Pubdate: Sun, 08 May 2016
Source: Buffalo News (NY)
Copyright: 2016 The Buffalo News
Contact: http://drugsense.org/url/GXIzebQL
Website: http://www.buffalonews.com/
Details: http://www.mapinc.org/media/61
Author: Keith Humphreys, Washington Post

LEGALIZED POT IS BECOMING VERY INEXPENSIVE

Two years ago, Washington State began an unprecedented policy 
experiment by allowing large-scale production and sale of 
recreational marijuana to the public. The effects on public health 
and safety and on the relationship of law enforcement to minority 
communities will take years to manifest fully, but one impact has 
become abundantly clear: Legalized marijuana is getting very cheap 
very quickly.

Marijuana price data from Washington's Liquor and Cannabis Board was 
aggregated by Steve Davenport of the Pardee RAND Graduate School and 
Jonathan Caulkins, a professor at Carnegie Mellon University. After a 
transitory rise in the first few months, which Davenport attributes 
to supply shortages as the system came online, both retail prices and 
wholesale prices have plummeted. Davenport said that prices "are now 
steadily falling at about 2 percent per month. If that trend holds, 
prices may fall 25 percent each year going forward."

Although some observers will be surprised by these sharp price 
declines,  perhaps particularly some investors in the emerging legal 
marijuana industry  seasoned drug policy analysts have long predicted 
this effect. As noted by Caulkins and his colleagues in the book 
"Marijuana Legalization: What Everyone Needs to Know," prohibition 
imposes many costs on drug producers. They must operate covertly, 
forgo advertising, pay higher wages to compensate for the risk of 
arrest, and lack recourse to civil courts for resolving contract 
disputes. Legal companies in contrast endure none of these costs and 
also can benefit from economies of scale that push production costs down.

Falling pot prices create winners and losers. Because state taxes are 
based on a percentage of the sales price, declining prices mean each 
sale puts less money in the public purse. On the other hand, 
bargain-basement prices undercut the black market, bringing the 
public reduced law enforcement costs, both in terms of tax dollars 
spent on jail and the damage done to individuals who are arrested.

On the downside, young people tend to be price-sensitive consumers, 
and their use of inexpensive pot may rise over time, as might that of 
problematic marijuana users.

How cheap can legal pot become? Says Caulkins, "It's just a plant. 
There will always be the marijuana equivalent of organically grown 
specialty crops sold at premium prices to yuppies, but at the same 
time, no-frills generic forms could become cheap enough to give away 
as a loss leader - the way bars give patrons beer nuts and hotels 
leave chocolates on your pillow."
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MAP posted-by: Jay Bergstrom