वेदानन्द विहीनानां मद्यं मेधां च तर्पयेत्।

वेदानन्द विहीनानां मद्यं मेधां च तर्पयेत्। "Vedānanda vihīnānāṃ madyaṃ medhāṃ ca tarpayet."("For those deprived of the bliss of the Vedas, let alcohol and intellect be the source of satisfaction.")– Charvaka aphorism Introduction Intoxication and intoxicants have been subject to huge debate and deliberation, primary from a moral standpoint. While they are criticised aspects of societies, considering their inebriating, addictive and unsophisticated nature, it would be false to say that they still aren’t consumed in large quantities. The market for alcoholic beverages was worth USD 2.3 trillion in 2023, and it is expected to expand from USD 2.5 trillion in 2024 to USD 5.7 trillion by 2032. That is one of many intoxicants. While alcohol is socially acceptable to a certain point, there exist many other intoxicants aren’t. Commonly referred to as “hard drugs”, such are often looked down upon, for their extremely unhealthy nature to a person’s health, citing how they lead to hallucinations, hyperventilation, brain damage etc. Of these, one lies in a major grey area. Marijuana, commonly referred to as ‘weed’ or ‘gaanja’ is derived from the cannabis plant, consumed for its often recreational and medical purposes. The primary psychoactive component in marijuana is tetrahydrocannabinol (THC), which is responsible for the "high" or euphoric sensation people experience when consuming it. While it does have its negative impacts, there is a major movement advocating for its legalisation. This paper, specifically tries to analyse the macroeconomic implications of its legalisation, if it can contribute to the economy or not. 

The Macroeconomic Impact (MI) Equation The Macroeconomic Impact (MI) equation provides a structured way to quantify the net economic effect of marijuana legalization. It is the result of taking into account prominent effects that marijuana consumption can lead to. The equation is: MI=T+J+H−E−C Where:

• T = Tax revenue from sales.

• J = Jobs Generated within the industry.

• H = Healthcare savings, including reduced law enforcement costs.

• E = Enforcement and regulation costs for managing legalized marijuana.

C = Potential external costs, such as health risks and productivity losses. It is important that each variable is broken down into further aspects, arguing upon its contribution- whether positive or negative to the economy.  1. Tax Revenue Gain (T)

The legalization of marijuana typically leads to an increase in government revenue through taxation. This is primarily derived from the sale of marijuana products, and the tax structure can vary widely depending on the jurisdiction. The formula for tax revenue is: T=Rs​×τ

Where:

Rs​ = Total revenue from marijuana sales.

τ = Effective tax rate on marijuana products. This is not limited to marijuana itself. Making it a substance of regulation means that the creation of its complimentary goods, that help in its consumption or are consumed alongside it. In 2022, 21 states of the United States of America legalised marijuana consumption, collection nearly USD 3 billion in taxes. To put that into perspective, that’s more than what the fishing industry generates in taxation. The impact on revenue, however, depends on the tax rate and market demand. A high tax rate may disincentivize legal purchases, pushing consumers toward the black market. 2. Job Creation Impact (J)

Legalizing marijuana not only generates tax revenue but also stimulates job creation in various sectors, including agriculture, retail, distribution, and ancillary services like marketing and legal advising. The job creation impact is represented by: J=N×W

Where:

N = Number of new jobs created in the marijuana industry (e.g., in cultivation, distribution, retail, etc.). W = Average wage of employees in the sector. (Certain sectors like e-commerce will also be affected in a better way. For e.g. the availability of such products, on platforms like dunzo, swiggy instamart etc. will increase their sales.)

From the planting to the selling of it, there is a huge space of increase in employment owing to the people involved. As mentioned earlier, it would be wrong to also not take into account the complimentary goods and how their manufacturing would also increase the employment rates. The state-licensed cannabis industry added over 100,000 new jobs in 2021, which is nothing less than a feat, taking into account how that means it employed around 275 people every day. Job creation leads to increased household income and, consequently, higher consumption spending, fuelling economic growth. 3. Healthcare Savings (H)

One of the indirect macroeconomic benefits of marijuana legalization is the potential for healthcare savings. Healthcare as a parameter here, is also taken in consideration with other state facilities and costs imply, which are primarily associated with law enforcement, court proceedings, and imprisonment for marijuana-related offenses. Additionally, marijuana has been posited as a substitute for more harmful substances like opioids or alcohol, which could reduce public health costs. The healthcare savings are expressed as: H=Hs​−Ha​

Where: 

Hs ​ = Estimated savings from reduced law enforcement, imprisonment, and court proceedings.

Ha ​ = Additional healthcare costs incurred (e.g., if marijuana consumption leads to more health issues). Studies have shown that legalizing marijuana can reduce opioid-related hospital admissions, helping to alleviate some of the strain on healthcare systems. This also leads us to another point, regarding how legalisation calls for regulation, which means that there will be certain health standards maintained and quality checks will happen, which decreases the chances of people consuming adulterated marijuana.  4. Enforcement and Regulation Costs (E)

Although legalization reduces the burden on law enforcement in terms of marijuana-related arrests, it introduces the need for regulatory oversight. Governments must establish and enforce rules for marijuana cultivation, distribution, sales, and advertising. The enforcement and regulation costs are calculated as: E=Cr​+Cp​

Where:

Cr  = Costs associated with regulatory enforcement (e.g., licensing, inspections).

Cp​ = Policing and monitoring costs to prevent illegal marijuana activity (e.g., black-market sales). While the latter will decrease owing to a lot of activity to be cleared out, it will also ameliorate in cartel and gang eliminations, taking into account how a primary source of their earnings is often selling intoxicants. Although legalization reduces the burden on the criminal justice system, these regulatory frameworks are costly to establish and maintain. States such as California, which has the most developed marijuana industry in the U.S., allocate millions annually to regulatory enforcement and monitoring.  5. Potential External Costs (C)

Marijuana legalization also comes with potential negative externalities, which could dampen its overall macroeconomic benefit. These external costs include health risks (e.g., mental health issues, increased addiction treatment) and losses in productivity due to impaired cognitive function among workers. These costs can be represented by:

C=Ch​+Cp​

Where:

Ch​ = Healthcare costs associated with increased consumption (e.g., addiction treatment).

Cp​ = Losses due to decreased worker productivity (e.g., impaired performance). Some studies have shown that while marijuana use can increase creativity, it can also impair attention and short-term memory, leading to reduced productivity in certain sectors. The primary negative aspect to the economy can be owing to the health effects and any sorts of other after-effects, primarily to a person’s mental health. Addiction, phases of rehabilitation and relapsing are potential negators of the positive effects it can have. Moreover, increased use could put a strain on public health resources, potentially leading to higher addiction treatment costs.

Expanded Equation for Macroeconomic Impact

Now, by combining all the factors, the equation for the total macroeconomic impact is expanded as follows:

MI=(Rs​×τ)+(N×W)+(Hs​−Ha​)−(Cr​+Cp​)−(Ch​+Cp​) Key Considerations 1.  Revenue from Tourism: According to some regions where the sales of marijuana is legal, there is usually enhanced tourism since people who come from other regions where it is prohibited may access it legally. This additional revenue could brought in (Rs) which is total sales revenue of the organisation.

 Agricultural and Supply Chain Impact: Legalizing marijuana is beneficial to legal sectors such as farming and transport among others. Demand for tractors, fertilizers, equipment distribution firms thus leads to an overall improvement of the economic activity. These may be added to the job creation and the re-venues that have been imparted in the supply chain.

3. Health Implications: Research regarding the legalization of marijuana has raised questions regarding its net effect on the health care system. Hence it might slowly decrease alcohol and opioid consumption, resulting to lower health care expenditure while on the other side might result to more problems associated with marijuana. To reduce these risks governments should spend on education and using mass media promotions on public health.

4. Consumer Surplus: Availability of marijuana through legal channels is more satisfying to the consumers since this eradicates the black market hence providing a legal ground for marijuana. While it is rather challenging to determine the rise in consumer utility, improving consumers’ quality of life, by extension, promotes general societal welfare. Conclusion

Using the equation that defines the assessment of the macroeconomic repercussions of the legalization of marijuana it is possible to determine that this process has a multifaceted positive picture concerning the financial aspect. The tax revenue that legal sales produce together with the creation of several employment opportunities considerably enhances government and household revenues. For example, the two U.S. states that legalized marijuana- Colorado and Washington, have shown the social-economic impact of the sale of marijuana in terms of public revenue, within the space of few years the two have raised over $1 billion in tax revenues. The employment statistics also reveal that the marijuana industry provides employment in other sectors apart from production and marketing of the substance and thus promotes economic development.

Alas, these benefits are not free. The expense of creating and sustaining the rules and compliance with them; together with the health consequences that potential growth in the volume of marijuana use may bring, contributes to the range of economic risks. Although the benefits of health care savings from reduced police enforcement are mega, the impact on the community’s health balance is still in debate. Of course, these problems have to be solved by governments via proper public health policies and regulation to avoid adverse effects.Lastly, in line with the Variable Scope Hypothesis, the extended formula implies that legalization of Marijuana may have positive macroeconomic impact rather the component impact if and only if the government is able to balance between maximizing the obtained tax revenue and possible macroeconomic costs. Consequently, the degree of legalization as an economic policy can only be determined with reference to implementation and management.

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2* Adam Hoffer, Cannabis Taxation: Lessons Learned from U.S. States and a Blueprint for Nationwide Cannabis Tax Policy, Tax Foundation (Dec. 14, 2023), https://taxfoundation.org/research/all/state/cannabis-tax-revenue-reform/  3* Report: Legal Marijuana Industry Employs Over 428,000 Full-Time Workers, NORML (Feb. 23, 2022), https://norml.org/news/2022/02/23/legal-marijuana-industry-employs-over-428000-full-time-workers/ 4* Drazen Jorgic, Mexico, Plagued by Cartel Wars, on Cusp of Legal Cannabis 'Green Rush', Reuters (Sept. 30, 2020), https://www.reuters.com/article/us-mexico-cannabis-insight-idUSKBN26M5UI/ 

5* California State Budget Summary, 2023-2024 (Proposed), State of California, https://ebudget.ca.gov/2023-24/pdf/BudgetSummary/FullBudgetSummary.pdf 

6* Volkow, N. D., Baler, R. D., Compton, W. M., & Weiss, S. R. (2014). Adverse health effects of marijuana use. The New England journal of medicine, 370(23), 2219–2227. https://doi.org/10.1056/NEJMra1402309