Measuring the Market Size for Cannabis: A New Approach Using Forensic Economics

Quantifying the market size for cannabis is important given vigorous policy debates about how to intervene in this market. We develop a new approach to measuring the size of the cannabis market using forensic economics. The key insight is that cannabis consumption often requires the use of complementary legal inputs: roll‐your‐own tobacco and rolling papers. The forensic approach specifies how legal and illegal inputs are combined in the production of hand‐rolled cigarettes and cannabis joints. These input relationships, along with market adding‐up conditions, can be used to infer the size of the cannabis market. We provide proof‐of‐concept that this approach can be readily calibrated using: (i) point‐of‐sale data on legal inputs of roll‐your‐own tobacco and rolling papers; (ii) input parameter estimates drawn from a wide‐ranging interdisciplinary evidence base. We implement the approach using data from 2008–9. For those years, the forensic estimates for the UK cannabis market are near double those derived from standard demand‐side approaches. We make precise what drives the measurement gap between methods by establishing the adjustments needed to match estimates from alternative approaches. Our analysis develops an agenda on measurement and data collection that allows for credible cost–benefit analysis of policy interventions in illicit drug markets.