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Legal Weed's Strange Economics in Colorado

Marijuana legalization may not undercut the illicit drug trade as hoped
Partygoers smoke marijuana during a New Year’s Eve celebration at a bar in Denver
Partygoers smoke marijuana during a New Year’s Eve celebration at a bar in DenverPhotograph by Brennan Linsley/AP Photo

This is a blazing moment for American stoners. Colorado has just legalized the commercial production, sale, and recreational use of marijuana, while Washington State will begin its own pot liberalization initiative at the end of February. On Jan. 8, New York Governor Andrew Cuomo said his state would join 20 others and the District of Columbia in allowing the drug for medical purposes.

Libertarians and progressives are thrilled. Addiction specialists are anxious. And economists, well, they’re a little like undergrads lost in a bong-induced thought experiment: One moment the economics of pot seem beautifully elegant, then the real-world implications suddenly become bewilderingly complex.