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The cannabis black market and the case for the legalisation of cannabis in New Zealand

Chris Wilkins
Centre for Social and Health Outcomes Research and Evaluation
Massey University

Sally Casswell
Director Centre for Social and Health Outcomes Research and Evaluation
Massey University


An argument put forward in favour of more liberal cannabis laws in New Zealand is that the legalisation of cannabis would eliminate the widespread black market for the drug and the related private and social harms. This paper investigates these black market harms and draws out the implications for the current cannabis law reform debate. Several features of the New Zealand cannabis black market appear to contribute to lower individual and social impacts than experienced in black markets for cocaine and heroin overseas. These include the unprocessed nature of cannabis products; the relatively low price of cannabis; the tradition of sale through peer networks; and the widespread amateur cultivation of the drug. However, it may be that some emerging features of the cannabis scene in New Zealand are increasing the harm of the black market, such as the selling of cannabis through “tinny” houses; the growing involvement of gangs in cultivation and sale; and the emerging indoor hydroponic cultivation industry. Additional research in these areas is required to confirm these trends.


In 2000 a Parliamentary Select Committee inquiry was established to investigate the most effective public health strategies to reduce the harm associated with cannabis, including its legal status. Those in favour of more liberal cannabis laws have argued that one of the benefits of the legalisation of cannabis would be to eliminate the widespread black market for the drug and the related private and social harms (Drug Policy Forum Trust 1997, 1998, Dawkins 2001, NORML 2001).

In the United States, proponents of the legalisation of drugs have identified a range of private and social harms that can be traced directly to the black markets created by drug prohibition (Friedman 1972, Nadelmann 1989, Ostrowski 1990, 1989, Dennis 1990, Miron and Zweibel 1995, Hamowy 1987). These include:

  • the increased health risks of drugs produced on the black market;
  • drug-user crime caused by inflated black market prices for drugs;
  • the risk of victimisation faced by buyers and sellers forced to transact in a criminal market;
  • the violent “turf wars” fought by rival gangs over lucrative drug-selling locations; and
  • the black market profits that finance organised crime.

However, the United States policy literature has dealt primarily with cocaine and heroin black markets in fairly unique urban environments. It is by no means clear that the cannabis black market in New Zealand is responsible for the same level of harm.

This paper investigates the harms of the cannabis black market in New Zealand and draws out the implications for the current cannabis law reform debate. The illegality of cannabis, and the natural aversion of users and sellers to being identified, limits the statistical data that are available on the black market. Police and criminal justice databases often do not contain the type of data or level of detail that a social scientist would wish for. Consequently, at times the best that can be done is to identify areas where further research and better data are needed. For this reason, only cautious policy conclusions can be drawn from the analysis. Nevertheless, some general features of the cannabis black market in New Zealand can be identified, with real implications for the ongoing policy debate.

Before beginning it is important to be clear about the aims of the analysis. The intention is not to discuss the health or social harms of cannabis use per se, or to evaluate the benefits and costs of different cannabis policy options. These issues have been summarised and discussed elsewhere (e.g. Field and Casswell 2000, New Zealand Health Information Service 2001). The aim is to identify the harms directly related to having cannabis produced, traded and consumed in a black market as opposed to a legal, regulated market, and to discuss the implications for cannabis law reform.

Size of the cannabis black market in New Zealand

The available evidence of the extent of the cannabis black market in New Zealand suggests it is significant. The 1998 National Drug Survey found 50% of New Zealanders aged 15–45 years had tried cannabis, with 20% having used it in the last 12 months (Field and Casswell 1999b). About 7% of the sample – or the national equivalent of approximately 121,700 New Zealanders – indicated they purchased at least some of their cannabis from the black market. Many cannabis users received the drug for free and some grew their own supply. In the 1990s the police regularly seized over 200,000 cannabis plants during the annual Cannabis Recovery Operation (New Zealand Police 1991–1998).

Estimates of the financial turnover of the cannabis market in New Zealand, calculated using the number of cannabis plants seized during the Cannabis Recovery Operation, have ranged from $636 million to $1.27 billion a year (Dawkins 2001). A more sophisticated method of estimating the turnover of the black market – using cannabis consumption data from the National Drug Survey – recently calculated the retail turnover of the cannabis black market to be $131–$170 million a year (Wilkins et al. in press).

Black market health risks

Drugs produced in black markets are not manufactured under any safety or health regulations and are not labelled with ingredients or potency. This can result in unsafe drugs being produced and sold, and users experiencing problems from consuming unknown substances.

In New Zealand, cannabis is produced in two main forms: cannabis plant material, which is the female flower buds and leaves of the cannabis plant; and hash (hashish) oil, which is a processed concentrate of cannabis plant material (Ministry of Health 1996). The only processing that takes place with cannabis plant material is drying and curing (Staff 1988). Hash oil is manufactured through a process of heating and reducing cannabis plant material with a solvent until a highly potent gummy substance remains (personal correspondence National Drug Intelligence Bureau 2001). The manufacture process has occasionally resulted in chemical explosions, as the solvents used are highly flammable (personal correspondence National Drug Intelligence Bureau 2001, NZPA 2002).

There is no known level of cannabis ingestion that will cause lethal overdose or poisoning (Kuhn et al. 1998). Some cannabis users, most commonly inexperienced users, have experienced panic attacks from consuming unexpectedly high-potency cannabis (Kuhn et al. 1998). These attacks are not life threatening and rarely lead to medical help-seeking (Ministry of Health 1996). Unexpectedly high-dose cannabis may increase the risk of accidental injury. There have been anecdotal reports in New Zealand of dealers lacing cannabis plant material with the animal tranquilliser ketamine, and then selling it as very strong cannabis. The extent of these incidents is difficult to verify.

It has been suggested that the police practice of spraying cannabis crops with a herbicide during cannabis crop eradication operations poses a health risk to cannabis users who subsequently smoke the sprayed material (Fowlie 2000). The herbicide used by the police is a mixture of Roundup, blue dye and water (personal correspondence ESR 2001). The National Drug Intelligence Bureau (NDIB) points out that both the speed at which the herbicide works and the discolouration it causes mean sprayed cannabis will rarely be fit for sale (personal correspondence NDIB 2001). The main concern held by the police is that cultivators might attempt to disguise sprayed cannabis by processing it into hash oil.

On the request of the police the Institute of Environmental Science and Research Limited (ESR) prepared a report on the potential toxicological harm to humans of sprayed cannabis (personal correspondence ESR 2001). It concluded the herbicide would not pose a significant health risk to cannabis users either in the original sprayed plant form or concentrated as hash oil. The report contained the caveats that for some of the chemicals involved there were gaps in the available toxicological information, and that the toxicological tests involved oral administration. Direct exposure to the lungs, via smoking or “spotting” cannabis, could have effects not anticipated by the tests. However, the risk was held to be slight as exposure would probably be low and repeated only over a limited time period.

User crime

Inflated black market prices for illicit drugs are often held to compel some drug users to resort to street crime and other illegal activity such as robbery, prostitution and drug dealing to pay for their drug use (Michaels 1987). Heroin is most often associated with this economically driven crime because of its expense and addictive capacity. An active opiate addict in New Zealand is said to require up to $100 per day to maintain their drug habit (Newbold 2000).

Two factors are likely to be central to the extent that a drug will be associated with economically driven crime: the prevalence of heavy addictive consumption in the population and the black market price. The 1998 National Drug Survey found that only 24% of those who had ever tried cannabis had used it more than twice in the previous 12 months (Field and Casswell 1999b). Only 6% of those who had ever tried cannabis had used it 10 or more times in the previous 30 days, and only 2% were daily users (Field and Casswell 1999b). Those who said their level of cannabis use was more than they were happy with were asked if they needed help to reduce their use: 82% of this group said they needed “no help at all”, 10% said they needed “a little help”, 6% said they needed “some help”, and 1% said they needed “a lot of help”. The average amount of cannabis smoked by a user on a typical occasion was 0.8 joints for men and 0.6 joints for women (Field and Casswell 1999b). The highest average level of use was found among the 15–17-year-old age group, who smoked an average of 0.97 joints each on a typical occasion (Field and Casswell 1999b).

In New Zealand, cannabis is commonly sold as “bullets”, $50 bags and ounces (Australian Bureau of Criminal Intelligence 2001:84-92). A bullet is a small package of cannabis that contains enough cannabis for about three joints and sells for $20–25. The price of a joint from a bullet is therefore about $7. A heavy daily cannabis user (0.97 joints on a typical occasion) would therefore be spending approximately $7 a day, or $49 per week. An average user (0.7 joints on a typical occasion) who smoked cannabis about 10 times in the last 30 days would be spending approximately $2 per day, or $11.00 per week. Purchasing cannabis in greater bulk, as regular users would be likely to do, would further reduce these costs.

Note that these calculations are based on population-level consumption averages. Some individuals will have much higher levels of consumption than the population average, and consequently will face a much greater financial expense. The financial burden of cannabis use will be greater for low-income groups, such as the unemployed and minors.

Victimisation of users and dealers

Drug dealers and drug users are said to be attractive targets for robbery as they are known to carry large amounts of cash and/or drugs and often carry out transactions in secluded areas away from the view of the police and public (Barnett 1987). Buyers and sellers cannot call on the police and courts to enforce the terms of transactions and are unlikely to report incidents of victimisation to the authorities (Goldstein 1989).

Reuter and MacCoun (1992) argue that the open street markets that exist for heroin and “crack” cocaine in the United States create environments that encourage victimisation by involving anonymous impersonal transactions, and by lacking clear territorial boundaries for sellers. They note that, in contrast, the private personal transactions associated with the cannabis market generate little violence or public nuisance.

The strong addictive qualities of heroin and crack appear to explain why they are widely sold from public street markets (Reuter and MacCoun 1992, Reuter and Kleiman 1986). Heroin and crack users will often require immediate access to drug sales and are least able to maintain a supply of drugs on hand without consuming them. Cannabis users, on the other hand, are more prepared to wait for private situations to purchase the drug and will often buy large quantities at one time with the intention of maintaining a supply (Reuter and MacCoun 1992, Reuter and Kleiman 1986).

In New Zealand, cannabis appears to be widely purchased and sold in private transactions between friends and personal acquaintances. The unprocessed nature of cannabis means physical inspection and weighing are fairly effective means of verifying the authenticity and value of cannabis products before payment is made (Wilkins 1999, Wilkins in press). A national survey of members of the Aotearoa Legalise Cannabis Party (ALCP) on the reliability of their cannabis transactions found that experiences of assault and robbery while purchasing cannabis were rare (Wilkins 2001). The selectivity of the ALCP sample, however, limits the conclusions that can be drawn about the New Zealand cannabis market as a whole. The sample contained a large number of experienced cannabis buyers who may well have more established and secure sources of supply than less experienced consumers.

In recent years a more public market for cannabis has emerged in New Zealand, which involves the sale of cannabis from “tinny” houses (Newbold 2000). These are private dwellings, often run by gangs, which have been adapted for the public sale of cannabis. In a recent prosecution up to 72 people a day were observed purchasing cannabis from a single “tinny” house (Newbold 2000). This type of selling is likely to increase the public nuisance associated with the cannabis market as large numbers of buyers are drawn to a single address, and may increase the risk of victimisation as transactions are no longer completed between personal acquaintances.

Black market violence

Those involved in the production and sale of illicit drugs cannot employ the legal system to enforce contractual agreements or settle competitive disputes (Moore 1977, Goldstein 1989, Ostrowski 1989). Threats and physical violence are therefore sometimes the sole means available to enforce rights against competitors or defaulting customers.

The absence of the state also means that criminal entrepreneurs can use intimidation and violence to remove competitors and expand market share (Paul and Wilhite 1994, Miron and Zweibel 1995). Violent competition between rival criminal operators can injure (and sometimes kill) innocent third parties, and contributes to a general fear of crime and victimisation in neighbourhoods where drug markets are present (Paul and Wilhite 1994, Ostrowski 1990).

The Northland police believe competition between rival cannabis cultivators and the theft of crops have been responsible for some incidents of violence in the area – including three of the last five murders (Te Runanga o te Rarawa 1995). A study of the impact of cannabis cultivation in Northland found the risk of violence from cultivators, and the risk of injury from systems designed to protect cannabis crops from thieves such as traps and poison, created areas of public exclusion and intimidation (Walker et al. 1998). Farmers, rural fire fighters and conservation staff have reported incidents of intimidation and violence by cultivators wanting to protect the secrecy of the location of cannabis plots (Walker et al. 1998).

Statistics provided by the Ministry of Justice indicate that in the 1990s only 2–5% of convictions for cannabis cultivation also involved a conviction for violence on the same day (personal correspondence P. Spier 2001). These statistics are unlikely to fully capture the relationship between cannabis cultivation and violence. Violent offences related to cannabis cultivation may occur without an accompanying conviction for cannabis cultivation or may go unreported. Further work is required to verify the extent that violence is related to cannabis cultivation and supply.

Organised crime

The prohibition of popular commodities can create economic opportunities for those prepared to take the risk of selling these commodities on the black market (Reuter 1983, Kleiman 1989, 1992). The enforcement of prohibition can have the further unintended consequence of promoting the more organised and violent of criminal groups as regular policing activity tends to eliminate those that are less organised and less willing to use violence (Kleiman 1989, 1992). The police can unintentionally reduce competition and increase profits for the most hardened of criminals, hence the need to established specialised enforcement agencies that concentrate specifically on organised crime.

The NDIB believes a significant proportion of cannabis cultivation in New Zealand is carried out by organised criminal groups – predominantly gangs (personal correspondence NDIB 2001). This view is consistent with statements made by leading police in the early 1990s about the growing involvement of organised criminal groups in the cultivation of cannabis in New Zealand (Abel and Casswell 1993).

The police conducted a survey of their staff in 1998 to gain a clearer picture of the extent of organised crime in New Zealand (McCardle 1999). A total of 337 organised criminal groups were identified, but as many as 660 groups were believed to exist (McCardle 1999). The definition of organised crime used in the survey was fairly broad. Five descriptive categories were provided to assist with the identification of organised criminal groups: “structured gangs”, “structured groups other than gangs”, “family crime groups”, “activist/paedophile crime groups”, and “career crime groups”. Fifty per cent of the identified groups (169 groups) were thought to be involved in the illicit cultivation of cannabis as an income source, and 64% (213) were believed to be involved in the sale of drugs as an income source. A separate analysis of the characteristics of the groups involved in cannabis cultivation was unfortunately not available.

The large number of groups involved in the cultivation of cannabis suggests no one group has any particular market power. Questions remain about the role gangs play in the cultivation of cannabis and whether the chapters and affiliations identified represent larger integrated organisations. Further research is required to gain a more complete picture of the people and criminal organisations involved in the cultivation of cannabis in New Zealand and the extent to which cannabis cultivation finances the growth of organised crime.

Marketing of hard drugs by cannabis dealers

A harm unique to discussions of cannabis black markets is the concern that contact with criminal drug dealers exposes cannabis users to “hard” drugs, such as heroin and cocaine (Kleiman 1992, Premier's Drug Advisory Council 1996, Lenton et al. 2000, MacCoun and Reuter 2001). The possibility of a marketing nexus between the black market sale of cannabis and the sale of other drugs is one of the rationales for the Dutch and South Australian systems, where authorities have endeavoured to separate the sale of cannabis from the sale of other drugs (Lenton et al. 2000, Premier's Drug Advisory Council 1996).

In the 1998 National Drug Survey, people who identified themselves as current cannabis users and who bought at least some of their cannabis supply, were asked if they knew whether their cannabis supplier sold other drugs, and if their cannabis dealer had encouraged them to buy other drugs (Field and Casswell 1999b). Just over a quarter of these cannabis users (1.4% of the overall sample) said they knew (or thought they knew) that their dealer sold other drugs. Of these, 9% (0.5%) said their supplier had encouraged them to buy other drugs.

A question related to this issue (which was not asked in the 1998 National Drug Survey) is how many of the cannabis users who were encouraged to buy other drugs actually did so. That is, how successful were these cross-marketing tactics? A regional drug survey conducted in 1990, and repeated in 1998, found that current cannabis use increased from 13% to 16%, current cocaine use increased from 0.2% to 0.8%, while current heroin use actually fell from 0.1% to 0.02% (Field and Casswell 1999a). Another possibility of cross-marketing that might occur in the New Zealand context is between cannabis and methamphetamine. The regional drug survey found that the level of current stimulant use – which includes methamphetamines – increased from 1.1% to 3% between 1990 and 1998 (Field and Casswell 1999a).


Those in favour of more liberal drug laws in the United States often argue that one of the benefits of the legalisation of heroin and cocaine would be to undermine the black markets for these drugs and the related private and social harms. A similar line of argument has recently been expressed in New Zealand with regard to cannabis prohibition. The evaluation of the harm of the New Zealand cannabis black market in this paper suggests these arguments may well be overstated in the New Zealand context.

It is likely that, in general, black markets for cannabis are less harmful than black markets for heroin and cocaine. This is due to the less harmful and addictive qualities of cannabis compared to heroin and cocaine, the unprocessed nature of cannabis products, the relatively low price of cannabis compared to other illicit drugs, and the tradition of sale through peer networks rather than street markets. In the New Zealand context these tendencies appear to be further promoted by the widespread domestic cultivation of cannabis. Widespread domestic cultivation provides cannabis at low prices and undermines attempts by organised criminal groups to gain monopoly control over the cultivation and distribution of the drug.

It may be the case that some emerging features of the cannabis scene in New Zealand are increasing the harm of the black market. The selling of cannabis through “tinny” houses increases the public nuisance of the market, provides a means for gangs to dominate the retail sale of the drug, and may expose buyers to a greater risk of victimisation, as they are more likely to transact with strangers. Gangs may be becoming more organised with regard to cannabis cultivation, which may crowd out traditional independent sources of supply. Emerging indoor hydroponic cannabis cultivation may also undermine the traditional independent sources of supply by allowing professional syndicates to produce higher-potency cannabis at lower prices.

Additional research is therefore required in a number of areas before strong policy conclusions can be drawn. Data are required on the extent of violence related to cannabis cultivation, the role organised criminal groups play in the cultivation and supply of the drug, and the extent that cannabis users are introduced to “hard” drugs through the cannabis black market.

From a wider policy perspective, a number of questions can be raised about the extent to which the legalisation of cannabis would actually reduce the cannabis black market. A significant black market for cannabis is likely to persist if the taxation and regulation of the legal cannabis market were too restrictive (Kleiman and Saiger 1990, Jacobs 1990). This would appear to be a particular risk in the case of cannabis, due to the ease of cultivation and the widespread nature of the existing black market. For some drug consumers – notably minors – the black market will remain the primary source of supply even after legalisation (Wilkins and Scrimgeour 2000).

Alternatively, if the cannabis black market were significantly reduced by the legalisation of the drug, violent criminals involved in the cannabis trade may simply switch to involvement in, and the expansion of, other illicit drug markets, such as the methamphetamine trade. The violence and victimisation associated with the cannabis black market may therefore simply shift to other black markets rather than be greatly reduced or eliminated. The question that emerges in this scenario is the extent to which markets for other illicit commodities may replace the cannabis black market.

Finally, it is worth reiterating that the analysis and discussion in this paper has been confined to the harms of cannabis directly related to the black market conditions of supply. A full evaluation of cannabis policy options should of course address many other issues, such as the impact any law change might have on the prevalence of cannabis use, and the cost of an enforcement regime (Field and Casswell 2000). The analysis in this paper is the exploration of just one of a number of issues that should be examined when considering future cannabis policy options.


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