Upmarket Versus Downmarket Marijuana Prices: A Response to Andrew Sullivan et al.

I recently presented a series of DIY calculations for determining the size of the U.S. marijuana market. This post got a lot of play around the web, most notably from Andrew Sullivan, who again did me the kindness of adding his millions of regular readers to my regular readers (both of them). A number of commenters at his site, RBC and other web outlets (e.g., Washington Monthly) jumped on my estimate that the average price of marijuana was $120-$144/ounce (i.e., $120 with an upward sensitivity of 20%). Across the comments I read of those people who reported their marijuana purchasing experiences, the average price quoted was $425/ounce.

How does one account for the price estimate generated in this fashion being so much higher than, for example, reports from Oregon that indoor-grown marijuana prices are as low as $2000/pound ($125 per ounce) and prices for outdoor grown weed are as low as $700/pound ($44 per ounce)? Or the reports of law enforcement officials (who are often accused of overstating the cash value of drug seizures) from South Texas showing that marijuana prices have plummeted to $540/kilogram ($15/ounce)? Are some people fibbing or simply wildly off-base? In my view, no. All have won and all must have prizes because of the bifurcated nature of the markets for many drugs, including marijuana.

In the early 1980s, I was working with drug addicted people on the mean streets of Detroit, which were very mean indeed in those days. The mainstream media at the time and my middle class friends saw cocaine as a glamorous drug consumed by bankers and movie stars at prices upwards of $100/dose. My daily experience however was that cocaine was becoming an unglamorous drug (crack) purchased at $5/dose or less by streetwalkers, homeless people, gangbangers, and housing projects residents. Had the Internet of today existed then and I had posted that the average price of a dose of cocaine in the U.S. was very low, I would no doubt have been inundated with people saying (to paraphrase a commenter on my marijuana market post) “if Humphreys knew a place where cocaine sold for $5/dose, the world would beat a path to his door”.

But what I was seeing in Detroit was real, namely the emergence of a “downmarket” in cocaine. The “upmarket” was also real and was mainly composed of casual users who bought high-quality product. They paid high prices and often purchased their drug with bundled services (e.g., home delivery). The “downmarket” was mainly composed of heavy users who bought low-quality product at cheap prices. The upmarket was mostly Caucasian in racial makeup, with good social capital (e.g. college education, employment). The downmarket was mainly composed of lower-income people of color. The upmarket was not just rich people; it included many middle class and some working class people. But the downmarket was overwhelmingly composed of people living in poverty (with a few cross-overs now and then).

All of what I have said about the cocaine market in the 1980s could be said about the bifurcated market in marijuana today. And that makes assessment of average marijuana prices a challenging task.

At first blush, determining the true average price of a drug across a bifurcated market might seem as simple as summing the upmarket and downmarket price and dividing by two. But this is not correct because the frequency of use and drug purchasing are much higher in the downmarket, meaning that the cheap price must be weighted much more heavily than the high-end price when determining the average national price. For marijuana, a good survey for determining average national price would require a sample in which about 80% of the marijuana purchasers live in or near poverty, and the other 20% of purchasers were financially better off.

This of course is not the sort of sample breakdown you will get on the Internet. Internet users clearly “skew upmarket“: They are more educated, have higher incomes, are more likely to be employed and are more likely to be Caucasian than is the U.S. population as whole. Although I don’t have any data on the characteristics of Internet users who read Andrew Sullivan and debate public policy with Stanford University professors, I feel safe in assuming that if anything they are even higher in education and income than is the average Internet user. Finally, to the extent that online contributions to marijuana price estimates come from websites and groups advocating marijuana legalization, this is yet another layer of upmarket bias as those sentiments are strongest among white, highly-educated and affluent people. All of the above factors combined would led us to expect that the comments about my original post would very much reflect an upmarket perspective, as indeed they do.

By and large, the various comments quote prices for an upmarket product, namely sensimilla, which is only about a fifth of the marijuana market (the rest is much cheaper commercial grade product, most of which comes from Mexico). The comments often reflect the upmarket phenomenon of service bundling, e.g., “At my dispensary in San Francisco”. If you live in a public housing project in Dallas and the local drug dealer comes to his door when you knock and hands you a half pound of marijuana in a garbage bag for $300, the price truly reflects the price of the drug. But at a dispensary, with a physical location that you enter, staff on hand and an elaborate system to reduce your perceived risk of arrest (i.e., the doctor’s recommendation), you are buying marijuana bundled with other services and the “price of weed” you pay is in fact only partly the weed.

Let me illustrate the upmarket perspective concretely using two of the many posted comments:

From one of Andrew Sullivan’s readers: I have never encountered decent quality marijuana for less than $200/ounce in the western US.

From a Washington Monthly reader: I’ve been a user since ’68 and nearly everyone I know is a user. Not abusers but users. From my experience, the avg. couple uses daily, usually after work in the evening aka a glass of wine etc. Most couples will average 1-2 oz/month, especially upper income users of which there are many.

The world these two comments describe — the upmarket — is real, but is a small part of the total marijuana market. Sullivan’s reader insists on “decent quality” which is not generally a consideration for marijuana smokers in the downmarket. And the pot smokers described by the Washington Monthly commenter are not the people who do most of the purchasing; lower income people who smoke all day almost every day complete far more transactions and thus influence average prices far more. These two comments and others like them reflect a reality as surely as did Pauline Kael’s alleged remark that she didn’t know anyone who voted for President Nixon in 1972. But Nixon won a landslide for the same reason that the average price of pot in the U.S. is far cheaper than $425/ounce: The experience of a selected part of the population can be extremely different from the experience of the whole.

Author: Keith Humphreys

Keith Humphreys is the Esther Ting Memorial Professor of Psychiatry at Stanford University and an Honorary Professor of Psychiatry at Kings College Lonon. His research, teaching and writing have focused on addictive disorders, self-help organizations (e.g., breast cancer support groups, Alcoholics Anonymous), evaluation research methods, and public policy related to health care, mental illness, veterans, drugs, crime and correctional systems. Professor Humphreys' over 300 scholarly articles, monographs and books have been cited over ten thousand times by scientific colleagues. He is a regular contributor to Washington Post and has also written for the New York Times, Wall Street Journal, Washington Monthly, San Francisco Chronicle, The Guardian (UK), The Telegraph (UK), Times Higher Education (UK), Crossbow (UK) and other media outlets.

54 thoughts on “Upmarket Versus Downmarket Marijuana Prices: A Response to Andrew Sullivan et al.”

  1. Isn’t the difference between wholesale and retail prices (especially for a product with a high-risk distribution system) a simpler explanation?

    1. Bob: The factor you mention matters, but we can’t ignore the fact that there isn’t one product here, there are two with significantly different properties, prices and customer bases, and this would be true whether everyone bought retail or everyone was a wholesaler.

      1. Wouldn’t regulating the production and distribution naturally skew the market upward? Mexican commercial grade product would be replaced by US regulated commercial grade product and all the value added costs that go with it. In addition, simply dividing the wholesale price to determine the market valuation for taxation purposes seems a bit off. If I own a bar and buy a keg there is no tax levied on that transaction. The tax is based on consumption. When you divided the wholesale cost by any unit of measure you are simply determining the cost per unit, not the sales price per unit which is the taxable amount. The taxable sales price per unit is much higher due to the previously stated value added costs (ie resale license, rent, insurance) and profit margin per unit. Finally, comparing street price of crack cocaine to regular ol cocaine seems like comparing the sale of a joint of marijuana to the sale of a spliff which containes some marijuana but a whole lot more tobacco. Please listen to the great drug philosopher Master P’s epic drug ballad “Ghetto D” for more information on how to make a dollar out of 15 cent by altering the chemical composition of cocaine into its cheaper (and much more addictive) derivative.

        http://www.youtube.com/watch?v=aVzhvz3S7FI

        1. Whoa Cowboy! This post and the previous one are about estimating the size of the *illegal* market. It is a separate question, worthy of another post, of what the tax revenue would be for a legal market in marijuana.

          1. But you were originally critiquing an estimate of the market valuation of total US marijuana consumption which currently includes illegal and legal methods of distribution. In addition, your follow up sources a report from South Texas that explicitly states average price per kilo based on wholesale value not retail. The report states that south Texas is a port of entry for illegal marijuana, and the end user is typically not a user in south Texas but a user several states, and middlemen, away. So, regardless of the legality you used wholesale price per pound at the port of entry (or at the peak of outdoor production in the case of Oregon outdoor) to help define the downward market and state sanctioned retail price per ounce to define the upward market in order to substantiate your claim. To compound the problem with your assumption, you failed to take into account the actual data found in the National Survey of Drug Use and Health. You stated that the average price per ounce would skew downward due to the fact that roughly 80% of drug users were at or below the poverty line. But survey data indicates the exact opposite conclusion should have been drawn:
            “In 2010, adults aged 18 or older who had not finished high school had the lowest rate of lifetime illicit drug use (38.9 percent)
            compared with the lifetime rate among high school graduates (46.4 percent), those with some
            college (56.2 percent), and those who were college graduates (52.0 percent)”

            The survey goes on to report that although the unemployed do have the highest rate of drug consumption, 2/3rd of drug users are fully or part time employed. Taking into account the percentage of users under the age of 18 (~7.5%)and those near or at the age of retirement(~5%), and you have an unemployment rate for drug users that is much closer to the national average than you account for in your analysis. You are right when you state that Sullivan users expect decent quality, but we also expect people when presented with data contradictory to the original premise to adjust their analysis accordingly.

            RORY: I CAN’T SEEM TO COMMENT MORE USING REPLY SO AM REPLYING WITHIN YOUR COMMENT. YOU ARE MIXING HEAD COUNTS OF USERS WITH AMOUNT OF USE. A SMALL PORTION OF USERS ACCOUNT FOR MOST OF THE USE OF MOST SUBSTANCES (IN ALCOHOL FOR EXAMPLE, 10% ACCOUNT FOR 50% OF USE), SO THERE IS NO CONTRADICTION BETWEEN A GROUP OF PEOPLE HAVING A LOW RATE OF USERS (WHICH IS JUST A NEVER/EVER VARIABLE) AND A HIGH AMOUNT OF USE EPISODES — KEITH

    1. He is in a better position to make a judgement than Sullivan’s readers with their anecdata. And certainly in a better position than you.

  2. North central Texas prices range from $25/ Oz. to $20/ gram and goes up from there. Many factors involved including quality and original source.

      1. That’s interesting Jerry B. Do you know whether dealers there are discounting ounces vs. quarters, i.e., is an ounce 4 X 25 = $100 or can you get it for $90?

  3. The “dirty cheap” stuff I used to get in college (late 90s) was $40 for a 1/4 ounce. Assume that an ounce would’ve been somewhat cheaper than $160. Say… $125. In 1997.

    Again, that was the cheapo stuff. The discerning middle/upper-middleclass user would scoff at it. It was like the Keystone Lite of pot. But it was over $100/ounce 15 years ago. I find it hard to believe it’s cheaper now, but I have no idea. I haven’t purchased any in 10 years or so.

    1. You’re really not grasping the point of the post that your experiences probably aren’t representative of the population as a whole, are you? Weighing in with anecdotal data is bad enough, but weighing in with anecdotal data that’s a decade out of date is beyond silly.

  4. Not that I’m disagreeing with you, because I don’t have any knowledge base at all about this issue. I just have a question.

    In your DIY calculation, you wrote:

    “Current pot smokers report that they use marijuana an average of 60 days a year. Using our current example, 40 ounces/60 days of use means that the average user would have to go through 2/3 of an ounce of marijuana on each day that they used marijuana. That’s .67 X 50 or 33.5 joints per day of use. And there’s a terrific bridge for sale in Brooklyn too.”

    Today, you write:

    “And the pot smokers described by the Washington Monthly commenter are not the people who do most of the purchasing; lower income people who smoke all day every day complete far more transactions and thus influence average prices far more.”

    Isn’t there some tension between the “average user’s” 60-day-per-year usage (i.e., a bit more often than once a week) and your “all day every day” description of the “people who do most of the perchasing”? If the “all day every day” user drives the average price, don’t we need to use his or her level of consumption – not the “average user’s” level of consumption – to determine the amount consumed? And based on your back of the envelope calculation, that would be 5 or 6 joints a day – which seems to me to be a huge amount of pot, but a joint every two or three hours could be “all day every day.” Or do I misunderstand?

  5. I really don’t think you’ve addressed the points people have made.

    On the higher price side, we have loads of input from the “online community”, including comments on your blog, but also including the crowd sourcing of priceofweed.com. I would grant your premise that the online community would skew towards upmarket, but there’s still a huge gap that must be explained.

    Your explanation for the discrepancy seems to consist of two main points:
    1. Some “cheap price” data you supply from Oregon and Texas.
    2. A personal anecdote about cocaine addicts in Detroit being extrapolated into an assumption of a huge market of poor weed fiends all over the country.

    For point 1, both sources you site are dealing strictly with wholesale. If you’re willing to buy multiple pounds, you will get a huge discount. Everyone disagreeing with you is discussing the retail price they pay for their small bit of weed. The vast majority of pot users buy less than an ounce, and that’s being conservative. It’s more often a quarter or an eighth. A grower does not want to deal with individual users. He’s got a large amount of pot on his hands that carries a lot of risk with it. He wants a couple of large transactions, and he will discount heavily for them. So maybe we’re talking apples and oranges here, but as far as I can tell, you have not yet provided any evidence that the retail market comes anywhere near the prices you are quoting. If you’re speaking wholesale than it would make more sense.

    For point 2, pot is not crack or cocaine. No one’s out there s*cking d*ck for pot money. Even if you smoke A LOT OF WEED, there’s a physical limit to how much you can smoke in a day and how much you feel like walking around with. In theory I guess weed could be so cheap you’d just buy a pound for the heck of it and throw most of it out, but why bother? And just think about the example you used of a guy who answers his door and gives you 8 ounces of weed for $300. 8 ounces of pot is almost the size of a football. Exactly how big is this guy’s apartment? How many people are knocking every day? What does he just have a huge room with piles of weed, and he just empties it out all day? The pure volume we’re talking about just makes your hypothetical transaction seem a bit unbelievable, don’t you think?

    Here’s what two pounds of pot looks like. As you can see it’s a ridiculously large amount. Most people come nowhere close to buying 8 ounces.

    I again take your point that the online community may skew towards the higher end market, but unless you can provide some retail data for low end schwag, I think all you currently have is, “I think prices are lower than you guys are saying.” I don’t see anything in your posts to justify your average pricing. Unless of course you are thinking wholesale, then maybe I could see it.

    1. Hola Alejandro!

      Always glad to hear from you and thanks for the question. I have edited my post to correct the problem you noted. About 80% (perhaps even 85%) of US pot is commercial grade, but some of that (15-20%) is domestically produced, with the rest being from Mexico.

      Your post about alcohol prohibition is excellent and I recommend it to all RBCers.

      Keith

  6. The key omission, which still persists, is that you haven’t provided sources for *your estimate* of $120/oz. STRIDE? NCIS? Your own network of informants from the ‘downmarkets’?

    Also, as noseeum has stated, we need to be clear that we are talking about end-user retail transactions, so the price to look at is the price that obtains in retail sales of quantities usually less than 0.25 Oz.

    tag test

  7. the average i pay for fairly high quality, not the most high quality, is $85 per 1/4 ounce. sometimes that gets as high as $100. and that’s just for 1/4 ounces at a time, which lasts me about a month. i think the ounce cost would be roughly $280 (at $85 per 1/4), for pretty high quality weed. don’t know what cheap weed goes for in chicago. fwiw.

  8. I think this is very informative. If I remember correctly, the original debate involved estimates of the taxable marijuana market in the event of legalization, and your posistion was that the estimated market size posited by Morgan Fox at $120 billion was too hig, and you broke down what $120 billion would be in terms of price/oz. But Fox’s estimate was $10-$120 billion — a wildly disparate range, probably because the price is hard to calculate. Wouldn’t your (convincing) argument on the lower price point suggest that the low end of the estimate is correct, rather than that the high end is wrong? At $120/oz, would the market reach $10 billion?

    1. At least personally, I am just trying to estimate the size of the illegal market. The legal market will have a different size and shape (more customers, but lower prices) and is worthy of a separate post.

      I would bet my house that the current size of the illegal market is closer to the $10 Billion figure than the $120 Billion figure.

  9. Scuttlebutt says, there is perhaps no more common gripe – among those in the know – than the notion of two (2) distinct markets. There is high grade and low grade, but very little in-between, at least in this corner of the northeast. This is cause for endless frustration and a sense of diminishing value. People hate the fact that good stuff is so pricey and cheap stuff is not that good.

    Think of it in terms of (real h2o) snow for skiing. We get plenty, but the fine powder is all out west.

    Such are the irritating vagaries of the gray market.

  10. Another law enforcement data point: Baltimore Police just reported on an 8 pound bust, their estimate of the street value being $25,000. That puts their estimate at $193.50/oz.

  11. Using the logic of this article, red wine costs $24/case because that’s what I can get Charles Shaw for at Trader Joe’s.

    1. No, it would be something slightly more than that depending on how much cheap wine vs. expensive wine is sold, but it would probably be closer to the $24/case than you’d suspect. I imagine that wine is a bit different than pot, however, in that there is a fairly stable relationship between price and quantity purchased, rather than the two-market phenomenon described here.

  12. I think by far the easiest part of determining the size of a post legalization market is estimating the state of the market now (number of users, average price paid, frequency of use, etc). The hard parts are figuring how much the price will fall and how much the number of users (casual and habitual) will rise post legalization.

  13. With a bimodal distribution of prices, determining an average price really isn’t that helpful. More meaningful would be to find the average price of the upmarket and the downmarket products separately.

    For instance, it could very easily be the case that it would be literally impossible to purchase an oz of pot for the avg price (i.e. the avg price of upmarket is $200+/oz, vs < $50/oz for the downmarket with no sellers in between). In which case it's not a very meaningful statistic. Even for determining the size of the total market, it really makes more sense to break out these two and calculate their sizes separately as they will likely be addressed very differently, even once pot is finally legalized.

    1. A similar problem occurs with average income in the U.S., at which few people are actually at, that’s why many economists quote median income instead.

      But for the math, an average is fine for determining total market size which was the point here. Number of ounces sold times the average price per ounce is the size of the market, even if there are zero people paying average price.

  14. I live in Alberta, in a city that’s a 3.5 hour drive from B.C., and regardless of who’s selling, it’s 240 an ounce, give or take.

  15. If you live near the Mexican border the price is a lot cheaper. I used to buy ounces of basic Mexican shwag for $50 in college. Of course once you cross the Border checkpoints in any direction the price goes up quite a bit. I knew people who made good money moving weed from near the border to cities further inland.

  16. Like reading Alice In Wonderland. I live on Vancouver Island, Ground Zero for grow-op grown “BC Bud.” From 1971 I’ve daily smoked my way to a Master’s Degree, a successful “knowledge-worker” career and a certain amount of international acclaim. (Big Deal.) I’ve bought dope everywhere from big time growers and dealers to street punks and dial-a-bag services. I’ve even sold it for a while a lifetime ago. I currently get mine from a 20-year old construction worker who gives me a “friend” (of the family) price. $120 an ounce? I wish! I pay $25 an eighth; buy in bulk it’s $160 per ounce. Police price it far higher.

    OK, even if BC-Bud is the Gold Standard for pot these days, I still pay more than $120 for a bag grown (maybe literally) next door. How much is BC-Bud smuggled into the States (or even outside BC)? More than I pay.

    I can’t speak to the situation in hard-scrabble Detroit or other US cities, yet I question the 80:20 split, as in, “For marijuana, a good survey for determining average national price would require a sample in which about 80% of the marijuana purchasers live in or near poverty, and the other 20% of purchasers were financially better off.” Come on, really?

    Smoking dope is about getting high, not how many joints you smoke. Great dope = high THC = less dope needed for X high; lousy dope is the opposite. But lousy dope is cheaper so wouldn’t the “cost per high” (CPH) be roughly equivalent? Cost per joint for cheap crap might be $1 each, for good shit maybe $4 (for illustration purpose only: not actual prices). But as I only need to smoke 1 good joint to get the same high as 4 bad joints, the CPH is the same.

    Lastly, I think Mr. Humphreys’ strange nomenclature betrays his “academic” knowledge of drugs. What exactly is a “dose” of cocaine? I ended up living as a hermit on a mountain coming down from cocaine addiction and was involved (in a much earlier life) in the trade. Not once, ever, did I hear anyone refer to “dose” when buying/selling blow. It was sold by weight, not dose. Besides, how much is a “dose?” We could cut lots of lines out a bindle so a gram held many “doses,” while I recall Marianne with the shaky hands slipping (sic) and snorting damn near a half a gram in one go. That was quite the “dose:” she was really shaking afterwards. 😉

    “Dose” to me means “one time” use. Thus my point is that until coke (in powder, freebase or crack form) is sold in a standardized one-use weight or size it can hardly be called a “dose.” Though maybe my knowledge is as “academic” as Humphreys’, me being white, 50+ and solidly middle class. And Canadian.

    Anyway I had to respond. Now I have a ton of work to do before I can have a toke, so best get to it.

  17. “…the frequency of use and drug purchasing are much higher in the downmarket…For marijuana, a good survey for determining average national price would require a sample in which about 80% of the marijuana purchasers live in or near poverty, and the other 20% of purchasers were financially better off.”

    What’s your citation for that? You can’t just pick facts and numbers out of a hat and expect readers to take them at face value. The discerning reader expects “data, nuance, the encouragement of independent thinking and a lot of other stuff [legalization advocates] will find upsetting.” This is the same problem that so many of us had with the first post – you just threw out “$120/ounce” for the average price of marijuana without any concrete evidence to back it up. As this post makes clear, that’s guesswork, not data. Is it safe to assume this 80/20 split is more of the same? Since we’re guessing, I would guess that the typical “down-market” user buys 2 grams at a time roughly 14 times a month and the “up-market” user buys an ounce at a time once per month. In that hypothetical case, the frequency of purchase is different, but the frequency of use is the same. I also think that just because you can allegedly buy cheaply by the pound near the border and in areas where cultivation is frequent, that does not necessarily make for a fair low-end base estimate on a nationwide scale.

    Based on what I know, which is more than the average user, $120/ounce is a low estimate even for a low-end user. $200 might be more typical, especially given that they’re not likely to get a “bulk discount” if they’re buying in small quantities. $400-450 is a fair estimate for high-end users. I also think you’re 80-20 split is extreme; 60-40 is probably more accurate. So, I’d put the “average” price at somewhere around $300/ounce.

  18. The price per pound near production or smuggling routes is product priced to sell quickly purchased by people intending to resell. How many pot smokers take a trip to texas to buy a pound for their use for the year? High end users sometimes by an ounce at time to get a bulk discount. But if we are looking at the habits of low income down market users it seems unreasonable to think they have means to take advantage of bulk discounts. People often buy enough for a single session each time they purchase (like crack users). In these markets prices for amounts are not referenced to weight, the names reference the price (this is what you get for 10$, this is what you get for 20$). So, perhaps some people buy a 100 dollar ounce of low grade pot to smoke it themselves. But most of those purchases of bulk weed, especially in a low income market are further broken down into 50$ 1/4 ounces, 20$ sacks weighing a bit more than a gram and half or so, and joints for five bucks. If you want to figure the value of a market don’t you have to include the value in the end sales and not initial purchases at bulk rates?

  19. You’re prices are too low. Everyone I know in California smokes weed, and no one pays less or is willing to pay less than about 250 an ounce or 35 an eigth. Anyone thay pays less than that probably doesn’t use weed often or regularly because it’s basically poorly grown trash (and there’s no excuse for poorly grown weed these days) that doesnt really work.

    1. Even within the quite limited space of this comment thread are people whose personal experience is different than your own.

  20. I think the analysis rings true. At least from my experience in Arizona for past 30+ years. Sure you can get the really, really good stuff for $75 a quarter, but regular grade is $75 an ounce and is hit or miss. I would be considered upmarket by this analysis, but with deep ties to the pot community and proximity to Mexico, I feel like I get downmarket pricing. Funny thing, though, is it’s too complicated to find the good stuff, of which I would gladly purchase on occasion — oh, to end prohibition!

  21. You misspelled sinsemilla (from the Spanish sin = without, semilla = seed) as sensimilla. I toke and I can spell that word correctly. 🙂

  22. Here in the Pacific Northwest, the average cost of an ounce is about $300. This is for high quality marijuana. Grams range from $8-$20, with prices breaks as you buy more. Even in Humboldt County, pounds of quality indoor go for around $3000 on the low end, up to $4000 on the high end.

    This is of course different from low-grade “mexi” weed, which can sell for $200/lb or less.

    I see how determining an average price is no easy task.

  23. The average cost of purchasing an ounce =/ the average cost per ounce. Lots of people buy smaller amounts, and their costs are higher (per ounce) than people who buy in bulk. That may be tripping everyone up.

    1. It seems for the most part none of us are even answering the same question. Take any give eighth purchased by an individual planning to smoke it. In the Northeast at least, that eighth was likely part of a half pound or pound purchased by a small time dealer, which was part of a multi pound delivery to a bigger dealer who may not just specialize in pot. This dealer in turn likely got it from a major importer or directly from a grower.

      There could be even more transactions that lead to the final smoke. And each time the seller expects to make a profit.

      Which of these transactions do you use to value the market? Tough question.

  24. Assuming you aren’t getting crappy weed, the normal prices here in the northeast are $50-60 for 1/8, $100-110 1/4, $200 1/2, $350-400 ounce

  25. I doubt the $125 number as well off hand, but I am in a decidedly “upmarket” area, if not exactly so upmarket myself (Northern California). Half of the time I pay $40 for 1/8th, half the time I get 1/4 oz + for free from growers, so, ya know. So any time I pay it’s high cost high quality, and when it’s free it’s high(ish, maybe a little leafy) quality no cost.

    “For marijuana, a good survey for determining average national price would require a sample in which about 80% of the marijuana purchasers live in or near poverty, and the other 20% of purchasers were financially better off.” I get your point on this line, and about Nixon vote etc., but I’d still note that a large percentage of that 80% is up-and-coming financially, for example people in their 20’s just starting out (eg. I am in my 20’s, closer to poverty than not at this time, but live, pay, and work “upmarket”). So yes, very difficult to determine.

  26. Unlike most of the posters here, I have some data on the “downscale” market that Humphreys talks about, though without much evidence.

    My wife is a public defender in a Pacific NW major metro area, and as with any public defender a lot of her cases are drug related. Over the last decade or so, she’s dealt with hundreds of cases involving “downscale” pot dealers or pot purchasers. Her estimate — admittedly, off the cuff — is that the street price in those sorts of deals runs about $150/ounce. Huge variation, as when talking about the downscale street deals you find plenty of cases of sellers, buyers, or both who are either idiots or totally desperate (or both). But $150/oz was her sense of a typical price.

    On the one hand, that’s a good deal lower than the people saying it’s $400 and up. On the other hand, $150 is higher than $120, and that’s in a city that’s known for having pot prices significantly below the national average (my wife confirmed that’s generally accepted by police and criminals too). So $120 as a nationwide average sounds too low too.

  27. It seems we are on the verge of finding a mean “THC Price”…why cannot this be the metric? Of course, this would take a bit of real research and not the assemblage of anecdotal price points; this is possible, but not too probable in this schizoid semi-enforced / semi-legalized environment.

    I find some of the low prices hard to believe as they seem to ignore the cost of doing business, e.g. growing, harvesting, transporting, selling, risk, etc…and some of the high prices as exceeding inflated; were the latter tabulated pre-lesser-recession when second mortgages and the like were fueling oh so many excesses?

    Be that as it may, why not look to something analogous to Mary-Jane, like tobacco?

    From the CDC web-site: “U.S. consumers spent an estimated $90 billion in 2006 on tobacco products”
    http://www.cdc.gov/tobacco/data_statistics/fact_sheets/economics/econ_facts/index.htm

    Source: U.S. Department of Agriculture. Table 21: Expenditures for Tobacco Products and Disposable Personal Income, 1989–2006. Washington: U.S. Department of Agriculture, Economic Research Service, 2007

    This still makes the $120 billion market somewhat high, but not that high…

  28. The reality appears to be that the Northern California and Oregon outdoor marijuana markets have seen prices drop considerably, early in the 2011 harvest season. The high prices noted around the US by commenters, reflect the fact that the ripple effects of price instability in underground markets are considerably slower than in aboveground commodities. Too many growers have jumped into the NorCal outdoor cultivation arena in the last four years, plus the internet has enabled far more cultivators to refine their growing techniques and increase their yields. Add to this the vast amount of marijuana being imported into the US by the southern cartels, and it’ may be a bad time to buy that plot in Humboldt. In mid-October 2011, high quality outdoor (16-20% THCA) was being offered at 1300/lb “up the hill” in NorCal. One month later, that same quality is being offered for $1100. What’s scary is that price is descending to the production cost of high quality indoor. The good news this year is all for consumers. The bad news is that marijuana middlemen, which includes a significant number of career offenders, are going to see a windfall as they soak up the inflated risk premium as the market catches up with this lower wholesale pricing. The prices I’m quoting are “wholesale” farmer-direct. Typically, these prices are at least doubled by the time they reach consumers.

    1. Morpheus wrote “high quality outdoor (16-20% THCA) was being offered at 1300/lb “up the hill” in NorCal. One month later, that same quality is being offered for $1100″

      That is amazing for high THC cannabis, much cheaper than I would have expected, even if one assumes a tripling of price at the consumer level, that’s still around $200/ounce for high-end product — not likely nationally representative, as you indicate.

      1. Writing in from the Pacific Northwest here and the phenomenon Morpheus describes is something that tracks with my empirical observation. I know both growers and folks who make an annual pilgrimage down to northern California for a little seasonal income augmentation. Last year some in the latter group’s prices began to quite honestly fall through the floor, causing no end of consternation for the former group. At the time I attributed this to the market finally being forced to respond to the general economic malaise of our nation since the financial crisis. And this year is no different, with prices depressed 25% to as much as 40% off their historical (in my personal experience, mind you) numbers.

        This to me is fascinating, for I’ve been amazed for years – the 18 I’ve lived up here to be exact – as to how absolutely stable have been the street level retail prices for up market cannabis. Almost 2 decades of $40 eights & $80 quarters. The price drops I mention barely show up at the level of eight purchases but decrease dramatically as up in purchased weight of weed.

        Not dispositive of much as regards Keith’s total market estimation question, being as it is a singular anecdotal data point, but an interesting phenomenon to me nonetheless.

  29. Keith –

    I hope it doesn’t seem like I’m gratuitously piling on here, for that is not at all my intention (though it may indeed come off that way; if so I apologize).

    I was quite heartened today when I saw that you had decided to revisit this topic. I’m one of the many folk who had a head-scratching “Wha?” moment at the average per oz. prices stated in your original posting – for the same reason as stated by others, namely how wildly at odds the number was with my own personal experiences. But when I read through above, I came away thinking “Man, this is weak sauce.” For I was expecting (hoping, really) to see more citations backing up your claims. And then there’s the rather snide response to Dan Riffle, which I thought beneath you – both in tone and the fact that it a textbook example of “appeal to authority”.

    My problems with your Round 2 posting are thus:

    1. The cited 80/20 split, which a number of others have also pointed out you just throw out there and expect your readers to accept at face value. I’m not claiming it is incorrect but would indeed love to know where it comes from.*

    2. The citation of an article from one of our (Portland, OR) local ‘alternative’ news weeklies. If one goes and reads the piece, the entire thing revolves around the empirical experiences of one individual, which if I’m not mistaken is exactly the same unreliable data sourcing methodology you have argued for the fallacy of several times in rebutting your critics. At the very minimum, it seems like the correct sentence structure should have read “a single report from Oregon…”

    I write the above as a layperson without any of the relevant policymaking experience you have. And so I am most inclined to think you know a lot more about the subject than I. Even so, I think you are not making your arguments as strong as they could be. Certainly there’s a happy medium between a ‘just believe me’ type position and writing out “30 pages of data”? Given your line of work, I feel somewhat secure in assuming this is a regular challenge, that is, succinctly convincing lawmakers, business leaders, etc., to accept as valid policymaking recommendations that (seemingly) fly in the face of said people’s experience and common sense?

    *I believe you hinted earlier that some of your statistics were pulled from Prof. Kleiman’s upcoming book on the subject. Maybe this is the source? I briefly thought about writing him to request he participate in the discussion (or start one of his own) to help substantiate your points, but never did.

    3.

    1. I sincerely appreciate your comment and the spirit in which it is offered. A couple responses.

      1. With respect, a blog written by an unpaid person with no support staff will never be as detailed as serious, peer-reviewed literature on a topic. I have published hundreds of scientific papers as well as a number of books (see our snazzy new left pane) which are full of a gazillion references and charts and formulas and data, most of which was done with federal support and so is in the public domain (i.e. free). I can’t do the same thing here and wouldn’t if I could because there would be no added value in my eyes of doing the same thing in two places. But my scholarly work (like Mark Kleiman’s) is always there for people who want to dig for hours into a topic and I sincerely hope they will. If people expect my blogging to be at the same level of detail as my formal academic work I will disappoint them and I accept that.

      2. Again, minding that I am unpaid blogger with a demanding day job, if I say it myself I answer questions about details here at RBC with regularity. I try to read every comment (look through my prior posts) from people who do not have a history of being abusive. I answer many questions, some of which result in another series of questions from the commenter. I understand everyone wants all their questions (and their follow-up questions) answered promptly and in detail. But even if this were paid gig I just couldn’t get to all of them, any more than I can answer all the emails I get every day asking me questions. Maybe a younger or more energetic person could do much better, but what you see here is what I can reasonably do, and I don’t think anyone can complain about the price.

      3. On the issue of authority, please don’t misread what I said to Dan Riffle (and how I feel more generally about people who write in and say they don’t believe what I say — why do they bother to read me, by the way?). I am not asking him to respect my authority I am telling him that if he doesn’t want to believe me, there’s nothing I can do about it and he should read someone he does respect. Every week I have people who do trust my expertise asking for my help: Desperate parents of kids who are addicted, people struggling with alcoholism, clinicians wanting help on implementing treatment, students wanting to learn about the field, people in state legislators and attorney general’s office and in Congress and in city government and in police departments and public health agencies trying to make good policy, officials in other nations who are grappling with addiction in their own countries. Think about my opportunity cost structure: I could take 30 minutes with someone who thinks I know something and thereby perhaps help them save lives, or I could spend the same 30 minutes trying to convince a total stranger who has pronounced me an idiot on the Internet (I know you are not saying that, but more or less many web denizens do) that I am not as much an idiot as he thinks. I do what you or anyone else would do, I prioritize helping the people who trust me to help them. As a result a number of people I don’t know continue to believe I don’t know what I’m talking about…so be it, life goes on.

  30. Keith — much props for your public health work! I am sure you are one of the good guys, overall. But this kind of explains to me why you would be offering the 80/20 estimate and thinking about cannabis consumption in that way:

    “Every week I have people who do trust my expertise asking for my help: Desperate parents of kids who are addicted, people struggling with alcoholism, clinicians wanting help on implementing treatment, students wanting to learn about the field, people in state legislators and attorney general’s office and in Congress and in city government and in police departments and public health agencies trying to make good policy, officials in other nations who are grappling with addiction in their own countries.”

    you know who doesn’t ask for your help? millions of people who consume lots of cannabis without any problem at all — these usually being folks who purchase “upmarket” cannabis. That might explain your 80/20 estimate. Someone who constantly encounters illicit drug consumption as a problem, and when it is a problem as I’m sure you know it correlates with socioeconomic insecurity, would be much more likely to make such an estimate. on a related note, would be interested in your opinion of Bruce K. Alexander’s work.

    1. Thanks for the kind words Dominic. But I wouldn’t generalize from my own idiosyncratic experience to infer national trends, just as I am cautioning others not to do.

      If you look in the NSDUH data set at days of use by educational level within the marijuana using population, you will get a much better sense than my personal experience will give about the shape of the market. IIRC much of this analysis will be included in the coming book on marijuana legalization by Hawken, Kleiman, Caulkins and Kilmer (out in March or so I believe).

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