes are actually paid and not evaded. Kilmer et al (2010) provide estimates of the possible effects of legalising cannabis in California. Taking into account that their estimates have unknown confidence intervals they find that pre-tax retail price of cannabis will decrease, likely by more than 80%. The effect on consumer prices will depend on taxes but it is likely that consumption will go up. Tax revenues will increase but it is virtually impossible to indicate by how much. The savings on enforcing cannabis laws are also difficult to indicate. Caulkins et al (2012) take Proposition 19 as their inspiration to discuss legalisation design choices – ie the level of taxes and whether taxes should depend on cannabis levels, rules on home cultivation, advertising restrictions, and design adjustments over time. They argue that taxes should be sufficiently high to discourage cannabis use and sufficiently low to drive out illegal supply. Furthermore, taxes should depend on cannabinoid levels, home cultivation should be allowed under restrictions, and advertising should be banned. The most important design choice of legalisation is the flexibility to adjustment, allowing for learning by doing.

Proposition 19 was narrowly rejected with 53.5% of the voters voting against the proposal.

Health effects of cannabis use

Worries about cannabis often relate to the connection between cannabis use and crime. Little is known about the subject but cannabis-induced crime by users seems to be limited (organised crime is however heavily involved in supplying cannabis use). Furthermore, there is a discussion about whether cannabis use induces the use of hard drugs, but this ‘stepping-stone’ effect seems to be absent or small (Van Ours 2003). People mainly worry about the health effects of cannabis use. Nevertheless, in the grand scheme of risky health behaviours cannabis use has a modest contribution (Cawley and Ruhm 2011).

From a meta-analysis, Degenhardt et al (2003) conclude that there seems to be a modest but significant association between heavy use of cannabis and later depression. In their overview study, Arseneault et al (2004) conclude that rates of cannabis use are approximately twice as high among people with schizophrenia as among the general population. Hall and Degenhardt (2009) argue that previous research on the relationship between mental health and illicit substance use comes almost entirely from epidemiology. The results from this research are mixed, with some papers reporting a positive association between cannabis use and mental health problems and others reporting no association. Discussing a variety of papers Werb et al (2010) conclude that the research to date is insufficient to conclusively claim that the association between cannabis use and psychosis is causal in nature.

In examining the relationship between mental health and cannabis use, the literature cited above has attempted to identify the causal effect of cannabis use by controlling for observed factors that may be a source of confounding. However, as noted by Pudney (2010), the potential for unobserved common confounding factors makes inference regarding the causal impact of cannabis use difficult. Nevertheless, recent evidence suggests that there is a negative causal effect of cannabis use on health (Van Ours and Williams 2011a and 2011b).

All of the linkages to assess the health effects of legalisation have one element in common: uncertainty. Therefore, opinions of people with personal experience of cannabis use may be helpful. From an analysis of Australian data it appears that past cannabis users are more in favour of legalisation than non-users. Apparently for individuals with personal experience the personal benefits of legalisation are more important than the personal costs (Williams et al 2011).

The long and winding road

Caulkins et al (2011) argue that prohibition of rarely used substances is easier to implement than prohibition of widely used drugs. This also applies in reverse. Legalisation of a frequently used drug such as cannabis will have smaller effects on use than legalising a less frequently used drug such as cocaine. However, the discussion about legalisation of cannabis is hampered because even simple effects are not clear in terms of their magnitude. It is most likely that cannabis prices will go down and cannabis use will go up. But whether this will induce negative health effects depends on whether the increase in use will be at the intensive margin as well as the extensive margin. Criminal activities, predominantly those by suppliers, will be reduced. Whether the benefits of legalisation outweigh its costs will also depend on design choices.

There are many relationships about which researchers are uncertain, debating whether they are causal or mere associations. Removing the veil of ignorance that surrounds the legalisation debate requires much more research effort. However, researchers rarely agree, and even if they would agree it is doubtful whether that would convince politicians to go ahead with cannabis legalisation. Doing further research and hoping that an evidence-based cannabis policy will emerge is wishful thinking. Rather than muddling through for several decades it would be wise to start moving on the long and winding road to cannabis legalisation.

The health effects of cannabis use should not be ignored. Clearly, it is healthier not to use cannabis at all. Nevertheless, the health effects should not be exaggerated either. If alcohol use and smoking cigarettes are accepted, albeit under restrictions, then so should cannabis use. There are clear advantages to legalisation. Legalisation would make life more comfortable for cannabis users, remove criminal organisations from the scene, allow for the possibility of quality control, provide governments with tax revenues and make it possible for researchers to collect empirical evidence. In short, it is time for politicians to walk down the legalisation road “to boldly go where no man has gone before” (Van Ours 2012).


Bieleman B and N Nijkamp (2010), Coffeeshops in Nederland 2009, Intraval, Rotterdam.

Caulkins JP, B Kilmer, RJ MacCoun, RL Pacula and P Reuter (2012). “Design considerations for legalizing cannabis: Lessons inspired by analysis of California's proposition 19”, Addiction, 106, forthcoming. 

Cawley J and C Ruhm (2011). “The economics of risky health behaviors”, NBER Working Paper No. 17081.

Degenhardt L, W Hall, and M Lynskey (2003), “Exploring the association between cannabis use and depression”, Addiction, 98:1493-1504.

Hall W and L Degenhardt (2009), “The adverse health effects of non-medical cannabis use”, Lancet, 374:1383-1391.

Hall W and M Lynskey (2009), “The challenges in developing a rational cannabis policy”, Current Opinion in Psychiatry, 22:258-262.

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Pacula RL (2010), “Examining the impact of marijuana legalization on harms associated with marijuana use”, RAND Working Paper WR-769-RC.

Pudney S (2010), “Drugs policy -– what should we do about cannabis?”, Economic Policy, 61:165-211.

Reuter P (2010), “Marijuana legalization: what can be learned from other countries?”, RAND Working Paper WR-771-RC.

United Nations Office on Drugs and Crime (2011), World Drugs Report, United Nations, New York.

Van Laar MW (2011), Nationale Drug Monitor, Trimbos-Instituut, Utrecht.

Van Ours JC (2003), “Is cannabis a stepping-stone for cocaine?”, Journal of Health Economics, 22:539-554.

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Van Ours JC (2012), “The long and winding road to cannabis legalization”, Addiction, 107, forthcoming.

Van Ours JC and J Williams (2011a), “Cannabis use and mental health problems”, Journal of Applied Econometrics, 26:1137-1156.

Van Ours JC and J Williams (2011b), “The effects of cannabis use on physical and mental health”, CEPR Discussion Paper No. 8499.

Werb, D, B Fischer, and E Wood (2010), “Cannabis policy: time to move beyond the psychosis debate”, International Journal of Drug Policy, 21:261-264.

Williams J, JC Van Ours, and M Grossman (2011), “Why do some people want to legalize cannabis use?”, NBER Working Paper No. 11-07.

Wouters M, A Benschop and DJ Korf (2010), “Local politics and retail cannabis markets: the case of Dutch coffeeshops”, International Journal of Drug Policy, 21:315-320.



Topics:  Health economics

Tags:  cannabis, Prohibition, drug policy, legalisation

Professor in Labour Economics, Tilburg University;Professorial Fellow at the Department of Economics, University of Melbourne; CEPR Research Fellow