The local option for marijuana, Part II: the theory of local control

In my last two posts, I’ve highlighted the emerging struggle between state and local governments for control of marijuana policy. My latest article tries to provide some guidance on whether states should give local governments the option of banning marijuana sales.

This Part of the article discusses the theory of local control. It illuminates the competing considerations that help determine whether local control over marijuana (or any other issue) is normatively desirable. (I’ve eliminated the footnotes for this post, but they’ll be available once I post the completed draft on SSRN.)

A. The case for local control

Local control is supposed to promote economic efficiency. In particular, empowering local governments to tackle divisive issues is supposed to enable more people to get the policy they desire. The reason is that minorities in statewide contests sometimes comprise majorities in local communities; there are, after all, more than 3,000 counties and 15,000 municipalities sprinkled throughout the 50 states. These residents would be happier if they were allowed to pursue the policy they prefer through these local communities, rather than live under the policy the state as a whole would choose. Mobility of the population arguably enhances the efficiency of local control. The idea is that residents who are dissatisfied with the policy espoused by one local government can relocate to a community with a more appealing policy. To be sure, residents could also relocate from one state to another, but the comparatively large number of local governments increases the chances that dissatisfied residents will find more appealing matches and it also lowers the cost of relocation.

The deep divisions in society over what to do about marijuana make local control of the drug look appealing. Indeed, the vote on Colorado’s Amendment 64 seems to demonstrate the benefits of localism in the marijuana policy domain. In fall 2012, 1,291,771 people (54.8%) voted for Amendment 64 and were presumably satisfied with the outcome of the election. At the same time, 1,064,342 (45.1%) voted against Amendment 64 and were presumably dissatisfied with the results. Legalization of marijuana clearly suits Colorado voters; 227,429 more of them were satisfied than dissatisfied with the decision made at the state level. But the level of satisfaction would seemingly be even higher if marijuana policy were decided at the county level. After all, majorities in 31 of Colorado’s 64 counties opposed Amendment 64. If we simply add up the number of voters who were in the majority (yes or no) in their home county, we get 1,330,986 satisfied voters. This is 39,215 more satisfied voters than under the statewide decision. The tally might be even higher if marijuana policy were decided at the municipal level (as it has been) or if some Colorado residents relocated to more like-minded communities following the election.

B. The case against local control

The case for local control starts to unravel when local activity affects outsiders. I call these effects inter-jurisdictional externalities. An inter-jurisdictional externality is any cost or benefit of local activity that is borne by outsiders. To illustrate, suppose a factory in Akron dumps pollutants into the Little Cuyahoga River, contaminating the water supply of downstream Cleveland. The problem is that local governments won’t consider such inter-jurisdictional externalities when formulating local policies. The interests of the local community and broader society diverge, and as a result, we can no longer trust local governments to choose the policy that maximizes societal well-being.

When local activity imposes costs on outsiders, local authorities will allow too much of it. Depending on one’s worldview, marijuana could impose a number of costs on outsiders. The drug is easily transported across jurisdictions and its harms, whatever they might be, are likely to follow. In particular, marijuana bought in one locale might be consumed elsewhere and cause accidents, illness, crime, use of harder drugs, reduced productivity, impaired learning, etc. there. To illustrate, suppose a shop in Denver sells marijuana to a Colorado Springs resident. The resident might return home, consume the drug, then drive under the influence and strike a local pedestrian. But the harms of marijuana might be externalized even when the drug itself stays put, that is, even when it is consumed locally. The THC in marijuana might impair cognitive functioning for hours, some even claim weeks after intake. Hence, marijuana might impair driving, productivity, etc. in one community long after it was consumed in another. For example, the Colorado Springs resident might consume marijuana in Denver, then drive 70 miles home and strike a pedestrian in Colorado Springs; the impact is the same regardless of where the activity of interest (consumption or sales) occurred. Even long after the high of marijuana wears off, users might experience latent harms like neurological damage caused by long-term chronic use of the drug. Under the right circumstances, these latent harms too might constitute inter-jurisdictional externalities. For example, suppose a young Colorado Springs resident goes on regular marijuana binges in Denver; she takes no physical risks while there, but after several months of chronic use she suffers brain damage. As a result, she might need medical care, special tutoring, and other social services provided by her domicile (Colorado Springs) and not by her weekend getaway hotspot (Denver). More controversially, the use of marijuana might cause moral harms to outsiders. Some people object to drug use by others for religious or other moral reasons. To them, drug use constitutes a sinful indulgence, a debasement of the soul (to borrow James Q. Wilson’s phraseology). They feel morally indignant when other people use drugs, whether or not such drug use causes them (or anyone else) physical injury. Even readers who don’t share this worldview might empathize a bit by thinking of the grief or anger felt when hearing about racial bigotry, animal cruelty, greed, etc. elsewhere.

Local governments can’t satisfactorily address such externalities on their own. Their options are limited both by the law and by economic forces. For one thing, they’re not allowed to prohibit their residents (or anyone else) from buying marijuana in other jurisdictions. To be sure, they can regulate activity inside their own borders, such as driving under the influence, but that may prove both more costly and less effective than regulating the supply of marijuana. For example, a local government might hire more police to arrest impaired drivers entering from neighboring jurisdictions. But police patrols cost money, and the local government couldn’t necessarily recoup those costs via taxes if marijuana is supplied elsewhere. In any event, police patrols can’t stop all of the harms local voters might associate with marijuana use—think of accidents in the home or neurological damage from chronic use.

Now consider what happens when local activity instead confers benefits on outsiders.  Marijuana supplied in one jurisdiction can have positive externalities elsewhere. It might provide effective medical treatment for outsiders or it might give them recreational enjoyment. To illustrate, suppose that Colorado Springs bans marijuana shops and Denver allows them; suppose as well that some Colorado Springs residents enjoy using marijuana and so make the short trek to Denver to buy the drug. In this case, local activity in Denver is conferring an external benefit on the outside community of Colorado Springs. The happiness those outsiders feel doesn’t accrue to Denver’s social welfare function (and it might not add to Colorado Springs’ either), though Denver might glean some indirect benefits from such pot tourism (business, etc.). Earlier I explained how travel like this creates problems for Colorado Springs. Now consider how it might create similar problems for Denver. In particular, suppose some of those Colorado Springs residents consume marijuana in Denver; they might cause accidents, brawls, etc. that harm Denverites. In fact, outsiders are arguably likely to cause more problems than locals because: 1) their connection to the local community is weaker, so they feel less inhibited; 2) they are less familiar with the local environment, so they are more prone to accidents; 3) they have to travel farther than residents, so they spend more time on the roads; and 4) they have limited access back home, so they are more inclined to overindulge, especially if the cost of traveling to and fro are high.

Legal and economic forces again prevent local governments from effectively addressing such free-riding on their own. Local governments can’t exclude outsiders from their borders. For example, Denver couldn’t bar non-locals from buying marijuana in its local shops, even if it wanted to. Neither can local governments easily recoup the costs that outsiders inflict. In theory, of course, Denver could try to recoup the costs of police, paramedics, regulatory inspectors, etc. by taxing marijuana sales.  In practice, however, Denver would never fully recoup those costs. To begin, outsiders are likely to impose higher costs than locals, as explained above, but Denver couldn’t charge those outsiders a proportionately higher tax rate. To recoup its costs then, Denver would have to raises taxes for everyone, including locals. But this might drive some Denverites to buy their marijuana elsewhere and bring it back home, subjecting Denver to the negative externalities discussed earlier. The scenario depicts a classic collective action problem; communities absorb the harms of local activity, but they are unable to exclude outsiders from enjoying the benefits of that activity.

Naturally, the prevalence of such negative and positive externalities will hinge on what we choose to count as an inter-jurisdictional cost or benefit. Given that people disagree about the local effects of marijuana and how local government should respond to them, it seems likely they will disagree as well about the external effects of marijuana and how state government should respond to them. For example, a community that rejects the legitimacy of a local marijuana prohibition motivated purely by moral considerations would reject the legitimacy of a state marijuana prohibition motivated by like considerations. But no matter what side we take on these controversial issues, the dissensus surrounding them ultimately weakens the case for local control. Consider, on the one hand, what happens if we credit the most far-fetched beliefs about the externalities generated by marijuana sales elsewhere. This approach would satisfy communities espousing such beliefs – that is, if they can persuade the state to intervene on their behalf; or it would satisfy communities rejecting such beliefs – that is, if they can persuade the state to forbear. But the approach can’t satisfy both sets of communities; after all, they both want to regulate marijuana sales, and they can’t both have their way. Now consider what happens if, instead, we credit only universally shared beliefs about marijuana externalities, e.g., that some people will drive across jurisdictions under the influence of marijuana. This approach arguably does offer something for (nearly) everyone. But the appeal of this approach is rather limited for jurisdictions that hold less widely recognized, though no less genuine views about marijuana’s external costs and benefits. These communities would not be allowed to enlist the state’s assistance in addressing such costs and benefits. In other words, for them localism has lost its appeal because their local government simply can’t address what matters most to them.

In sum, local control is supposed to promote economic efficiency. The idea is that local governments can custom-tailor policies that suit local interests better than the one-size-fits all policies adopted by state government. But local control loses its appeal when local activity affects outsiders. In the presence of such external effects, we can no longer trust local governments to do what is best for the state; they will permit either too much or too little of the activity. State intervention is warranted to address externalities local communities are unable to address on their own.