The Green Light: How legalising and regulating cannabis will reduce crime, protect children and improve safety

A new paper by Daniel Pryor, a Research Economist and the Head of Programmes at the ASI, and Liz McCulloch, Director of Policy at the drug reform advocacy group Volteface, makes the case for legalising cannabis:

  • Britain is falling behind the rest of the world on recreational cannabis legalisation. Canada, ten US states and Uruguay have already legalised the drug for recreational use. Other US states and countries are close to legalisation.

  • Legalisation is supported by MPs and Police & Crime Commissioners from across parties, and a majority of the UK public. 

  • The UK’s current approach to cannabis is generating misery, fuelling gang violence and increasing knife crime. It is now easier for children to get cannabis than alcohol, and most often dangerous skunk that dominates the illegal market. One-third of Brits have used the drug at some point in their life. Drug law enforcement depends on where you live and your ethnicity, undermining the rule of law.

  • The evidence for legalisation is overwhelming. It would protect children, eliminate the criminal—and often violent—market, encourage safer cannabis consumption, and educate people about the effects of cannabis, leading to more informed choices. By contrast, decriminalisation would fail to tackle many of the harms associated with the prohibition of cannabis.

The ASI has developed a Six Point Plan for Cannabis Legalisation: 

  1. Private enterprise: The free market should be responsible for cannabis production and retail to ensure providers are responsive to consumer-wants and to avoid shortages driving a persistent black market. Recreational cannabis could be sold in dedicated licensed stores, behind the counter by trained staff in pharmacies like Boots and mobile apps to compete with drug dealers.

  2. Advertising and branding: Some forms of advertising and branded packaging should be allowed—as in many US states—in order to signal quality, consistency, and safety, giving legal products another advantage over the black market.

  3. Consumption: Edibles and vaping cannabis products should also be allowed to help people move away from tobacco joints.

  4. Taxation: The taxation of cannabis must be low enough to ensure the final product is as cheap as illicit cannabis, or risk continuation of the black market like in California. High potency cannabis (skunk) should be taxed more than lower potency varieties, encouraging consumers to switch to safer products. 

  5. Education: Users should be presented with the latest evidence on the health effects of cannabis at point-of-sale - like in Canada.

  6. Criminal justice: Those currently or previously involved in the illegal cannabis industry should have pathways to transfer in to the regulated, legal market. The Government should also expunge previous cannabis convictions, where appropriate, in order to limit the damage that criminal records cause to the life chances of low-risk offenders.

Ready for Takeoff: Building competition in the aviation industry

A new paper by Matthew Lesh, the ASI’s Head of Research, makes the case for building competition in the aviation sector:

  • Airline deregulation and airport privatisation has substantially increased aviation industry competition, improving passenger choice, encouraging innovation, and reducing flying costs. It has opened the opportunity of regular travel to millions, boosting economic growth.

  • Competition forces firms to innovate, reduce costs, and provide greater consumer benefits. It ensures resources are put to best use. Monopolies lead to stagnation, laziness, overcharging, and market manipulation. 

  • There are a number of policies that could promote further aviation sector competition:

  • 1. Initiate an independent process to assess the potential benefits of the competing Development Consent Order (DCO) applications for the Heathrow Airport expansion, with a view to the potential benefits provided by terminal competition at the design, construction, and operational stages.

    • Despite separate ownership, following the Competition Commission (CC)’s forced BAA plc breakup in 2009, individual airports maintain substantial market power. Heathrow Airport has been accused of ‘gold plating’ infrastructure, contributing to the highest per passenger costs in the world. 

    • There are now competing applications for Heathrow Airport’s expansion, for the first time since the introduction of the DCOs in 2008. There is no tender-like process to analyse DCO applications

    • International evidence, as well as pronouncements from the CC, favour terminal competition. JFK International Airport in New York City currently has five competing terminals, each owned by separate entities, providing lower costs without coordination difficulties.  

  • 2. Introduce slot auctions for the allocation of additional landing and take-off capacity at Heathrow and Gatwick airports, and consider auctioning some, if not all, grandfathered slots, following Britain’s exit from the EU.

    • The existing system of landing and takeoff slot allocation allows existing airlines to hoard rights, resulting in inefficiency and creating a barrier to new entrants and smaller airline expansion. Over half of the slots at Heathrow Airport are currently allocated to IAG, the owner of British Airways, limiting competition. 

    • Slot auctions would ensure that slots go to airlines willing to pay the most, leading to each slot being used most efficiently. This would provide opportunities for new and mid-sized carriers to expand, increasing market competition, encouraging innovation, and avoiding arbitrary decision-making and political interference. 

    • If slot auctions are used to allocate expanded capacity at Heathrow Airport, there could be 16 million more passengers per year than under the existing allocation rules. This change could raise over £7.5 billion for the Heathrow expansion.

  • 3. Auction low-altitude airspace for new forms of transport such as air taxis and autonomous freight drones.

    • Air taxis will soon be able to transport passengers from Heathrow Airport to the City of London in 8 minutes and from London to Brighton or Oxford in 23 minutes. Hundreds of hourly take-offs and landings could congest the skies, requiring allocation of scarce air corridors.

    • Bureaucratic allocation of access to congested airspace would be unresponsive to changing technology, entrench early movers, and lead to inefficient allocation.

    • The auctioning of rights to operate an aerial travel corridor, at a specific altitude over for a period of time, would deliver efficient use of the space, and raise substantial revenue.

Safeguarding Progress: The risks of internet regulation

A new paper by Matthew Lesh, the ASI’s Head of Research, and Sam Dumitriu and Philip Salter of the The Entrepreneurs Network, makes the case for a free, open internet:

  • Technology is improving our lives, connecting people, creating communities and contributing to Britain’s economy to the tune of £170bn a year.

  • The policy environment is becoming increasingly hostile to technology, undermining the free exploration of ideas and innovation that is essential to economic progress.

  • If policymakers want to encourage entrepreneurship they should embrace a culture of ‘permissionless innovation’.

    • Permissionless innovation means allowing entrepreneurs to experiment with new business models and technologies, and only intervening when there are clear, demonstrable harms to the public. 

    • Growing calls to regulate the internet risk undermining progress and threaten the future of the internet and the digital economy.

  • Platform liability exemptions are essential to the fabric of the internet, and promote free speech and enterprise.

    • The exemption of platforms, such as Google and Facebook, from liability for the activity of their users was essential for the development of the internet, and digital innovation, and has delivered massive benefits for consumers.

    • Laws forcing platforms to be liable for user content to restrict hate speech have prompted social media companies to engage in excessively risk-averse moderation, threatening freedom of expression. Further measures such as the EU’s new Copyright Directive threaten the capacity of ‘creators’ to remix copyrighted content and share memes, while the Online Harms White Paper is a serious threat to free expression.

  • Internet red tape undermines small business, competition, and entrepreneurial activity

    • There is intense competition within the technology sector, including between large online platforms and from startups and small businesses. Platforms help stimulate entrepreneurial activity by providing Corporate Venture Capital and opportunities for exit.

    • Controls such as excessive data regulations, by creating barriers to entry and excessive costs, are particularly harmful to startups and small-to-medium sized enterprises (SMEs) that have lesser financial capacity for compliance.

The report also explains that if the Government wants to achieve an open, competitive and entrepreneurial online space they would do well to follow these Five Principles for Permissionless Innovation:

  1. Identify and remove barriers to entry and innovation;

  2. Protect freedom of speech and entrepreneurship by retaining immunities for intermediaries from liability;

  3. Rely on existing legal solutions, the common law, and competitive pressures to solve problems. 

  4. Push for industry self-regulation and best practices.

  5. Adopt targeted, limited legal measures for truly hard problems based on evidence.

The Magic Money Tree: The case against Modern Monetary Theory

A new paper by Professor Antony P. Mueller, a German professor of economics who currently teaches in Brazil, unpacks the logic behind Modern Monetary Theory:

  • Modern Monetary Theory (MMT) contends that government can spend without restraint and large deficits and debt don’t matter when the economy is not at full capacity. It asserts that the state, as the issuer of the nation’s currency, cannot go bankrupt because it can just keep creating and printing money; taxation exists not to obtain revenue but to oblige people to use a nation’s currency and control inflation; and that all public expenditure can be financed by debt or creating money.

  • MMT, whose theoretical foundations can be linked to the Marxist economic theories of Michal Kalecki, have come to prominence in recent months because of advocacy by the far-left of the Democratic Party in the United States and some left-wing commentators and campaigners in the United Kingdom.

  • MMT advocacy, particularly in the political sphere, is often driven by Utopian thinking by those who want massive unaffordable public spending programmes.

  • MMT is rejected by most economists. A recent survey by the University of Chicago found that no economic expert thinks that countries that borrow in their own currency need not worry about deficits because they can print money to finance debt. Similarly, none thought that it is possible to fund as much real government spending as you want by creating money.

  • There are a number of serious flaws in MMT:

    • MMT asserts, with limited evidence, that there is substantial unused economic capacity that government spending can activate. However, in practice, when government excessively expands the monetary supply (prints money) the impact is inflationary, if not hyperinflationary - as was the case in the Weimar Republic, Zimbabwe, and today in Venezuela.

    • MMT depends on governments knowing much more than they possibly could and acting more rationally than politics allows. It depends on government knowing precisely the natural rate of unemployment, and therefore when to spend, to stimulate activity, and when to tax, to drain the excessive inflationary impact of creating money. This ignores ignorance.

    • MMT is premised on substantial public employment policies to create economic activity for the unemployed. This policy underestimates the bureaucratic costs and the coordination problems that come with public employment policies. Only autocratic governments would have the means to enforce such policies.

What a Capital Idea! How to make Britain’s banks more competitive, innovative, and safer

A new ASI volume, What a Capital Idea! How to make Britain’s banks more competitive, innovative, and safer, argues that UK banks that issue high levels of capital should be freed of other cumbersome prudential regulation, such as the mandatory deposit insurance scheme.

John Cochrane, Senior Fellow at Hoover Institution at Stanford University, in his chapter, says:

  • For as long as there have been banks, there have been recurring banking and financial crises, intermittently spreading economic distress. Rather than solve the problem, the last round of regulation just compounds the tried and failed remedies of previous rounds.

  • A financial crisis is, at its heart, a bank run. A bank run causes systematic damage when a bank lacks the underlying assets to fund their liabilities, that is, they lack capital. Banks get their money largely from sources that are prone to runs.

  • The government creates a moral hazard by guaranteeing deposits, this means people do not ensure banks are healthy before depositing money. Banks undertake risky behaviour, which then causes a cycle of crisis requiring large bailouts.

  • Banks should be more like other businesses, which get their money by selling stocks and long-term bonds, rather than risky liabilities like deposits and very short-term wholesale borrowing. 

  • Banks should be required to issue immense amounts of capital (and long-term debt), so much that their remaining run-prone liabilities are never in question. 

  • The United States’ CHOICE Act offers banks a choice to either continue with the existing system that requires low levels of capital, or if a bank operates with a higher level of capital it can be exempt from swaths of regulation. 

Kevin Dowd, Professor of Finance and Economics at Durham University, in his chapter, says:

  • The history of UK banking prudential regulation is one of repeated failures.

  • Prudential regulation fails because it is captured by the banks it seeks to regulate and because it presupposes ‘forward-looking’ abilities on the part of regulators that do not exist.

  • The current UK system of prudential regulation of banking is bound to fail for the same reasons as its predecessors have failed.

  • The best system is one of high minimum capital standards and strictly unlimited personal liability on the part of senior bankers, and such a system should not be subject to prudential regulation . 

Room for improvement: How drug consumption rooms save lives

A new report by Jarryd Bartle, a drug policy consultant and university lecturer, calls for Britain to introduce life-saving Drug Consumption Rooms:

  • Drug consumption rooms are an evidence-based harm reduction intervention which allow people who use illicit drugs to do so within a medically supervised environment.

  • The use of drug consumption rooms in other jurisdictions has been shown to reduce drug-related deaths, reduce health burdens and decrease public injection and syringe litter.

  • Supervised Drug Consumption Rooms are effective at engaging hard to reach, highly marginalised populations with drug treatment, healthcare and other services. People in treatment use less illegal heroin and other drugs, potentially reducing the scale of the illegal drugs market.

  • Concerns that drug consumption rooms will increase drug use, attract substance users to an area or increase local crime are not supported by research.

  • A large majority (89%) of drug users are willing to use a drug consumption room.

    The UK is falling behind the rest of the world, including countries such as Australia, Canada, Denmark and France which are increasingly adopting drug consumption rooms as part of drug harm reduction strategies. 

  • This paper recommends that the UK prioritises the introduction of an integrated drug consumption room in an area identified as being of increased risk of drug-related harms.

  • Drug consumption rooms currently sit in a legal gray zone, leading to a lack of willingness by local authorities to introduce this proven harm reduction strategy. This could be addressed by:

    • 1. An explicit statement by the Home Office that the operation of DCRs is a matter for local authorities; specific rules could then be agreed by police forces, the Crown Prosecution Service (CPS), health bodies and local authorities; and

    • 2. The UK Parliament passing legislation that makes it explicitly legal to take controlled substances within such facilities in specified circumstances.

How to Make Long-Distance Work: Fixing Britain’s railways with open access

A new report by Adrian Quine, rail consultant and journalist, and Sophie Jarvis, Head of Government at the ASI, calls for the abolition of the current monopoly franchise system for trains and replacement with an Open Access system:

  • Open Access, by enabling competition between operators on the same route, drives down costs and ticket prices, improves passenger satisfaction, increases frequency, and encourages innovation. 

  • Fares are up to 55% cheaper on routes on Open Access routes compared to where a single monopoly franchise operates.

  • Open Access operators have the highest level of passanger satisfaction. Open Access operator Grand Central has had the largest increase of passengers of any train company, up 12% over 2017-18, discluding Transport for London services.

  • Under Open Access new routes have been opened by operators, giving smaller stations direct, fast, long-distance services without the need to change trains. These new rail destinations drive economic growth, social mobility and wider prosperity.

  • The running costs of Open Access operators is lower than the heavily unionised monopoly franchise operators, resulting in lower passenger fares.

  • In order to expand rail competition, this paper In order to expand rail competition, this paper recommends:

    • 1. Abolishing the current monopoly franchise system for long distance rail routes and replacement with an Open Access system.

    • 2. In the meantime, the creation a level playing field between Open Access and monopoly franchise operators by:

      • a. Abolishing the Not Primarily Abstractive (NPA) test, which limits which tracks Open Access operators can use. 

      • b. Introducing parity between the track access charges for monopoly franchise operators and the open access operators. 

    • 3. Reverse auctions to allocate operators and decide the subsidy level for less profitable stations.

Build, Baby, Build!

In a new paper Senior Fellow Nigel Hawkins explains how we can get Britain building and end the housing crisis:

  • During the 1950s, the UK’s annual new house-build exceeded 300,000 units. Prior to the introduction of wide-ranging planning legislation in 1947, the annual figure had been even higher in the 1930s.

  • In recent years, despite a steadily rising population, around 200,000 new units per year have been built, so that the English housing stock figure is now c23.8 million dwellings. The shortfall in new housing stock has contributed to soaring property prices, and the consequential erection of major financial barriers to first-time buyers.

  • For under-35s, unless they are high earners or the beneficiaries of family financial support, the hopes of becoming a homeowner before their mid-30s are receding. Many of this age-group are accepting—perhaps reluctantly—the attractions of home rental rather than home ownership.

  • Following the financial crisis in 2008/09 and despite ultra-low interest rates subsequently, securing the necessary mortgage has often been challenging; indeed, house-building levels fell.

  • While constructing more homes is a widely-held priority, volume housebuilders (VHBs) face real challenges in navigating the time-consuming planning process, before even a brick is laid.

  • This Paper examines a number of potential ways that Britain could increase the level of housebuilding at a national and local level: Local authorities must reverse their opposition to smaller units in order to provide Londoners with more housing choice at affordable levels.

  1. Major planning reform

  2. Modest Green Belt encroachment

  3. Easing constraints for medium-sized/small house-builders

  4. Dismantling some rental restrictions covering Housing Associations

  5. Promoting innovation within the house-building sector

  6. Establishing some Infrastructure Developments Zones (IDZs) which could offer tax incentives and relaxed planning laws

  7. Developing surplus public land

  8. Kickstarting the New Garden Towns proposals

Size Doesn’t Matter: Giving a green light to micro-homes

A new report by Vera Kichanova, an urban policy researcher with Zaha Hadid Architects and PhD student at King's College London, argues that Britain should legalise micro homes:

  • Housing is the most crucial problem faced by Londoners as supply has not kept pace with demand, leading to a quintupling of average prices over the past 50 years.

  • Many are now forced to endure long commutes, live in overcrowded shared flats, or leave the city. In the past 20 years, London’s population has grown by 25%, but the number of homes by only 15%. By 2025, 3.5m Londoners will be living in rented housing, with 79% of the adults who moved to London in the last year renting.

  • In addition to reforming the planning system to allow more houses to be built, micro-housing would enable land to be used more efficiently.

  • Micro-housing is not for everyone, however, for many younger individuals smaller homes would provide the opportunity to live centrally: close to work, entertainment and other amenities at an affordable price.

  • Micro-housing is about expanding the choices available to the many Londoners who are open to living in smaller apartments.

  • Micro-housing is not the same as cramped sub-division of existing units, they are smart, modern, custom designed units that make good use of space which have won prestigious architectural awards. Micro-housing is often accompanied by communal amenities such as games rooms and open living spaces that help address loneliness.

  • Local authorities must reverse their opposition to smaller units in order to provide Londoners with more housing choice at affordable levels.