It’s a story every Intro to Economics student has heard before. A market is profitable, so firms enter the market until it’s not profitable, then leave the market until it is and continue the cycle until it reaches equilibrium. It’s one of the first steps in free-market correction.
While we often think of free-market dynamics as fairy tales of the right to justify looking the other way, that story is playing out up and down the West Coast right now. And judging by the articles written about it, it’s not a pretty picture.
Oregon has a six-and-a-half-year supply of cannabis, according to a recent article from The Stranger in Portland. Oregon retailers can buy a pound of cannabis for around $600 (up from $400 last August). Pre-legalization, a pound would go for anywhere between $3,000 to $4,000.
A pound of cannabis goes for $600 in Washington too. Colorado and California have it a bit easier at $900 and $1,000 per pound, respectively.
Now, cheap cannabis sounds like a great thing. As consumers, that’s certainly what we want.
But for those who want to sell cannabis, it’s the pits.
Oregon has 2,200 producer licenses. Washington has 1,200 and Colorado has 1,400. Now that the price of cannabis has fallen so low many of those growers face going out of business—their dreams crushed by the invisible hand.
Unless they get rid of their product, that’s what will happen. Meanwhile, cannabis consumers are happy and don’t feel like buying more cannabis.
So, who are the wanton suppliers to sell to? Well, the same people they sold to before.
A pound of cannabis fetches a much higher paycheck in Idaho than Washington or Oregon. The kicker is that only a third of Oregon’s growers have undergone a single inspection, so the state doesn’t even know how much cannabis licensed growers may be exporting.
The problem is magnified in California. The state has had such trouble issuing licenses that people are tired of waiting and getting rid of it any way they can, whether that be out of state or to unsanctioned dispensaries.
The Colorado Department of Revenue claims to be keeping a close eye on production to prevent an oversupply. Apparently it’s working, because it’s the only state people aren’t clamoring about too much cannabis.
It’s a good thing for Arizona to keep a close eye on these markets and what it means for the upcoming bid for adult-use cannabis in 2020. The topic of contention will be how many licenses the state issues.
Consumers have no incentive to limit the number of cannabis suppliers. For them, it just means cheaper cannabis. But for those hoping to make a buck in the industry, it’s a tricky matter.
On one hand, potential suppliers want enough licenses to have a chance of getting one. On the other, they don’t want so many that it’s unlikely they’ll hold on to it.
With members of the Arizona Dispensaries Association guiding the legalization effort this time around, it’s a safe bet they’ll want to keep a tight grip on their market share. But will voters allow that?
While the specifics of how many licenses the initiative will allow, or how it determines that number, remain under wraps, it’s almost arbitrary. There’s no right answer.
It depends on whether, like news outlets up and down the West Coast, you find free market corrections, cheap cannabis and bankrupt businesses a bad thing, or whether you believe in artificial market restrictions that favor the people who put them there.
It seems like a tough sell for voters, but never underestimate the power of the hype.
This article appears in Mar 14-20, 2019.
The Marijuana of today is NOT like the Marijuana used in the 70’s and 80’s. Through Artificial Selection Experiments, strains of Marijuana have been developed by the Marijuana Drug Industry that substantially increase the potency of the Drug. As such, its’ use poses serious potential consequences:
https://www.drugabuse.gov/publications/dru…
https://www.ncbi.nlm.nih.gov/pmc/articles/…
“Crashes are up by as much as 6 percent in Colorado, Nevada, Oregon and Washington, compared with neighboring states that haven’t legalized marijuana for recreational use,…..The new IIHS-HLDI research (10/18/2108) on marijuana and crashes indicates that legalizing marijuana for all uses is having a negative impact on the safety of our roads,” says IIHS-HLDI President David Harkey. “States exploring legalizing marijuana should consider this effect on highway safety….”
Marijuana use for Medical purpose should be supported by Scientific evidence, including Clinical Trials, and regulated by the FDA; closely monitored by the tending Physician and State Department of Health.”Medical Marijuana” should be available by Prescription only (in a Pharmacy) issued by a License Physician
The major consumers of this Drug, if legalized for so-called recreational purposes, will be the younger generation; destroying the very fabric/future of our Democracy.
Congress should amend Controlled Substances Act (CSA) (21 U.S.C. 811) making Marijuana available for FDA Approved Medical Treatment; invalidating all the current State “Medical Marijuana” Programs, including the use of Marijuana for so called Recreational Proposes.
Francis Saitta, your post is not relevant to the article, though a topic worth debating in a different venue.
I have no stake in this, as I am neither a consumer nor producer. However, as a believer in the free market, why should current producers be protected from market forces any more than anyone else?
When producers are shielded from market forces, inefficiencies and sloppiness happen. Then when markets change and open up (and they always do), they are ill equipped to compete. The efficient will win, the inefficient will lose.
I am generally reluctant to respond to a Post where the “Poster” does NOT have the Courage to Identify Himself/Herself; using the Anonymity of “Pen Name” .
However, this Article discuses the Economics of Marijuana Sales and clearly supports the Use of this Drug!…fair game for anyone that Opposes the Non-Medical/Non-FDA Controlled use of this Dangerous Drug!!!
I dont like the way Tucson is regulating distribution of weed. Each pot shop has to be something like 2000-feet from another pot shop. Why is this, to limit competition or guard against crime? I dont think porn shops, bars or liquor stores are regulated by distance. Granting licenses is like granting mafia crime drug distribution. Competition is good, right, capitalism, survival of the fittest!
What New Mexico is passing through its legislature is State owned dispensaries or leglization.
New Mexico state then would be responsible for all aspects, testing, banking, distribution, tax collection, accounting education. (stop the ATM nonsense)
Then stated those counties municipalities that abstained marijuana sales could not share in the tax collected by those that do.
Tax’s collected will NOT!! go to some police administrative court quasi BS board.
limit one ounce personal posession those with narrowed complex medical issues that have licenses no tax. Back pain migraines are not listed as medical ailments in NM.
Just ponder for a minute the customer wont have the pay the burden of advertising overhead of cottage business upstarts. Qualified medical agents at the dispensary.
https://azmarijuana.com/marijuana-news/new-mexicos-house-approves-recreational-marijuana-bill/
Smoking strong pot daily raises psychosis risk, study finds
(AP, 2/19/19):
“Smoking high-potency marijuana every day could increase the chances of developing psychosis by nearly five times, according to the biggest-ever study to examine the impact of pot on psychotic disorder rates….”
https://www.apnews.com/4f9b18c6ac0d4cd5a8c…
Beware!!! Pot is a very Dangerous Drug!!
Beware! Sugar is a dangerous drug!
so, you mean the users are too stoned to buy more pot?