Throughout 2014, Washington State and Colorado are moving towards liberalizing production and distribution of marijuana. The experiment in the two states is watched closely in Canada and elsewhere. Should we follow as well?

First, it is useful to distinguish between decriminalization and legalization. The first simply means not punishing users, while production and distribution remains illegal and punishable under the Criminal Code. Legalization, on the other hand, brings the entire marijuana industry out into the open. Production, distribution, and use are legal. A legalized industry can then be regulated, controlled, monitored, and last not least: taxed. The tax revenue can be used to offset some of the ill effects of marijuana use, as well as educate people about responsible use. Successful policy reform must rest on four pillars: legalize, control, tax, and discourage.

Why is legalization better than decriminalization? In short, decrminalization does not put an end to the social ills related to the illegal marijuana industry: the gang warfare, the peddling of marijuana to minors, the electricity theft, the ruined real estate through grow-ops, etc. Decriminalizing marijuana leaves the profits in the hands of the gangsters. Legalization puts parts of the profits into public coffers through tax revenues. Legalization takes the busineess out of the hands of gangs and puts it into the hands of "normal" businesses—businesses that we can regulate and tax.

Why has the so-called "war on drugs" failed so miserably? The answer is simple: economics. As demand is rather inelastic, policing and enforcement can only ever achieve temporary successes. Curtailed supply increases prices, and higher prices attract more risk-taking entrants into the illegal business. It is a vicious cycle: successful elimination of one gang only makes it more profitable for other gangs to take over. The "war on drugs" cannot succeed because it ultimately fails to change the demand side of the equation.

But can't we simply stem the tide by being "tough on crime"? The US tried—and failed. The US has 5% of the world population but a quarter of the world's prison population. Longer prison terms only fill the prisons without reducing crime. The empirical evidence suggest that harsher punishment does not reduce crime. The "war on drugs" cannot be won through being "tough on crime". Such policy fails to understand the underlying economics.

So shall Canada follow Washington State and Colorado? In my view: yes. But we need to avoid doing this in half measures. Decriminalization is sometimes suggested as a "compromise" or "first step". It is the wrong step. Only outright liberalization is going to achieve the benefits we seek as society—reducing crime and harm. I have little doubt that the experiments in Colorado and Washington State will demonstrate that the sky is not falling. Marijuana use will not explode. But gang activity will decline. And tax coffers will be filled with new revenue.

For the record, I've never smoked marijuana. I've not even smoked a cigarette, ever. By advocating policy reform, I do not wish to encourage increased consumption of marijuana. Instead, by bringing marijuana production and trade out into the open, I hope we can achieve what we have already achieved for tobacco—regulate and control it, and ultimately discouarge its use. While marijuana appears to have some legitimate medical uses, such use should be treated no different than the use of other pharmaceutical products.

If you want to read more about the topic, I recommend my op-ed piece in the National Post, joint with Evan Woods, Canada should follow America's lead in liberalizing marijuana laws from January 18, 2013, and Why it's time to legalize marijuana by Ken MacQueen in Maclean's magazine from June 10, 2013. For scholarly work, I recommend Marijuana Liberalization Policies: Why We Can't Learn Much from Policy Still in Motion by Rosalie Liccardo Pacula and Eric Sevvigny in the Journal of Policy Analysis and Management 33(1), Winter 2014, pp. 212-221. This scholarly article points to some of the unimportant unanswered questions in the legalization debate.

Happy Independence Day to everyone in the United States.