This book was written by two University of California economists (Robin Goldstein and Daniel Sumner) who make no secret they see the legalization of “weed” (their preferred term for marijuana) as a positive step toward a more logical, more just society. They take no position about the moral implications of drug use, but rather focus on the economics. and more specifically the claims that legalization would have several positive results: ending the illegal drug trade (at least in weed), eliminating the unnecessary incarceration of those involved in the trade, redirecting law enforcement resources, and generating large and growing revenues for federal, state, and local governments. They conclude that– unsurprisingly for anyone familiar with supply and demand–none of these projections proved to be true.
When California led the way by decriminalizing weed in the form of medical marijuana, the path seemed clear: safer weed to smoke (or eat), easily available via a doctor’s note at local dispensaries, less expensive, and without the baggage of any connection to the illegal drug trade. The alleged medicinal properties of weed, which to date remain under study but not proven, were the ostensible reason to legalize weed. Yet medicinal weed was never the intended endpoint, but rather a useful start toward full legalization. Dispensaries and the fiction of a “doctor’s note” only salved some consciences, but did not satisfy the final goal of legitimizing recreational weed use. And that is where things became interesting.
What went wrong? Let us count the ways:
The move to full legalization almost always involved government regulation, taxing, safety and quality restrictions. Which increased the cost of doing business. So the price of legal weed went up, while illegal weed remained available from all the same suppliers at a discount. Would consumers pay extra for the government assurances and regulation? No, since most weed users had been buying for years from suppliers they considered safe, and the connection to the illegal drug trade seemed tenuous, even though it was real (“I don’t deal with a cartel; I buy from Joe down the street.”)
Meanwhile, decriminalization/legalization made retailing weed a crime, but not possessing small amounts. So there was no longer a strong reason for police to “police” the illegal weed marketplace, except as a matter of violation of commercial regulations. And the move toward legitimate recreational weed use eliminated the need for the “medicinal marijuana” ruse: in states which legalized weed, the dispensary weed business largely evaporated. Meanwhile, Oklahoma, a relative newcomer, has stayed at the medicinal weed way point, and has a medicinal weed dispensary for every 3,000 residents (the greatest density of medicinal weed suppliers in the nation, despite no strong medical evidence)!
Specifically in California, legalization included giving local officials the right to regulate where and how weed was bought, sold, and consumed, a compromise necessary to ensure legislative support for legalization. And in the land where NIMBY (Not In My Back Yard) rules supreme, public use of weed in most of the state, which was unregulated under medicinal weed rules, became outlawed under legal recreational weed laws. It seems that most Californians didn’t want a weed shop on their street, people smoking a joint in their public parks, or even a weed field next door to their homeowners association (marijuana fields are well-known for a distinctive, unpleasant odor).
Of course, the wild card in legalization was how would organized crime respond. The optimistic forecast was that drug-dealers would simply accept the inevitable and either go legit by becoming regulated weed retailers, or leave the weed business for other, more lucrative drugs. As the authors point out, people who thrived selling weed when it was illegal were those adept at avoiding government regulation and maneuvering among violent competitors: not skills which translate well into a legal marketplace. So local drug dealers simply went on selling weed more cheaply and without government interference (remember, the police don’t care as much about economic regulations), undercutting the legal business. And cartels have taken to offering legitimate weed retailers the classic Mexican dilemma: “plato or plomo,” meaning work with the cartels (accept their silver, plato) or get killed (received their lead, plomo). So illegal weed also continues to leak into the legal business. The biggest change in the illegal weed market has been to move weed growth from Mexico to the US, to avoid the problem of federal restrictions on its importation. Cartels don’t need to smuggle weed across the border anymore, when they only need to hide it as it grows in the States (where law enforcement is less interested in finding it).
Which points toward the long-term outlook. Of course federal law which still treats weed as a Schedule 1 substance (serious drug) acts as a restraint, but only just. The drug war was always fought primarily at the state and local level, and there it is ending with a whimper, not a bang. Eventually the federal government will give up also, but of course local drug-dealers and cartels will not. Meanwhile, numerous investing firms, tycoons, and get-rich quick investors have gone literally bankrupt betting on the profitability of legal weed.
What happens next? The authors point to several scenarios, but none of them are particularly positive for the weed business. They posit four changes they see as relatively certain in the long term (2050): (1) national legalization of weed, (2) legal interstate weed commerce, (3) more efficient weed farming production, and (4) agribusiness involvement in the weed market. Legal weed loses its counterculture cachet and a national market reduces profit differentials. Weed grown in greenhouses needs cheap labor and cheap power, making a place like Oklahoma incredibly competitive with California. Current demand is met by small, distributed producers, and while some weed aficionados claim market use will soar, that is unlikely. Just as weed may prove to have health benefits for some, long-term weed use is likely to pose health challenges. More efficient farming techniques will produce stronger, safer, and cheaper weed. All of which is to say the legal weed business will resemble farming more than prospecting: a highly competitive market with some product customization (read craft weed), low prices and profit margins, and relatively static demand.
Hardly the profitable, smokey nirvana the weed industry projected. If you like supply and demand charts and lots of data, read the book. The authors have a wicked sense of humor and make the economics discussions about as lively as the dismal science can be. Otherwise, you received the gist of their analysis here. And it is a cautionary tale: legal weed will be neither a golden goose for government revenue, nor a rainmaker for investors. Legal weed will not affect the illegal drug business, nor will it reduce crime. Legal weed does not cause mass addiction, but it also (probably) is not a wonder drug. What legal weed does do is add one more legal way to get high. That’s the blunt truth.
Drugs are drugs and the best is Cocaine followed closely by Bourbon