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Marijuana Prohibition and Rent Seeking

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  • R. Warren Anderson

    (University of Michigan-Dearborn)

Abstract

A popular theory explains that marijuana’s criminalization resulted from DuPont’s lobbying as DuPont viewed hemp as competition for their products and was politically connected. To test the effects of this rent seeking story I analyze DuPont’s stock price. Initially, Congress taxed marijuana at a prohibitive level instead of an outright ban on consumption. Such legislative authority of prohibitive taxation remained in question until a Supreme Court decision in March 1937. DuPont’s Sharpe Ratio saw a break in trend immediately upon this ruling. However, in a panel dataset the effects of the ruling are found to be highly insignificant. While DuPont may have gained from marijuana’s criminalization, ultimately it was not reflected in its stock price.

Suggested Citation

  • R. Warren Anderson, 2017. "Marijuana Prohibition and Rent Seeking," Homo Oeconomicus: Journal of Behavioral and Institutional Economics, Springer, vol. 34(1), pages 33-46, April.
    • Handle: RePEc:spr:homoec:v:34:y:2017:i:1:d:10.1007_s41412-017-0037-4
    DOI: 10.1007/s41412-017-0037-4
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    References listed on IDEAS

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    More about this item

    Keywords

    Rent seeking; Marijuana; DuPont; Stock;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • N12 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: 1913-

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