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There is still time for Canadian governments to serve the public

Alcoholic beverages and cannabis have in common a serious problem. It is widely believed that prices for these products determined in private markets would be so low as to lead to high levels of consumption and accompanying major health and social problems. For this reason, governments impose so-called sin taxes on alcoholic beverages and are expected to impose sin taxes on cannabis products eventually, too.

However, the ability of governments to impose these sin taxes is limited by the fact that, at some critical level, they encourage production and sales by black markets. After much experimentation, governments have set taxation levels that prevent the development of such markets while discouraging excess consumption and also raise considerable amounts of revenue for the authorities. The taxation of cannabis products may be expected to be set after some experimentation at a similarly optimal level.

There is still time for Canadian governments to serve the public by copying the market for alcoholic beverages: Abandon background checks and other licensing requirements for producers and sellers by simply letting individuals and firms operate production facilities and retail outlets risking their own money. Enact and enforce regulations affecting the quality and level of active ingredients in cannabis products like those that have been proven to work in the market for alcoholic beverages.

Under such a regulatory framework, competition among producers, sellers and importers would lead to the survival of the lowest-cost producers and of retailers offering the best services to consumers, while the public would be protected from the risk of consuming polluted or mislabelled products.

But chances are that politicians will not. They will instead continue to design regulations that will buy the votes of powerful interest groups — all justified as being in “the public interest” — but which will end up delivering licencing delays and inferior services to consumers, making it possible for unlicensed producers and retailers to stay in business.

Herbert Grubel is professor emeritus of economics at Simon Fraser University.