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Legalizing marijuana in California would lead to a major decline in the pretax price, but the price for consumers will depend heavily on taxes, the regulatory regime structure, and how taxes and regulations are enforced. The lower price and nonprice effects will increase consumption, but it is unclear by how much. There is much uncertainty about the effect on public budgets; even minor changes in assumptions lead to major differences in outcomes.

U.S. demand for illicit drugs creates markets for Mexican drug- trafficking organizations (DTOs) and helps foster violence in Mexico. This paper examines how marijuana legalization in California might influence DTO revenues and the violence in Mexico.