Does Cannabis Legalisation Stimulate Corporate Innovation?

A joint paper from the University of Iowa in the U.S. claims that companies based in American states which have legalised cannabis enjoy greater levels of innovation. The findings use patents, stock valuation and income levels as a proxy for such improvements on business. The paper even indicates that, after cannabis is made legal, inventors may even move to locations with more amenable cannabis laws.

Related: The 15 Best Countries for Medical Marijuana

For readers here in Europe, the study also points out that many of these benefits apply to countries that have legalised medical cannabis too.


Getting high at work 

The abstract of the University of Iowa’s report looks into various corporations, not just those that may benefit the cannabis sector. A quick glance at the cannabis market and, indeed, such a correlation might not be an advantage.

Researchers from the university’s department of finance and school of business examined nearly 10,000 corporations throughout the United States. They concluded that any ‘positive financial impact’ that businesses based in cannabis-friendly states enjoyed was likely related to improvements on a ‘firm’s human capital.’

This capital refers to how well employees work or how much they are enjoying their work. Human capital is a critical resource for any business, big or small. It is also why certain employees are paid more than others; it is a reflection of a greater or lesser amount of human capital. This, however, needs to be understood with a grain of salt.

One might quickly deduce that firms based in states with more forward-thinking cannabis laws would subsequently have a larger workforce of cannabis users. While this might be true, this correlation is beyond the scope of the study.

The study does, however, indicate that it may be easier to recruit better-performing human capital when looking abroad. The authors said that companies ‘become more productive and hire more productive human capital from out of state after the passage of the law.’

One can think of this as a bonus that companies may use when courting top talent.

Once hired, it also appears that employees sustain this high performance over the long term. But this is only in regard to medical cannabis, according to Marijuana Moment, a cannabis-specific media outlet.

This detail is reflected via a comparison of net income between employees. According to the study, firms operating in a state that has legalised medical marijuana tend to ‘earn higher net income per employee.’

Related: Medical Marijuana at Work

The benefits expand beyond employee output, too. The stock value of companies based in states that have legalised medical marijuana also enjoys slightly higher valuations. The authors conclude that this is because these companies, for some reason, prioritise research and development after such laws are passed.

A focus on innovation and the future has traditionally helped boost stock prices for relevant companies, no matter the industry. Now, much in the study demands critical attention.

Though the data collected may be valid, the conclusions proposed by the researchers appear weak. It should also be noted that the state of Iowa, where the research was conducted, only allows medical cannabis oil of up to 3 percent tetrahydrocannabinol (THC). Authorities also indicated that patients with a specific kind of epilepsy are the only ones that would qualify.

The medical marijuana board in Iowa has since moved to open these regulations, but the jury is still out.

Though the board’s recommendation came many months after the initial research, the researchers at the University of Iowa may nonetheless be subject to a phenomenon called social desirability. This term refers to a large focus of study within the realm of sociology.

It highlights how people in research contexts and elsewhere tend towards an activity that is found favourable within their community. It’s a bias that reveals people’s preference to go with the crowd rather than against it.

After reviewing the study, Alex Tabarrok, an economist and co-author, with Tyler Cowen, of the economics blog Marginal Revolution, said that the University of Iowa study above may have succumbed to social desirability. To that end, he cites how ‘nicotine is [a] solid cognitive enhancer’, and he also touches on the words of Tyler Cowen, a Bloomberg columnist, who said ‘that pot makes people dumb.’

He writes elsewhere:

‘I see intelligence as one of the ultimate scarcities when it comes to making the world a better place, and smoking marijuana does not make people smarter. Even if you think there is no long-term damage, right after smoking a person is less able to perform most IQ-intensive tasks (with improvisational jazz as a possible exception).’

Though knee-jerk at first glance, Cowen brings a much more nuanced take to the table. In a world hurtling as fast as possible towards all things cannabis, research and studies may also reflect this desire despite any conflicting bias or evidence.

More importantly, researchers eager to prove a thesis rather than let the evidence speak for itself can quickly become victims of misinformation. Cowen does nonetheless give some leeway to improvisational jazz.

This poses another question: if not as an economic maximiser, how should society integrate cannabis?


Getting high and getting in the ‘flow’

The rise of flow within popular literature, clinical studies and psychology courses around the world is no secret. Any institution that could pin down this mental state, specifically how to induce it, would be at a huge advantage.

This mental state refers specifically to the moment in which an individual simultaneously experiences a deep sense of calm, focus and well-being. In his seminal book, which brought flow to the mainstream, Mihaly Csikszentmihalyi investigated how athletes, musicians and entrepreneurs interpret their experiences.

The experience isn’t limited to these demographics either.

Indeed, the reasons for entering such a state are the subject of much research in the field of psychology. Now, it appears that cannabidiol (CBD), the non-psychoactive compound found in cannabis, may also offer users an entry to flow.

Related: The Effects of CBD on the Human Body

At least that’s what researchers at the University of California, Los Angeles (UCLA) believe.

In a joint study between UCLA, Ojai Energetics, a CBD provider, and the Flow Research Collective, researchers will investigate the effects of CBD ‘on the amount of time it takes to drop into the flow, the depth of flow experienced, and recovery.’

Interested parties can participate in the study and even receive a discount code for Ojai products.

Looking past the marketing manoeuvre, the study does appear to be pursued in good faith. Not only will UCLA be leading the experiment, but the Executive Director of the Flow Research Collective, Steven Kotler, is also an advisor to Ojai. Kotler’s group has been featured in various notable publications.

Thus, there are many reputations on the line for failing to deliver clear, objective results. Of course, this doesn’t mean the study won’t also fall prey to growing social desirability in the cannabis space.

The results of this experiment would also help bridge any observed correlation found in the University of Iowa experiment. Though it was focused primarily on medical cannabis, if one can prove that CBD has an effect on improving an employee’s productivity, then advocates may have yet another data point to show regulators.

Concluding, cannabis’ effects on human productivity are difficult to identify.

Related: Can Cannabis Really Make You More Creative?

In some cases, it may help stimulate creativity and focus. In others, it may have the exact opposite effect. Until more research emerges, users, entrepreneurs and academics will remain in the dark. And if innovators are lacking critical information on cannabis, one can be sure that regulators are much worse off.

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