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Rand Study: Marijuana Legalization Would Markedly Cut Mexican Drug Cartel Profits

We believe that legalizing marijuana in California would effectively eliminate Mexican DTOs’ revenues from supplying Mexican-grown marijuana to the California market. As we elaborate in this chapter, even with taxes, legally produced marijuana would likely cost no more than would illegal marijuana from Mexico and would cost less than half as much per unit of THC (Kilmer, Caulkins, Pacula, et al., 2010). Thus, the needs of the California market would be supplied by the new legal industry. While, in theory, some DTO employees might choose to work in the legal marijuana industry, they would not be able to generate unusual profits, nor be able to draw on talents that are particular to a criminal organization.

Jon Walker has the true story of the newest Rand report, and how some of the intellectually dishonest “academics” at Rand are trying to spin it.

They use the worst argument fallacies imaginable. The government comes out and says that 60% of the cartels’ income is from marijuana. Legalizers say that legalizing will hurt the cartels (true) and mention the government’s numbers. Rand comes out and says that the government was lying through its teeth, but they don’t really know for sure what the real numbers are, but probably lower, and therefore the legalizers’ argument for legalization is supposedly weakened. And yet they admit that the legalizers’ core argument is true (that legalization will hurt the cartels – see above). Then they word their press release in such a way that they know the newspapers will report it as a blow to Prop 19.

The fact is that Prop 19 will be the first blow of many to the profits of the cartels, and it will be significant.

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44 comments to Rand Study: Marijuana Legalization Would Markedly Cut Mexican Drug Cartel Profits

  • Dano

    Amazing how the government wants to use numbers against marijuana smokers as a guilt trip – “you cause all the death in Mexico when you smoke reefer.” But then when we want to use that argument for legalization the government turns around with think tanks and tells us that those numbers aren’t even close to correct…

    Every $billion we take away from violent gangs is a good thing. The government hasn’t been effective at stopping them either in trade, courts or banking; so let’s take on the drug war itself since it’s the root source of power for drug cartels.

    In the words of Tim Lambert at FDL (check the comments in the link)
    “END PROHIBITION NOW – Because we can’t do it forty years ago.”

  • Cliff

    Really? Dude…They could have saved a lot of $ and just came to this site to reach that earth shattering conclusion.

  • prop 19 will basically do *nothing* to the profits of the mexican drug cartels — perversely enough, in the short term it will probably boost their profits somewhat

    mainly that is because there simply isn’t much of a market for shitty mexican weed in california — certainly there is a market, but what little there is will quickly disappear if top quality pot is available at a reasonable cost (i.e. no idiotic punitive taxes)

    second, it will still be illegal in the other 47 of the lower 48 states in which (surprisingly enough) demand will still exist. [and yes, some small number of people will travel to california to buy cheaper weed — but not a significant number of them]

    and third it is highly unlikely that the cartels make anywhere near 60% of their profits from weed. jeffrey miron’s latest study is probably way closer to the “truth” — but the reality remains that no one really knows.

    the herring farmers are working overtime, and that’s a good thing — to the extent that we don’t take the bait.

    if hurting the cartels is considered a “core” argument, then i’m afraid we’re screwed.

    stick to the individual’s right to self-determination (not to mention the fundamental right to partake of nature’s bounty) and there is a better chance to prevail.

  • If you’re trying to turn people off to working for legalization, you’re doing a real nice job of it, Brian. Thanks a bunch.

    I’m too tired to deal with your crap today. But yes, I’m aware of the purposeful way you misread my post.

  • Dano

    @Brian,
    “if hurting the cartels is considered a ‘core’ argument, then i’m afraid we’re screwed.”

    I don’t think that this was a “core” argument ever, but it’s one of many effects the legislation could have. Unfortunately the individual right to self-determination should be the core argument, but that just won’t get us anywhere. We’ve been saying that for so long, and it has netted us very little. Sure the libertarians listen to that argument, but neither the public in general nor the government give a crap about that when it comes to drugs.

    That’s why in order to pass prop 19 all the ancillary effects have to be brought up first. Tax revenue, taking gangs out of the loop, saving money on courts, prison and policing, etc. I don’t like talking about the ancillary more than the core of individual self-determination or even harm reduction, but that’s where politics are today.

    I think it’s the possible tax revenue at this critical budget busting point in history that has has put us over the top. It’s not a great reason to legalize, but at this point I’d take it as the anti-prohibition movement did when alcohol’s prohibition was repealed. We might not win on prop 19, but at least we got the discussion started. (Although I really hope we win this one.)

    Cartels are unlikely to get much money from this, even during an initial surge in use. From what I’ve read there is already quite a bit of overproduction in California, and I’m sure alot of the lesser quality domestic herb will be available should it become legal.

  • Rhayader

    stick to the individual’s right to self-determination (not to mention the fundamental right to partake of nature’s bounty) and there is a better chance to prevail.

    Dude, believe me, I wish more than anyone that the libertarian argument carried weight. I really do. But unfortunately, more voters are convinced by issues like public revenue, crime reduction, and safety than by simple freedom. That’s just how it works from a tactical standpoint, ie, that sort of argument represents the “better chance to prevail”.

    Plus, while Prop 19 itself will be an oasis in a prohibition desert, and there will still be plenty of restricted areas in which criminal dealers can sell their wares, it’s a critically important crack in the wall. If California justifies and galvanizes the momentum building around drug war criticism in this country, we could see some major changes in a short period of time. To think this won’t have a significant and lasting impact on large-scale criminal drug trafficking seems questionable at best.

  • claygooding

    The ONDCP has been setting up this propaganda since the hearing in congress where Kerli and the FBI gave the 60%
    estimate and the FBI recently told a congressman that they stand behind their estimate in July.
    This is just some more of “anything necessary” to keep marijuana illegal.

    But somewhere,the ONADCP needs to explain how they reduced the profits of the cartels while not busting that much more marijuana. I know the amounts are up but not enough to account for this drop in profits to the cartels.

    Someone with the expertise can pick Rands study apart and compare it to other statistics published about amounts of marijuana imported every year from Mexico and expose this propaganda for what it is.

  • Bruce

    I resent the term ‘Cartels’
    These are human beings first and foremost, Husbands wives fathers children aunts uncles and cousins and grandparents merely trying to survive day to day against seemingly unsurmountable obstacles needlessly placed in their path by nothing less than meddlesome twit operatives for high finance whose onehundredfold deeper criminality and lust for total power goes back centuries.
    This is what we Canadians are being fed as news today:
    http://start.shaw.ca/start/enCA/News/WorldNewsArticle.htm?src=a38461.xml

  • DdC

    Prop 19 is redundant and unnecessary in a law abiding Democracy. Since we have a corporate fascism going on, every lil bit adds up. Landlords and city councils still try to tweak prop 215. Banning use in low income housing or parks. 19 won’t hurt and is another weapon against maverick cops and DA’s. 215 already covers anyone for any reason and it’s all BS until Nixon’s lie is overturned Federally. Till then, these Band-Aids are what we have and why I support them.

    Study: Legalizing Pot Won’t Hinder Mexican Cartels
    By Martha Mendoza October 12, 2010
    CN Source: Associated Press

    Mexico’s drug traffickers are likely to lose customers in America’s largest pot consuming state if California legalizes marijuana, but they won’t lose much money overall because California’s residents already prefer to grow their own, according to a study released Tuesday.

    That means the proposal on the state’s November ballot to legalize marijuana also will do little to quell the drug gangs’ violent and sophisticated organizations that generate billions of dollars a year, according to the study by the nonpartisan RAND Drug Policy Research Center.

    Compassionate Use Act not the MMJ Act

    HS 11362.5. (a) This section shall be known and may be cited as the Compassionate Use Act of 1996.

    * has been RECOMMENDED by a physician

    * person’s health would benefit

    * or ANY OTHER ILLNESS for which marijuana provides relief.

    * no physician in this state shall be punished,

    * Illegal possession and cultivation of marijuana,
    SHALL NOT APPLY to a patient, or to a patient’s primary caregiver

    * upon the written or ORAL RECOMMENDATION or approval of a physician

    * The department shall establish and maintain A VOLUNTARY program for the issuance of identification cards to qualified patients who satisfy the requirements of this article and VOLUNTARILY apply to the identification card program.

    * “Qualified patient” means a person who is entitled to the protections of Section 11362.5, BUT WHO DOES NOT HAVE an identification card issued pursuant to this article.

    * IT SHALL NOT BE NECESSARY for a person to obtain an identification card in order to claim the protections of Section 11362.5.

    * A qualified patient or a person with an identification card

    * ANY individual who provides assistance

    * A DESIGNATED primary caregiver who transports, processes, administers, delivers, or gives away marijuana for medical purposes

    * (a) Subject to the requirements of this article, the individuals specified in subdivision (b) shall not be subject, on that sole basis, to criminal liability.

  • Chris

    Yeah um.. it’s pretty clear to me that no one will be buying weed from mexican cartels after prop 19. Once everyone and their mom can legally cultivate and commercial scale grows get started up, it will be illegally exported from there. Sure, the mexican DTOs have tons of land they control that they can grow a garbage product on and the supply lines through the country right now, but it’s not going to matter. Tell me, which is easier? Driving across a state lines with weed, or getting it through customs? Importing it from cali will have less costs associated with it, meaning that they can undercut the cartel’s price with far better quality.

  • seems like a bunch of you are in need of chill pills.

    pete, you really should know better by now than to accuse me of undermining anything. “trying to turn people off legalization” — really? if you truly believe that then you are a total idiot.

  • Just me.

    Brian B said :[and yes, some small number of people will travel to california to buy cheaper weed — but not a significant number of them]

    LOL Why would you have to go to cali to get it? Get outta here jackass.

  • OK, Brian. I’ll take the time to answer you. (I would have liked to take this time instead to blog.)

    1. Read the post again. The use of the word “core” was in the context of the specific argument regarding reducing the profits to traffickers. It was not the “core” argument of legalization. It was the “core” argument of legalizers in the context of this particular discussion — that legalization would hurt the profits of criminals, not that it would hurt them X amount.

    2. You swoop in and essentially accuse me of having an argument that “screws” the legalization movement. That feels really good, thank you.

    3. My statement “If you’re trying to turn people off to working for legalization, you’re doing a real nice job of it, Brian. ” was sarcasm, indicating not that I believed that it was your intent, but that, in fact, it’s the result of what you sometimes do. You have a tendency to, now and then, drop in and condescendingly inform everyone that what they’ve been doing is worthless. Whether you intend it or not, that can be demoralizing. You come in like you’d stop by a mechanic hard at work and say “You idiot! Stop messing with the plugs. The problem is you have to fix the ENGINE!”

  • Windy

    “Prohibition Is The Golden Goose Of Terrorism!” Cops Explain Why Marijuana Must Be Legalized http://bit.ly/c9DxW5

  • ezrydn

    From the arguments noted above, the only other answer is the Utopian “status quo.” Is that the alternative people in reform seek? REALLY? Rather than tell us what won’t work, try telling us what will, in a logical, well thought out manner.

    The above argument sounds just like “Prop 19 is badly written” without any mention of what a well written Prop would say. When the asteroid heads for Earth, many here will simply fold their arms and wait, offering nothing to stop the problem.

    On that note, I REFUSE! ANYTHING is better than the status quo.

  • darkcycle

    The press release claims that 19 will not affect Cartel’s income, but the study contains this little bombshell: “Our analysis leads to the following insights:

    • The only way Prop 19 could importantly cut DTO drug export revenues is if Californiaproduced
    marijuana is smuggled to other states at prices that outcompete current Mexican
    supplies. The extent of such smuggling will depend on a number of factors, including
    the actions of the federal government and other states. It is very hard to anticipate how the
    conflict between state, federal, and international law engendered by Prop 19 would play
    out, but it is important to note that hopes for substantially undermining DTO revenues
    are contingent on varying scenarios concerning that conflict.
    • If marijuana can be diverted from legal production in California to other states and if
    smuggling it is no harder than it is to do today within U.S. borders, then California
    production could undercut sales of Mexican marijuana throughout much of the United
    States, cutting DTOs’ marijuana export revenues by more than 65 percent and probably
    by 85 percent or more. However, there is significant uncertainty regarding the assupmtions
    underlying this estimate, including (1) whether taxes are collected on the marijuana
    4 Reducing Drug Trafficking Revenues and Violence in Mexico
    before it is diverted out of California’s legal distribution chain, (2) how intense federal,
    state, and local enforcement efforts will be against that diverted marijuana, and (3) how
    many grams of lower-potency Mexican marijuana consumers will see as being equivalent
    to one gram of higher-potency, California- grown sinsemilla (i.e., how closely users view
    the two forms of the drug as substitutes).”
    Sounds like if nothing else changes, it takes 65-85% of their Grass revenues. Kinda put the lie to the press release, huh?

  • Just me.

    (EZ Said:On that note, I REFUSE! ANYTHING is better than the status quo.)

    And.. ” Im mad as hell and Im not going to take it anymore !! “

  • malcolmkyle

    James A. Thomson, RAND Corporation’s president and chief executive officer since 1989 is also a director of Encysive Pharmaceuticals, which, in 2008, was acquired by -32 billion dollar per year- Pfizer.

    http://en.wikipedia.org/wiki/James_Thomson_(executive)

    http://en.wikipedia.org/wiki/Rand_corp

    http://www.linkedin.com/companies/encysive-pharmaceuticals

    http://mcsocal.com/blog/tag/pfizer/

  • darkcycle

    Guess we know what their agenda is then. No surprise on my part, but that information should be tagged to every reference we can find to this study in upcoming days. Nothin makes ’em madder than when their affiliations and motives are laid bare.

  • claygooding

    Thanks for the links Malcolm,they are posted with the three articles regarding the study at two major activist sites and am headed for the third :<)

  • malcolmkyle

    “that information should be tagged to every reference we can find to this study in upcoming days”

    http://discussions.latimes.com/20/lanews/la-me-1013-pot-mexico-20101013/10?page=3

    I’,m already on the case, but I may be out of commission for several days starting this Friday evening, so please feel free to help.

  • malcolmkyle

    Wow,That’s great to hear Clay!

  • darkcycle

    We’ll try to take up your slack, Malcolm.

  • ezrydn

    Notice the cartel cost is still in bickering mode? It’s still “Destroy them or do nothing.” Where does that come from. While in combat, while I may not center punch the guy, I have no problem raking his limbs. While we might not get a clear head shot, any discomfort we can provide our friends down south will be to our appreciation. Get over the all or nothing notion. Have you guys sudenly become Utopian perfectionists? Remember, “almost” counts in horseshoes and hand grenades.

  • pete, you are the one who is misreading stuff.

    what in the world makes you think i’m specifically addressing you or what you wrote? all i did was give my opinion of the overall situation. nowhere in there did i quote you directly or say anything that you should have interpreted as a personal indictment.

    you didn’t even bring up the “core argument” as yours specifically, but instead tossed it out as belonging to “the legalizer’s” — in the context of the RAND study.

    i didn’t write anything that was an attack on your or your opinion — sorry i don’t sprinkle rose petals around and worship you enough your majesty.

  • darkcycle

    Ezzy, when you wound, you are exponentially more effective (on the battle field, anyway), you tax the supply lines and screw with their logistics, the wounded have to get to the rear, aid and replacements have to move forward. If you look at the subtext of the section I quoted above and did a little if/then analysis, it’s easy to see how the entire fabric of marijuana enforcement as it is currently practised is about to unravel. With heavy inderdiction forces at the Mexican border now moot, where do they intervene?
    No administration, no matter how oblivious would try customs-style interdiction at all interstate crossings; the barrier to free transit and commerce would have everybody, right and left, screamming bloody murder. So where does that leave our drug warriors? I mention this only hypothetically. To accept what I have pointed out, you would have to believe that interdiction at the Mexican border was effective in the first place. The functional reality is that it will have no effect on avalability.
    Am I rambling?

  • darkcycle

    Yeah…. I’m ramling. “never mind”

  • TrebleBass

    This study will probably help us because, believe it or not, there are a lot of people out there that have not yet processed the basic argument that legalizing a drug replaces the black market with a legal one, and, ultimately, reduces violence. This RAND study will have a lot of credibility, especially because it frames the findings in a negative way (which means it is more palatable to our opposition).

  • Cobb

    i really expect that California invites the whole world to test their weed and -of course- the other states as well, Californians need to send the message “hey, it’s ok, it’s not bad for you, come try it or support your local reform association”, once the inception is done, the whole world is the limit.

  • TrebleBass

    (continuation of my last post)

    But it might take more than 20 days for the legalization position to be strengthened by this latest RAND study. The negative headlines will probably do their influence first. I don’t know; it’s kind of a toss up whether it helps or hurts prop 19 in time. The last RAND study (also presented with an intention to hurt it), ended up helping it in my opinion, but the first wave of negative headlines hurt it for a little while.

  • Just me.

    Brian Bennett, I apologies for call you a jackass. but really man, You said ::[and yes, some small number of people will travel to california to buy cheaper weed — but not a significant number of them].

    Dont you believe Cali cannabis isnt ALREADY sold across America? Sure LE makes it hard to do but, LE has not and cannot stop that…legal in cali or not.

  • fortyouncer

    darkcycle makes an excellent point about the diversion of MJ to other states. This is a near certainty. RAND recgonizes this will create a larger impact, and it needs to get repeated.

    They also mention the spread of legalization will change the estimates. Success here will breed sucess in other states, just like 215 did. Again, this further harms the cartel.

    But most importantly, it’s misleading to talk about the cartels without talking about their business partners – Sreet gangs. While cartels killing each other is horrible, it really doesn’t hurt Californians they way street gangs do. They are the main retail level distributors. RAND specifically mentions their profits aren’t included in their study. They also don’t include grows in our forest controlled by Cartels.

    So there is a lot more crime to fight with Prop 19.

  • strayan

    Watch this: http://www.vcl.org/

    Marijuana and Federalism: California a Test Case
    The Legal Implications of Proposition 19

  • just me: yes cannabis from california is already sold across the country. but the issue is not the fact of, it is the *scale* — and the quality of the weed.

    the most important factor in determining how much the current flow of weed from california will be affected by prop 19 is largely going to be due to what taxation and regulatory schemes are implemented.

    some growers will want to continue to get extremely high profits from their business and thus would be the ones most likely to take their crop elsewhere to make more money. however, such growers are not part of any mexican drug cartels.

    for most American pot smokers, the choice between a $500 ounce and a $250 ounce leans toward the cheap crap. so until and unless high quality california weed is available for $250 an ounce across the country, the cartels will still make plenty of money.

    so i stick with my assessment: prop 19 is highly unlikely to have much of an impact on drug cartel profits. the only way to significantly affect the cartels is for all drugs to be sold at prices that reflect their actual worth. that can’t happen until the drug war itself is over.

  • claygooding

    I am so proud to hang out with people that can afford $250
    ozs,like,that is so cool.

    I would have to settle for $100 oz brick unless I can rake up enough to buy a quarter lb which drops it to $60 an oz.

    And the cartels and everyone between me and them is making money at that price. If we put you guys in charge of pricing the cartels can double their prices and just continue on.

  • ezrydn

    darkcycle,

    If you have $100 in your pocket and somehow, I’m able to extract $60, do you still have the same capability? If I sell you 100 rounds knowing that 60 of them won’t fire, are you ready for “the big hunt?” If I can effect 60 of anything of yours, you only have 40 to more forward with. Do you consider that a slowing factor?

    Of course, some here say that I have to grab “all or nothing” to affect change. Your 40 rounds against my 100 rounds. Who holds advantage???

  • Duncan20903

    I swear we should negotiate a trade with the Chinese. They have all those freedom loving reacalitrants which they find annoying, and we seem to be overrun by authoritarian sycophants. They give us their freedom lovers and we give them our sieg heiling goose steppers. Everyone is happy. Really, it’s win/win/win for all involved. Somebody call Jimmy Carter and get him working on it. We’ll probably have to throw in some cash to get them to take Calvina. I’ll chip in $100.

  • claygooding

    Maybe we could luck out and get two Hung Chows for Calvina.

  • ezrydn

    One response I heard Howard deliver over and over to the “Why” question was: I’d rather have our officers partolling online chat rooms, seeking pedophiles who are trying to make appointments to meet out kids in some motel room than running around in highly expensive helicopters, looking for Willy Nelson’s plants.

    People underatand that one!

  • TrebleBass

    fortyouncer, you say:

    ‘So there is a lot more crime to fight with Prop 19.’

    I’m not sure i understand why you say that. Is it because of the increased exportation being an illegal activity? Maybe so, but it depends how much enforcement there is. If there is as much enforcement as there is right now, then it’s as if it was still illegal. The price will go up, and there won’t be a reason to export it in the first place.

  • oops, sorry clay i forgot to respond: it costs $200 – $250 for cheap mexican shit in large swaths of the country. there is nothing glamorous about that.

  • […] Guither does a nice job summing up the headache this causes: The government comes out and says that 60% of the cartels’ […]

  • I’m hopeful that Prop 19 passes – legal cannabis is better than illegal cannabis (though it seems the price for legal cannabis will, at least initially, be the same as illegal cannabis).

    That said, however, Brian makes a good point (or two). The reform movement has made it clear they believe legal cannabis will cripple if not ruin the cartels and considerably reduce drug-war violence. I just don’t see that happening.

    Like any business, the cartels will try to recoup lost revenues through increased sales and marketing of the products still in their mix – cocaine, meth and heroin. And these drugs are responsible for the highest level of violence. Yeah, yeah, I know, most folks will not flock to those drugs. But what if the cartels introduce opium as a smoking substitute for cannabis? They grow a lot of poppies in Mexico, ya know…

    Should the cartels not be ruined and drug violence continues unabated, the prohibitionists will wag their fingers and shout “See, we told you so!” and be emboldened to fight for repealing Prop 19 – and the cartels will, once again, be their strange bedfellows. The only way to end the violence and restore sanity is repealing drug prohibition. Until that day, and the incremental approach only makes it farther down the road, declaring any victory is premature.