Abstract for: Legalization of Cannabis in the USA: A System Dynamics Approach to Drug Policy

Colorado and Washington State have made history by approving measures to make marijuana sale and use legal for people over the age of 21, in direct opposition to federal law. While there is a sizable discussion of the actual repercussions that legal marijuana would entail, no one knows exactly what will happen. Politicians in both states (and the federal government) must now make decisions on how best to implement these policies in a highly uncertain setting. Furthermore, the lack of specific information of existing black market trade makes pure economically driven policies highly speculative. The purpose of this paper is to aid in making such decisions by analyzing the relationship between the legal production of marijuana and the black market trade as well as their effects on the general population using a System Dynamics approach. As there is uncertainty about the initiation of cannabis use, addiction, and the effect of legalization on these processes, further research is needed. Preliminary conclusions can be drawn from looking at legalization from a market perspective, which imply that both that regulating supply through permits is an effective deterrent of oversupply and that heavy taxes may leave room for the illegal market to remain operational.