Cannabis taxes will wind up too low, not too high

The big threat to cannabis legalization isnt high taxes; it’s low taxes and loose regulation.

Legal cannabis will naturally be much, much cheaper than illegal cannabis. A joint is the same sort of item as a teabag: the dried flowers of a plant in a wrapper. A fancy teabag costs a dime at the supermarket; the marijuana in an average joint costs about $4 (0.4 gram of sinsemilla flowers @ $10/gram) on the current illicit and quasi-medical markets. The combination of not having to worry about law enforcement and the economies of mass production will inevitably drive the joint price down close to the teabag price. (Generic tobacco cigarettes can be manufactured for about two cents each; the remainder of the price is marketing expense, quasi-rent on brand names, and taxes.)

Now that the federal government has made it clear that state-licensed production in Washington and Colorado will mostly get a pass from federal law enforcement, and now that Washington has decided to allow outdoor growing, avoiding the production bottleneck that might have resulted from the lags in local land-use approval for growing facilities, I’d expect to see much lower-than-current prices in Washington State’s commercial stores no later than next fall. (If I had been running things, I would have started with lower tax rates to speed the transition to the legal market, and then raised taxes to offset the fall in market prices, but the tax rates were in the legislation the voters passed.)

Even at current prices, cannabis is a remarkably cheap intoxicant. A  drinker who hasn’t built up a tolerance might need about $5 worth of mass-market beer to get sloshed; a similarly fresh cannabis smoker could float away on half a normal joint: call it $2 worth. Colorado medical dispensaries already offer their “weekly special” strains of sinsemilla at $5/gm., with volume discounts, and vaporization seems likely to lower the effective cost substantially.  Anyone who’s worried about the price of cannabis is spending far too much time stoned.

Taxation, even if it is very heavy on ad valorem (percentage-of-price) basis, won’t change that picture much; Washington state will collect something like 40% of total retail prices in tax, but 40% of “damned near free” isn’t very much. Colorado’s taxes will be even lower.

The illicit markets may start out with a price advantage over taxed and regulated commercial markets for a year or two. Even then, the quality/reliability/ legality advantages enjoyed by the legal stores would be expected to quickly push the illicit business to the margins, as legal alcohol has done with moonshining. That will be especially true if the states that legalize make a vigorous law-enforcement push against purely illicit activity.

The untaxed and (in Washington State) unregulated quasi-medical markets may also enjoy a price advantage; if people with medical recommendations can buy their cannabis tax-free, we should expect a certain amount of arbitrage. How best to rein in the out-of-control medical-recommendation systems is a challenge that Washington and Colorado (and California, which hasn’t legalized for non-medical use but which has more “medical marijuana” outlets than it has Starbucks) will confront over the coming months and years.

So the biggest worry about legalize cannabis would be a big upsurge in heavy use, and that worry would be exacerbated to the extent that the growth in heavy use is among juveniles. (Provision to minors is by definition illegal, but, as with alcohol, it seems unlikely to generate a distinct illicit market; younger smokers who can’t buy in the stores will be supplied by older siblings, older friends, their parents’ supplies at home, and straw purchasers.

How big that problem turns out to be depends in part on unknowns and in part on policy choices. If cannabis prices are allowed to fall to something like their free-market levels, a very large increase in heavy use would be the likely result. Preventing that will require heavy specific-excise taxation (perhaps on a per-milligram-of-THC basis) and enough enforcement to prevent the evasion of that tax.

The other approach to limiting the increase in heavy use and use by minors would be on the information side: limits on marketing, required vendor training, aggressive consumer information both at point of sale and in the community.

Naturally, true-believing libertarians insist that cannabis legalization be done in the way likely to generate bad outcomes. Taxes BAD! Regulations BAD! “Commercial speech” is SACRED! The free market FOREVER! And of course drug abuse is a merely imaginary problem, so cannabis is just an ordinary commodity that the market will handle perfectly.

It’s possible that they’ll get their way, and that as a consequence the results of cannabis legalization will be just about as bad as the drug warriors keep predicting: the reproduction of our very bad, no good, awful alcohol markets. It’s barely possible – this is what my drug-warrior friends hope – that the results will be so awful that the voters shy away from legalization altogether.

Jacob Sullum has elevated the temporary risk that relatively high taxes starting will slow down the migration from the illicit to the licit market into an existential threat to the legalization project, and is more or less encouraging Colorado pot fans to double-cross the rest of the voters by rejecting the taxes that were the premise of last year’s legalization push. “From a consumer’s perspective, something has gone terribly wrong if legal marijuana prices do not end up being substantially lower than black-market prices.” That’s true, if by “consumer” you mean someone who smokes multiple joints per day. For anyone else, the cost of weed is way down in the rounding error of a personal budget; a weekly smoker might now be paying something like $100 per year for cannabis, even at current prices.

Andrew Sullivan seems to take this seriously. Talk about solving the wrong problem!

Author: Mark Kleiman

Professor of Public Policy at the NYU Marron Institute for Urban Management and editor of the Journal of Drug Policy Analysis. Teaches about the methods of policy analysis about drug abuse control and crime control policy, working out the implications of two principles: that swift and certain sanctions don't have to be severe to be effective, and that well-designed threats usually don't have to be carried out. Books: Drugs and Drug Policy: What Everyone Needs to Know (with Jonathan Caulkins and Angela Hawken) When Brute Force Fails: How to Have Less Crime and Less Punishment (Princeton, 2009; named one of the "books of the year" by The Economist Against Excess: Drug Policy for Results (Basic, 1993) Marijuana: Costs of Abuse, Costs of Control (Greenwood, 1989) UCLA Homepage Curriculum Vitae Contact:

87 thoughts on “Cannabis taxes will wind up too low, not too high”

  1. Even using the most expensive grow methods with the top strains of seeds it costs pennies a gram to produce what the government wants to make 3 or 4 dollars from,,that leaves too much room for a black market,especially where numerous people know how to grow premium quality marijuana. When yu add profits to the growers and distributors you are underwriting a black market.The only way the state can make even $2 a gram in taxes is if the move production into the prison system where the taxes would be the cost of the weed. Hell,deliver it through the post office and save their ass while you are at it.

    1. You could say all this about ethanol, too, and yet we’re not overrun with moonshiners (that I know of!). People will pay significant taxes to remain within the licit marketplace; there are so many advantages not only for the producers and sellers (no legal harassment, no costs of doing furtive business, no snitches, no money laundering) but also for the consumers (name-brand, reliable, reproducible products wherever and whenever they want them). I don’t know about the numbers, but your scream of rage that the government shall never take away the marijuana sellers’ freedom seems empty to me.

      1. Clay: Even using the most expensive grow methods with the top strains of seeds it costs pennies a gram to produce what the government wants to make 3 or 4 dollars from

        Warren: You could say all this about ethanol, too, and yet we’re not overrun with moonshiners (that I know of)

        I challenge you to produce your own beer for significantly less cost than the equivalent volume of Budweiser at retail, taxed prices. It’s not as inexpensive as you seem to think.

        Warren: I don’t know about the numbers, but your scream of rage that the government shall never take away the marijuana sellers’ freedom seems empty to me.

        WTF??? Please quote from Clay’s commentary where the hell you got this notion from?

    2. @ the article. (I can reply, but not comment………..websites hate guests……)

      $100 a year? At current prices? Are you serious? $100 per two weeks, at $5 for a gram or two, local prices (red state/bible belt/felony=Higher prices), for mid. (that’s 2 dubs a week at $40 {$20 for a dub, dub=4-7 grams, depending on the dealer….. 5 grams, average}, plus gas $10). $100 a year, right. yeah $100 a year for gas too, while were at it…..

    1. There are regular posters on this blog who seem to believe exactly that. Sometimes they hand wave in that direction and proceed to argue that any attempt to do anything about it is evil. If they want me to believe that they think it is not an imaginary problem, they need to address it in some way.

    2. Go ahead, Pete. Look through Sullum’s column and find the reference to drug abuse. If it’s a real problem, why is he ignoring it?

      1. And once again, you have produced an article on marijuana legalization policy in which I cannot find a single reference to the real problems resulting from prohibition enforcement. Should I assume and then assert to others that just because you’re not reproducing Radley Balko’s work today that the abuses inherent in prohibition enforcement are imaginary problems in your viewpoint? After all, if this is a real problem, why are you ignoring it in this singled-out column?

        1. If I were arguing against legalization, of course I’d discuss the disadvantages of prohibition. Since I’m writing specifically about how to implement legalization, the problems of prohibition aren’t really relevant. Sullum is arguing for lower taxes. The predictable result of lower taxes is more drug abuse. He doesn’t mention drug abuse. That’s an error.

          1. The problems of prohibition enforcement are relevant when you’re arguing for “a vigorous law-enforcement push against purely illicit activity” in the context of implementing legalization, wouldn’t you agree?

            While I was scanning Sullum’s columns at Forbes, looking for the missing second link (thanks, BTW, for fixing it), I came across a piece on addiction which explains why he might find worries over drug abuse as irrelevant to the issue of taxation as you find prohibition abuse irrelevant to the issue of implementing legalization. Summing it up in the last paragraph:

            But the study inadvertently highlights an important truth: Anything that provides pleasure (or relieves stress) can be the focus of an addiction, the strength of which depends not on the inherent power of the stimulus but on the individual’s relationship with it, which in turn depends on various factors, including his personality, circumstances, values, tastes, and preferences. As Peele and other critics of neurological reductionism have been pointing out for many years, the reality of addiction lies not in patterns of brain activity but in the lived experience of the addict. Locating addiction in the unmediated effect that certain stimuli have on “the brain’s pleasure center” cuts the addict out of the picture. His desires and choices do not matter, because he is under the control of irresistible impulses caused by exposure to stimuli too powerful for him to deal with on his own. And this is where the fallacious moral justification for forcible intervention, whether aimed at drug abuse or obesity, comes from: He cannot help himself, so we must help him, whether he likes it or not.

            I’m still trying to understand your fears over marijuana abuse specifically. Millions of people in this country smoke it daily. Where are all the bodies? People abuse caffiene too, and I could show you a few of those bodies, including children, to whom it is readily and inexpensively available everywhere in the country (and probably world-wide), but I never see you fret over that.

          2. The oreos “study” is a press release of an unpublished, unreviewed undergraduate student research project.

          3. I think the “pleasure = addiction” framework is basically right. Of course anything pleasurable is addictive. Indeed, the unstated premise of ALL Prohibition campaigns is puritanism, the idea that pleasure is bad and the government has to make sure people don’t get too much of it because they might become addictive.

            Now, of course, certain substances are addictive disproportionate to the amount of pleasure they provide and also cause harmful effects on other people (like auto accidents– increasing health care costs doesn’t count as that would allow the government to ban tasty foods). With respect to those substances, you can still justify Prohibition. But the general Prohibition instinct is that if someone’s putting something in their body and having fun, they must be sinning and have to be stopped.

          4. Yes, good points here on the Prohibitionist ideal, although I think hanging that tag is freighted with negatives that have more to do with attempts to implement it as policy than with there being anything wrong with purity of soul and mind. On the other hand, modern life is even more psychologically brutal than Victorian life. I certainly agree with the notion that human are drug-taking organisms. It’s in our DNA. We’re smart when we foster wisdom about that and really dumb when we foster myths about it. Obviously, YMMV for participants here.

            One thing I have noticed about the antipathy to home grow as an option is that it seems grounded in the assumption that anyone doing that is, per se, engaged in abusive behavior the state doesn’t want to sanction in a positive way. “They must need so much they have to grow their own! And that can only mean abuse!” Certainly not true. There are many reasons to grow your own. Certainly, if your habits would otherwise be a financial burden, then yeah, that makes sense and is even responsible behavior in many circumstances. But for those growing, that’s rarely the sole or even a major calculus.

            Most importantly for the argument here, it’s a healthy relationship. You have to rely on your crop, generally, so you don’t binge smoke it. You notice the need to moderate consumption to really enjoy something like this. Decoupling from the brutal concepts of “value” our society imposes in itself releases a lot of positive energy that is valuable for the rest of your relationships. I’m not a religious person, more spiritual, so perceptions of what this is will differ. Empowering people to do for themselves one thing important in their life they could not previously control is a known way to improve one’s psychological condition. For all the worries about abuse and those who want to neglect that possibility, I’d argue the net positives have yet to be taken fully into account. For most of us, that’s what we’ll find if marijuana is legalized in a fair and reasonable fashion.

            Yet there are still those who find that approach to things to rate a prison cell, not studied consideration. We’ve got to get past that, just as we have to find a way to legalize marijuana that doesn’t do more damage than has already been done to our society. I’ll consider anything, but I start with what I know reasonable people are doing and what solutions have a credible chance of success. “Law enforcement surges to enforce tax laws” sounds more like the plot from “Red Dawn II: Self-Invasion!” to me — and I’m a practicing (when I can) socialist. Good luck with that.

          5. OK, now it’s clear. Kleiman is unwilling or unable to distinguish between frequent use and abuse.
            Can someone direct me to a post of K’s that spells out exactly how much pot use is abuse? What if one vaporizes nightly and in the day is a productive professional- from this article, I’m afraid Kleiman would say that person is a drug abuser. Which is stupid for anyone who’s familiar with such users (Mark probably IS familiar with such, but they probably don’t reveal it to him because of his small mindedness on this subject).
            I was a wake-n-baker (i.e. getting high throughout the day) for a few years in my early 20’s. While I was an “abuser,” I worked full-time, decided to complete my bachelors, continued to get a masters, and found full-time employment. Anecdotal, yes. But not uncommon, and absolutely nothing in Mark’s posts that I’ve seen address the fact that millions can consume plenty of cannabis with no tangible negative effects. Mark has a tendency to dichotomize, and such lack of nuance is not helpful when talking about this complicated and RELATIVELY innocuous drug. This is much ado about nothing.

      2. BTW: Your second link in reference to Sullum links back to your own blog post (this one) instead of pointing to anything Sullum wrote.

      3. Mr Kleiman is being either deliberately or intentionally misleading by using the unqualified phrase “drug abuse.” He is too smart to know that the consequences of chronic use of marijuana, while real, nothing like other substances that come to mind when we hear the word “drugs.” He knows very well that alcohol, meth, crack, heroin, are quite toxic and leave chronic users unable to function in society. If he insists on putting scare quotes around ‘medical marijuana,’ then he should definitely use when he speaks of ‘drug abuse’ and marijuana.

        Kleiman also insists we cannot know with any certainty the societal price tag of cheap legal weed; in another breath he’ll assure us that it’ll lead to high rates of “abuse,” which he somehow knows, is so bad that the government must make pains to discourage adults from doing what they want. I’m trying to understand the nature of his apparent disdain for people who enjoy cannabis more than once a week…

  2. a similarly fresh cannabis smoker could float away on half a normal joint

    Despite all the talk about high-end marijuana as a connoisseur product (which is sincere, just incomplete), the drive to stronger breeds was more about making an illegal product in an efficient way. Easier to hide the growing, easier to move in bulk, higher margins per weight. It’s denser, like platinum versus silver, and thus more potent in small quantities. I suspect there are also a lot of people who would prefer to have marijuana which was just as tasty as the newer strains but had a significantly lower level of active ingredient. Most people do not want to gulp a big glass of beer only to discover it was actually high-proof booze. I suspect but can’t prove that a lot of unfortunate stoned behavior results from getting a lot higher than one expects. There would be some gains from having reliably less potent varieties available. There must be a taxation method that would encourage that.

    1. In Britain, excise taxes (true specific or per unit taxes, not sales taxes) on booze follow this logic. Table here. For spirits and strongly fortified wines like liqueurs, it’s a pure tax on alcohol content. For wine, beer and cider, it’s in various bands by alcohol concentration. Presumably this is because it’s much easier to administer. Most wine and beer will fall in two quite wide standard bands (2.8%-7.5% for beer, 5.5%-15% for wine). The exciseman only has to count the bottles, not test them.

      A hybrid scheme like this is surely easier to run than a pure THC-based one. That is, for a standard low concentration joint, you tax by weight or packet. For the higher-strength stuff, you tax by THC content, more intrusively. This creates an administrative incentive to market low-strength product.

      1. I can’t figure out why bands (they may be called step functions or they may be said to create cliffs) make sense today.

        The first cliffs I know of – six of them — arose in the first U.S. Federal liquor tax under Hamilton and Washington, the one that sparked the Whiskey Rebellion. The measuring device mandated by statute was “Dicas’s hydrometer,” which operated by adding weights “only one at a time.” I don’t follow the technology completely, but a step function seems to make sense as a result in that iterative process. We are more accurate today. Maybe bands are easier to administer, but if you can measure something, why not just apply some rate to what you measure?

        But these bands, step functions, or cliffs persist in the United States as in the United Kingdom. Here are the Federal alcohol tax rates. We tax liquor by potency, beer by volume, and wine with bands or cliffs. Since the rate goes up at 14 percent, we see a good bit of 13.9 percent alcohol content.

        Maybe inertia in the law explains these bands.

        1. It’s not like income where step functions make no sense now, with spreadsheets available to all. Suppose you tax wine and beer by alcohol content, not in bands. Every single vintage of wine – and even a small merchant will carry hundreds – has its own rate; every time a craft brewer brings out a new brew, he has to register it with the excise. No, bands make a lot of sense. Clustering at the top end of the band isn’t a major problem, it improves predictability for the customer. KISS!

          1. Thanks for thinking about this minor matter – we are getting down into the capillaries.

            I’m all for simplicity. I just think bands (cliffs) are meaningfully simpler now only if the winemaker (or brewer, in the United Kingdom) doesn’t measure alcohol content at all, and just assumes it falls within a particular band for tax purposes. I wonder if that happens much. We see alcohol by volume listed on beer and wine bottles routinely here. Maybe disclosure is mandated.

            Pre-computer, it certainly used to be meaningfully simpler to lump together (here I rely on imagination rather than knowledge of batch size) a batch of 223 gallons at 12.9 percent alcohol by volume, a batch of 371 gallons at 12.3 percent alcohol by volume, and a batch of 406 gallons at 13.1 percent alcohol by volume – and apply a single rate to the whole 1000 gallons. But these wine bands or cliffs in current U.S. law pre-date the computer age, and seem like vestige of an earlier time.

            This kind of percentage threshold in the tax law is quite different from, say, the 2 percent floor on itemized deductions here in the United States. If you go over the threshold, each dollar is deductible. There’s no cliff or whipsaw. With the alcohol bands or cliffs, one hundredth of a percent difference in potency (we are in Theoryland here) creates an enormous difference in tax. That makes for silly results, and for game-playing and brinksmanship. That’s just my take. This may be the smallest issue around, but still worth getting to the bottom of — and I’m not sure I have yet.

    2. I have no idea about what level of potency will emerge as being popular (nor about marijuana generally, really), but common sense says that a commoditized, industrialized joint will be predictable in its effects (or at least reliable, as individuals vary), which should take care of a lot of what you describe.

    3. Encouraging lower-potency strains is the point of taxation by THC (or, if you want to get a little fancy, THC minus CBD).

      I hope you’re right that the demand for super-pot is an artifact of illegality, but that doesn’t seem to be true in, e.g., the Netherlands or Colorado. The more likely mechanism is that the volume in the market is driven by people who smoke so much they’ve built up a tolerance.

      1. Mark,
        I’ll have a lengthier reply re taxation issues tomorrow.

        For now I just wanted to note, the demand for potent pot is not driven by users who have “built up a tolerance.” Potent pot gets to be ho-hum when you’ve smoked enough of it, just like its weaker cousins.

        Smoking more of the same won’t do satisfy you, no matter how strong it is. That’s one of the clear benefits to the consumer of a legal, regulated market. The key to gaining a buzz under those circumstances is switching to a _different variety_. Most street level dealers typically sell a single strain — whatever brick they bought last is your choice. The average cannabis storefront offers multiple strains. This makes it much easier to switch off and not run into the “been there-done that” characteristic, where your brain is telling you it’s bored with what you’re smoking.

        This feature actually works pretty well for medical users. In many case, not all, we still get most of the medical benefit under these circumstances, but quickly acclimatize to the variety just like everyone else in terms of “stoniness” just not being there. This is what facilitates many med patients simply being able to go on about their business without their medicine substantially interfering with things like work and driving.

        In fact, part of being a patient is realizing you’re just not going to have as much fun with what is now your medicine in the more usual circumstances where you don’t have a store with lots of different choices for your supply or when you grow you own and that variety is what it is.

        I am actually rather surprised that you have this notion that potency is about overcoming “tolerance.” John A. has it pretty much right. I will only add that expensive pot tends to be taken care of better, not compressed into bricks to get across the border, careful attention to humidity to avoid mold, trimmed nicely, etc. It’s just tastier in most cases compared to its more pedestrian kin, while the potency is nonetheless treasured.

        And it’s rarely the case that someone truly overindulges in smoking marijuana, no matter what its strength, with the exception of naive first time users. If it’s particularly strong, you can usually tell after the first hit — and titrate accordingly.

        I will agree that most users probably won’t seek out the strongest varieties when presented with a choice of multiple varieties. This is one place where a legal market will definitely benefit the consumer. The reason for this is one often smokes more of the same ol’ weed trying for the buzz you got from it at first. If you have more than one variety on hand, you’ll most likely smoke less in the aggregate than you would if it was all the same by switching between different strains. This may seem paradoxical to non-users, who still tend to see marijuana through lenses made for alcohol, but it is one of the advantageous features of marijuana that set it apart from alcohol.

        1. Mike,

          I suspect having that variety available will reduce the tolerance phenomenon, but I doubt it will eliminate it. There are people who smoke pot to get wasted, period. They are going to seek out high-THC strains and behave just like Mark suggests.

          I also think you somewhat underestimate how powerful some of the strains have gotten. There are experienced dope smokers for whom one hit of those strains is already more than they want.

          1. John,
            You are correct. Switching varieties is not going to get you back to Square One Stoniness. Which is actually another feature that militates against Mark’s concerns about overindulgence. The only way to enjoy fully is to NOT overindulge. Otherwise, you’re just wasting money.

            And it doesn’t matter whether it’s taxed at a particular level or not. The relatively few who abuse it are simply abusing their pocketbooks. Mark wants to hit them again by making sure taxes are high, even though they’re – not so much. Which do you think they’ll notice quicker, not getting the buzz they expected or the thinning of their wallet? I’d argue that the lack of enjoyment is a far greater incentive to moderation than whatever level the tax might be. Once again, a seeming paradox to those familiar with alcohol, but that’s the way reefer rolls.

            As for those powerful strains that will numb my brain so that I wished I’d stopped at the first hit…bring it on. Hasn’t stopped me from a second hit yet…although a few times that was enough. And then I didn’t take another hit right away. No problem!

            Marijuana is pretty much self-regulating in terms of overindulgence. Scare stories circulate, but once put into context, they are simply a reminder about how unique and typically harmless even overindulgence can be in comparison to alcohol. Yes, there are a very few people for whom that sets off problems, but that’s like saying we should ban peanuts because a few people have deadly reactions to them. And marijuana will NEVER cause a deadly reaction.

          2. Mike,

            You are right that one of the strongest points in marijuana’s favor is that overuse of it is a lot less horrible than it is with almost any other drug. But there are a lot of people who are smoking it less for enjoyment and more to become comfortably numb. (Maybe that’s enjoyment for them, but it wouldn’t be for me.) And I think there are more of them than you are acknowledging. There’s a good chance they’ll drive the market.

          3. John,
            I don’t doubt that are people who smoke dope to numb out. But I can only point to the fact that marijuana is probably the least harmful of the many substances, legal and illegal, that people turn to to do that. I think there’s actually quite a bit of social value in that and firmly believe that more than offsets whatever negatives occur.

            Regardless, neither legal sanctions or high taxes will prevent that. Someone having those sorts of issues who doesn’t sort it out for themselves before doing damage to themselves or their relations with other should seek help. Making a substance illegal always makes that more difficult. Thus I tend to have some trouble when concerns are expressed about “helping” people in various ways when it’s not clear this is either necessary or desired.

            This is even more the case when those efforts to “help” are generalized against certain groups in our society. I know those who’ve benefited from the way things are are frightened about the Brave New World of legal weed dawning on the horizon. But I think we already know how that world is — a lot like the one we have now. It’s only the government that can really screw up this transition, because they have the power, money, and actual responsibility to enact their own change from within. The population has already largely moved on. The cat is long out of the bag. Solutions that imply the cat should be back in the bag, tied to a leash, or caged for its own good are just not going to work.

            War is over.

            If some important parts of our society don’t come to terms with that, then war will continue for them — and the social costs will continue to accumulate for the rest of us. It’s time we quit pretending we can control something anyone can easily grow, who the majority of our society believes commits no crime to have, and which the continued enforcement of laws against it only alienates and divides a society that badly needs to come together to meet the needs of the 21st century. That future includes legal weed, with no more stigma attached to it than picking up at the store — or brewing in your basement — a six-pack.

      2. Mark,

        This is one more reason your ideal approach to legalization makes so much sense to me. With lots of little growers and no centralized distribution, there should be more room for diversification in the market. (I think. My microeconomics is at about freshman class level.) But your story about that once-popular strain that left the market once its relatively low THC content serves as a cautionary tale.

        It also might be that, had the market developed under a legal regime earlier, high-THC strains wouldn’t have become the default, but that now that trend has established, it isn’t possible to reverse.

        1. A legal marijuana regime would have to have developed by circa 1978 to have undermined the trend toward homegrow that developed in response to Pres. Carter’s ill-advised decision to spray paraquat on the foreign source fields in coordination with a marked increase in efforts to obstruct the air and sea routes that were the primary lines of transport. I know that’s what first got me growing full-time for my supply and if you look at High Times from that era you can see the explosion in ads for lights and other growing aids.

          Then there’s hashish, of course.

          I think those who enjoy marijuana have typically sought out greater strength in their cannabis, in large part because what was available to the average consumer was so poorly handled. Improved quality should not be labeled as a negative result. People do in fact smoke less when they have a stronger product. Learning about how strong a new sample is is one of the great joys — or disappointments — of reaching in for that first toke. If it is stronger than expected, well your baggie is going to last longer. That’s a good thing in my mind, whether you just want the buzz or you’re worried about public health.

          1. Some of the push towards high grade is due to market efficiency, but a lot is because better pot is better – a hit of the best will take you places that any amount of mediocre can’t.

            Hash and other concentrates may well be the game changer. Some small time Colorado growers I know are reserving the trim and lowers for their own use making oil and selling the buds. Growing outdoors and not having to put in the hand labor required for buds with bag appeal would drop the cost to teabag or below.

    4. As a corollary to this, I’ve wondered if we’ll see a drastic increase in the number of people who are moderate or light smokers of marijuana after all these legalization efforts.

      Almost every adult I know drinks occasionally–i.e. one glass of alcohol four or five times a week. Far fewer people either overdrink (three or more glasses every night) or don’t drink at all. Will the marijuana market operate in the same way?

      I’ve enjoyed marijuana the twenty or so times I’ve smoked it in my life. But only in its mellow varieties. (The one experience with a hyper-potent strain I had, I absolutely hated.) But I don’t smoke more often simply because it’s been illegal and I don’t see myself as the type of person who would purchase illegal drugs. I wonder if I and others like me will now be more inclined to partake.

      1. Yes, that would be the good outcome: more casual smokers, not much expansion in heavy use. Much more likely if prices don’t collapse.

    5. Wrong. Those rich, skunky smells that make high end cannabis high end are essential to the flavor. If it were simply a matter of breeding the crop to be easy to hide, then those smells would be a thing of the past. There are breeds of cannabis that are low odor, and are grown for that purpose. NONE of them are “premium” strains, and some (like M39, a commercial strain out of Canada)are supremely strong. I’ve been growing and breeding cannabis for decades, ever since I was a graduate student. I do not consider those things when I select parents for a cross.

      1. A fair point.

        Still, it’s easier to hide a pound of skunky pot than, oh, four pounds that aren’t, space-wise. Once you’re moving a lot of it around, the effort to disguise the smell should be lower than the effort to hide the bulk.

  3. A joint is the same sort of item as a teabag: the dried flowers of a plant in a wrapper. A fancy teabag costs a dime at the supermarket

    Ah, here comes the teabag analogy again. When I can buy a dime-bag (of any size) for an actual dime, I’ll take this sort of argument seriously.

    “From a consumer’s perspective, something has gone terribly wrong if legal marijuana prices do not end up being substantially lower than black-market prices.” That’s true, if by “consumer” you mean someone who smokes multiple joints per day. For anyone else, the cost of weed is way down in the rounding error of a personal budget; a weekly smoker might now be paying something like $100 per year for cannabis, even at current prices.

    Show me a weekly coffee drinker. Most people I know drink multiple cups a day, and though maintaining their “habit” isn’t a major cost factor in their personal budgeting, they are still sensitive to price increases and would probably feel that something had gone terribly wrong if it were taxed to raise the price to levels approaching what we might expect if it were prohibited. Is that drug abuse?

    I’ll repeat what I recently said in reply to one of Keith’s articles:

    Scientists are discovering what a lot of us already knew — practically anything can be addictive and have the same negative effects as drug addiction. Joseph Schroeder of Connecticut College in New London found that Oreo cookies have similar addictive effects using the same biological mechanisms as Cocaine and Morphine. So I guess Keith might actually have a valid point about legalization and commercialization leading to more potent products: Nabisco has been fiddling with the potency of Oreos for years. These are not your grandfather’s Woodstock cookies!

    Anyone still serious about using the law to curb addiction really has their work cut out for them.

  4. OK, I promised a longer reply to the issues of taxing marijuana. Here it is.

    Price does send signals, but this is one factor among many that drives consumption. I think the argument Mark made can be stood on its head by pointing out that it’s probably the case that whatever taxes are set, they can’t be set high enough to discourage heavy users — although my experience shows me there is nowhere near as much to worry about with that as Mark implies.

    Yes, some people overindulge. A few may have bad reactions. But these numbers are, by way of comparison to alcohol, dramatically fewer in number and severity, enough so it makes many heavy users wondering about the depths of hypocrisy that make booze legal and marijuana not – yet in many places. It’s also a strong argument that the substitution effect hasn’t been factored into Mark’s analysis, i.e. how many people will put down the bottle – or never start – because they have marijuana available as another option to booze. I’d argue that if even a small percentage of drinkers were diverted to marijuana, the benefits of them not engaging in behaviors typical of alcohol abuse would be far greater than any possible negative effects from marijuana use – or even marijuana abuse.

    I’d argue that pushing prices up through taxation simply presents a “come-back” opportunity for the black market. If high taxes mean an ounce will cost $300, while production costs remain pennies on the dollar, then that situation _sustains_ a black market. To set up a situation that pushes the illegal trade out requires underpricing that trade. So long as high taxes – or illegality – prevail, this builds in profit for those who produce but have no intention of paying taxes. Illegal producers pocket the difference that taxes would otherwise be paid from. In fact, high taxes, like illegality now, sustains illegal trafficking by building in a subsidy to the illegal trade they can access by simply selling their product.

    I will agree that marijuana taxation will work best as an excise tax on weight, rather than on price/value. Tax schemes that require testing for THC content/potency are problematic and far too complicated for what might be gained, as well as building in more unnecessary cost. The accuracy of these tests is also questionable beyond the sample tested. I do support the need for labeling for the consumer, but as a general guide rather than a precision pursuit. If a strain produced a certain potency, you can probably assume that level would be reproduced in subsequent batches, so there’s a more limited need for testing than has been suggested in both the CO and WA proposals.

    A big upsurge in heavy use? I’m skeptical. Those so inclined are mostly already in the market. And it depends on the definition of “heavy use” as well as what negatives are claimed about it. As for juveniles, a regulated system will be less accessible than the black market ever was to minors. Then we arrive at this:

    “If cannabis prices are allowed to fall to something like their free-market levels, a very large increase in heavy use would be the likely result. Preventing that will require heavy specific-excise taxation (perhaps on a per-milligram-of-THC basis) and enough enforcement to prevent the evasion of that tax.”

    I see only a limited possibility for a few more to engage in heavy use. The idea that it can’t or doesn’t happen now is another artifact of the mistaken belief that current enforcement does something to prevent use beyond acting as a price support mechanism for the traffickers. It does not. Marijuana’s illegality doesn’t prevent much of anything now, certainly not it’s general availability, except common sense in public policy. I find it rather fantastical to believe that you’ll find much public support for enforcement actions taken over tax evasion on the scale Mark argues will be needed. Now for those in law enforcement still believing enforcement makes any positive difference, this sounds like an appealing notion, but really? Nothing much changes except the charges. I seriously doubt a public that has already reached majority support for legalization will support that. Hasn’t worked up to this point and is even less likely to work once cannabis is legal. Even worse, it’ll a breeding ground for resistance that will be much more public and better organized simply because the underlying substance is no longer illegal.

    I agree with Mark’s sentiments about the need for limits on marketing, training requirements, etc. However, I disagree in his painting most such opposition to these proposals as being libertarian. I’m about as solid on the left as anyone, but beyond my personal example I can tell you that most of those I know who indulge are also on the left and share similar misgivings as I’ve shared here, so it’s not just a libertarian notion. Government, run well, is something we support. High taxes and increased enforcement are something we reject, in large part because of the racially disparate application of these laws, but also just because they are monumental failures. It won’t change a thing to tart illegality up as tax enforcement and let it persist as prohibition-lite.

    Mark’s “biggest worry” is that the result of legalizing cannabis “would be a big upsurge in heavy use.” Very doubtful and, frankly, if we just change the excuse for calling in SWAT, nothing really changes, does it? Diverting real reform into a cul-de-sac like that is what is my biggest worry.

    In fact, to me any scheme that relies on continued fostering of the present conflicts is a deadend. Let us not forget there is a war going on. It needs to end definitively, or we won’t reap the benefits of peace. Setting up a variety of traps and disincentives that will effectively continue prohibition with various new forms of illegality related to taxes and then to call for increased enforcement to make this happen is unrealistic. The tax man should be the one dealing with marijuana on a day-to-day basis when this is over, not the police. Somehow, the IRS manages this with little need for law enforcement actions in most other areas where government has an interest in collecting taxes. Generally in this country, people pay their taxes without the need for force, so long as they are reasonable and easy to pay. Any solution that doesn’t take us THERE is really no solution, merely a convenient relabeling of bad policy served by a bloated and largely unnecessary paramilitary enforcement mechanism that has no place in a free society.

  5. Daniel Patrick Moynihan was drunk all the time. He seemed like an okay legislator. But now that we’re regulating herb and not booze, it’s essential that people smoke only as much dope as Professor Kleiman deems is okay? I don’t think you have to be an anarchist to bristle at the amount of social control that is being assumed by the politically powerful–oppressors such as McCaffrey, Walters, Bennett, etc.

    Professor Kleiman, you’re old enough to remember when people used to say about America “It’s a free country” without falling on the floor in paroxysms of uncontrollable laughter. Whatever happened to that idea?

    tl;dr – Not all choices are good choices. Being an adult means you have the right to hoist yourself by your own petard.

    1. You mean, back when people actually went to prison for cannabis possession and gay sex and when abortions were done in back alleys? Yes, unfortunately I am old enough to remember that.

      1. Me, too, Mark, but in that period the cultural attitudes and lax enforcement may have made for more freedom in practice and on average for the everyday dope fiend. Not at all true of your other examples, though.

      2. Well, I guess it depends what issue you’re talking about. That’s a fair point.

        (I still think that Daniel Ellsberg lived in a more liberal/open society than Edward Snowden.)

      3. Yes, there’s a limited number for simple possession who are imprisoned. However, that avoids the legal dodge of possession with intent to deliver, where either the quantity or the circumstances makes it easy to pile on higher charges. There you see many people who were not, in fact, dealing, but simply had more than what the law views as simple possession. The drug war’s pyramid scheme of overcharging, plea bargaining, informing, and judicial sanction to the whole mess is tawdry and an affront to the Constitution, even assuming it was effective, which it’s not.

        The real point here is should there be any legal sanction for responsible use, sales, production, etc of marijuana?


      4. I think you could quite plausibly argue that America in 1975, for instance, was a freer society than America today. Less surveillance, a *lot* fewer people in jail and prison, shorter terms for people who did wind up there, less stigma when they got out. Much less income inequality, too.

      1. The harms done by the apparatus of control are infinitely larger than all of those done by the object of control. The problems are never solved by the apparatus of control.

        One of the harms done by the apparatus of control is that it drives people to drink, and to do drugs, and to destroy themselves in a desperate bid to escape the cage which is the apparatus of control.

        Mark Kleiman is a brilliant man, obviously much smarter than all but a handful of the countless thousands of people I’ve read or spoken to, but no man is smart enough to make invalid paradigms work. The apparatus of control is an invalid paradigm. Human beings do not successfully live and thrive in cages, not as individuals and not as societies.

        tl;dr: It was a tax act that started pot prohibition – and repeating the problem is not the solution.

  6. So the biggest worry about legalize cannabis would be a big upsurge in heavy use, and that worry would be exacerbated to the extent that the growth in heavy use is among juveniles.

    Part of my libertarianism on this issue comes from the fact that I really, really don’t see the problem here. I got addicted to caffeine when I was a young teenager. Probably not that good for me, but it didn’t do me serious harm either.

    In contrast, the people I know who got addicted to alcohol at that age have continued to have that problem all their lives and it has affected them in various seriously negative ways.

    Marijuana, to me, looks more like caffeine than it does like alcohol. It’s more pleasurable, sure, but there’s nothing wrong with juveniles engaging in pleasurable activity.

    It should probably, actually, be legal for minors to buy it. It’s so much less dangerous for them than tobacco or alcohol. It’s probably less dangeorous than a lot of the pharmaceuticals they are prescribed.

    1. ugh. if you are serious about ending prohibition, you’ll never get anywhere advocating legal access to minors. There are plenty of good reasons NOT to advocate that. Let’s just stick with adults…

      1. I accept that it’s not going to happen. I’m simply observing that the fact that this really isn’t a substance that is harmful to minors to begin with (and thus the bans on juvenile consumption are stupid) means that we should be doubly skeptical of Mark’s moral panic over juvenile use.

        Yeah, they are going to use it. So what?

  7. “Commercial speech” is SACRED!

    As for this, Mark, you are going to have to accept that the First Amendment exists and that you aren’t allowed to legalize something and then ban its marketing. That’s just established doctrine.

    You may not think this is a correct interpretation of the First Amendment, but it’s a rule and you are required to live with it whether or not you think it is correct, because the Supreme Court, and not drug policy wonks, have the final say on it. So stop pretending you have any chance to ban truthful marketing of legal marijuana.

    1. What makes you think that the Supreme Court a decade hence will adopt the frivolous reasoning of the current Court? Free speech is a widely respected principle around the world, and only the U.S. has created a rule that allows the state to ban an activity entirely, with criminal penalties, but not to allow it with restrictions.

      Even the current Court might well carve out an exception for cannabis, given the cultural prejudices of some of its Justices. Note that the Securities and Exchange Commission has had no problem whatever enforcing rules about the marketing of securities by underwriters.

      1. Mark, the reasoning is not frivolous. Most constitutional scholars, even liberal ones, think Virginia Board of Pharmacy was rightly decided. As far as I know the only justices who didn’t agree with it were on the right, and their replacements do agree with it. I practice a fair amount of First Amendment and commercial speech law, and I would set the chances of Virginia Board of Pharmacy being overturned at under 2 percent. And I think most people in this field would agree with me. It’s just not happening.

        As for your second point– an exception for cannibis– I suppose that’s slightly more possible. But we’ve seen lots of “sin” cases– alcohol, gambling, sexual speech– go through the court system and up to the Supreme Court, and the commercial speech doctrine has survived all of them, with one defined exception. If cannibis remains illegal, there is no doubt that the government may ban its advertisement. But if its legal, there would have to be whole bunch of cases overturned to change the law in this area.

        Finally, the SEC rules are constitutional ONLY because they go to false and/or misleading commercial speech. Virginia Board of Pharmacy extends only to truthful marketing. What you can’t ban is truthful corporate marketing of legal marijuana.

        You should talk to some of your colleagues on the UCLA law faculty about this. Trust me, you are really, really, really beyond your remit here. The commercial speech doctrine is a given, and if marijuana is legalized, truthful marketing of marijuana will be constitutionally protected. You should treat this as basically an absolute constraint on your wonkery.

    2. What makes you think that the Supreme Court a decade hence will adopt the frivolous reasoning of the current Court? Even the current Court might well carve out an exception for cannabis, given the cultural prejudices of some of its Justices.

      Free speech is a widely respected principle around the world, and only the U.S. has created an absurd legal doctrine that allows the state to ban an activity entirely, with criminal penalties, but not to allow it with restrictions.

      John Stuart Mill – more cited than read by libertarians – makes a completely convincing argument while commercial behavior, being obviously social rather than individual by nature, is justly subject to much tighter restrictions. Note that the Securities and Exchange Commission has had no problem whatever enforcing rules about the marketing of securities by underwriters.

      1. The First Amendment does not enact John Stuart Mill’s version of civil libertarianism.

        (In any event, Mill was dead wrong. I doubt I am going to convince you, but in practice, the reason Virginia Board of Pharmacy came out the way it did is because in practice, most commercial speech regulations were just forms of economic favoritism rather than consumer protections.)

  8. We’ll see, Dr. Kleiman. I don’t think you have a crystal ball. None of us do and we won’t really know how this will all work out until a few years pass. We all have our opinions though, our predictions. My fear is that taxes are being set too high out of the gate and marijuana will end up being a lot more expensive from the stores than it is for people on the black market today. Marijuana could be super cheap with plenty of room for super high taxes before it costs consumers more than it does today. You could kill the black market, but not if you get too greedy with taxes up front, and not if you have a bunch of stupid rules that make it such that competition and the economy of scale can’t drive pre-tax prices down.

    Washington is not just limiting the amount of marijuana that can be grown, you guys are putting ridiculously low limits on how much a commercial producer can grow. You have three tiers of producers with the lowest tier only being able to grow 2,000 square feet worth of pot and the biggest producers only allowed to produce on 30,000 square feet. That’s way less than an acre. Farmers typically grow dozens or more acres of a crop, if not hundreds of acres or more. For typical crops they’re usually making a few hundred an acre in profits if they’re lucky.

    Maybe this is some kind of anti-corporation thing. You guys want to keep the big players out of the game. What it’s going to do though is make it such that producers must charge ridiculously high prices on their product to make a living. It’s also going to make it such that they try their hardest only to produce super powerful pot. If it’s going to be super expensive it had better be super powerful or nobody is going to want to buy their product. If a farmer had a hundred acres growing and was making his profits on volume sales of his commodity product, he wouldn’t have to worry about having super powerful pot. He could let the sunlight grow it. He could cut down on labor costs and try to mechanically harvest it rather than having people out in the fields checking each plant to see if it is just at the right stage of ripeness for maximum THC levels. In Washington they’ll be tempted to grow most of their product indoors or in greenhouses with supplemental lighting because they can harvest several times a year that way. They have to spend money to make money and they’re going to spend a lot trying to produce the most potent product possible so they can charge super high prices to cover those costs and maximize profits from their tiny plots of pot.

    This actually limits choices for consumers because not everybody wants something so strong that as little as a half a puff too much will get them so high that it is an unpleasant scary feeling for them for hours and hours and hours. Marijuana affects different people differently. Two people can consume the same amount and one will be high as a kite wile the other barely feels it. It’s this way for experienced users and especially so for inexperienced users or those who only do it occasionally. When a “lightweight” (one who for whatever reason has a low tolerance to pot) uses a super strong product it’s a lot harder for him to get just the right dose for him without being over-stoned, which can be a very unpleasant experience and can cause more impairment than one would normally experience from marijuana. It would be good if there was lower potency product available for people, which may even be most smokers as most are far from heavy users. Few would pay the same high price for something that’s maybe half as strong though so the severely limited growing space with high production costs acts as a very strong disincentive for producers to produce weaker product. Why limit choices and make it such that producers have such a strong incentive to produce the most potent product they can produce?

    Dr. Kleiman, you’re a smart man, but you’re no expert on marijuana legalization. Nobody is, really. You could be wrong on some things. Odds are you’re wrong about a lot. Of course there is a lot of disagreement on how to best tax and regulate marijuana. We’re in uncharted territory. Sounds like you’re taking things a bit too personal and resorting to your own personal attacks. I wouldn’t do that if I were you because in the end you’re going to be really embarrassed when it turns out that you’re wrong on an awful lot, being the “hemperor” and all, some legalization expert. Leave the personal attacks to us lay people, the backseat drivers. Be humble with the pundits and so on now or odds are you will be humbled in the future and it’s not going to be any fun for you.

    Anyone worried about the price of cannabis is spending far too much time stoned? If we want legalization to provide the benefits it can provide we ought to be worried about prices. I want to see the black market get killed. I’d also actually like to see tax revenues pay for the cost of regulating marijuana and more. For most people who smoke pot today, it is cheaper than beer on a per use basis. It needs to stay that way. In fact, it would be good if it got even cheaper for consumers for a while to do the black market in.

    We’ll see what happens. I think taxes are too high out of the gate, especially with the monumentally stupid limitations on the canopy area size that commercial producers are allowed to have. Was that your idea, Kleiman? Whoever thought that up is a complete moron. (I don’t have to be humble. I’m just a backseat driver, not an expert.) Pot needs to be produced much like other crops so that the economy of scale and competition can drive pre-tax prices through the floor. That’s the only way to kill the black market and generate big tax revenues.

  9. As long as we’re just guessing what the future might hold, here’s what I see happening. Marijuana will be legalized in several more states and by the federal government within a few years. The rest of the states will follow suit, with a few in the Bible Belt maybe taking a few years like we saw with alcohol after Prohibition. At first there will be various whacky systems of regulation set up and most won’t work very well. Eventually things will settle down and what we’ll end up with is a system where large corporations dominate most of the marijuana industry. Just like in the beer industry big corporations will supply most of the market and smaller producers will fight over the rest. Nobody is going to be producing marijuana indoors under lights on a commercial basis. That’s just too expensive and it wastes too much energy. Most will be produced outdoors in open fields on large farms like other crops. Some higher grade product will be produced in row after row of greenhouses like you might see at large hothouse tomato growing operations.

    I bet hash dominates the market too in the future. Washington is afraid of “concentrates” right now, but that will change. Right now medical producers produce hash from their bud trimmings and so on as it gives them a product they can sell from something they would have just thrown away. In the future we’ll see pot growing on hundred acre or more plots like other crops and producers are going to want to cut costs every way they can and increase yields, just as they’ve done with other crops. Companies like Monsanto (much to the dismay of the hippie types) will help in developing uniform strains that mature at the same time and have both good “hemp” properties and are decent resin producers. These plant will be mechanically harvested and brought back to a factory basically where they are dried and the resin removed from the plants and the rest of the plant material will be used for hemp purposes. The resin will be blended with resin from different strains and perhaps flavorings and so on will be added in to make a product that the focus groups liked the most that can be marketed to the masses like Bud Lite. Probably though advertising will be limited at least as much as it is for cigarettes. That’s what the people will want and the libertarians Kleiman talks about and the big corporations will just have to live with that.

    Why hash? Hash doesn’t make much sense in today’s market where they can charge an arm and leg for well manicured buds. There is a lot of labor involved in that though. They have small scale grows really and make their profits by selling their products at super high prices. Hash makes no sense at all today because if they can get 500 pounds of buds from an acre they’d only get something like 50 pounds of hash that they won’t be able to sell for ten times as much as they could sell the buds. But what if they didn’t have to worry about “bag appeal?” What if they could grow huge fields and mechanically harvest it all and not trim the buds at all? What if they could use the rest of the plant for hemp purposes so there is no waste and end up with a product that the masses like, a unique product that cannot be easily replicated at home or by their competitors, a product with a ridiculously long shelf life that is easier to store and transport than fluffy buds because it is compressed and takes up so much less space? With a mostly mechanized process it could be mass produced with low labor costs. It wouldn’t necessarily be super strong. Most hash produced in the world isn’t as strong as medical grade marijuana because it’s produced from seedy lower grade product grown in huge fields. I’m talking about places like Morocco. Here though with modern farming practices and processing they could vary the product and produce strong or weaker product depending on taxing schemes and consumer demand and the various regulations.

    So, my crystal ball tells me that twenty or thirty years from now most pot smokers will be smoking hash produced by large corporations. It also tells me though that most people won’t be smoking pot just like most don’t today here or in places where it’s practically legal already like the Netherlands. It will always have limited appeal. Stoner stereotypes will persist (because there is some basis in fact when it comes to heavy users) and it will never be cool to be somebody that wakes and bakes and still lives with his mom at forty. Fears of us seeing everybody start smoking pot are overblown. Most who want to do it are already doing it. The price will drop through the floor, but taxes and regulatory costs will keep the cost to consumers up. They’ll keep upping the taxes as prices fall telling us they’re doing it to keep demand in check when it comes to minors. The big reason of course though will be that government needs the money, but it’s not going to matter as long as the per use cost of marijuana stays low, cheaper than beer like it is today. Consumer tastes will change and they won’t want nasty homegrown or back alley block market weed. Connoisseurs will buy their fancy hand manicured certified organic buds that have been produced by smaller boutique producers, kind of like craft breweries. The pot smoking masses will buy heavily processed hash or maybe some outdoor grown buds that aren’t nearly as pretty or potent as the fancy expensive stuff.

    All I know is that I can’t wait to see the HOW IT’S MADE episode on the Science Channel after mechanized hash production takes off in this country.

    1. Not hashish, which – unless/until the separation of the trichomes can be automated – is also labor-intensive. The coming product is extracts and concentrates (called “hash oil,” but having nothing to do with hashish except potency.) They can be made from industrially-farmed cannabis, or from the side-products of bud production. They already trade at a discount to bud on a THC-content basis, and that discount is likely to grow with time.

      [Footnote: Making reasonable projections on the basis of carefully-gathered facts is not the same as owning a crystal ball and . None of us claims infallibility. Still, there’s a difference between actual expertise and opinionated ignorance. Sorry.]

      1. I’m not sure what your expertise is in, Mark. Is it in getting the government to give you money for research and teaching and so on? Me, I sure smoked my fair share of pot back in the day, grew up in an environment where I became familiar with the black market and since have handled many thousands of pounds worth of pot cases as an attorney. I’ve handled simple possession cases, dealing cases, manufacturing, drug mule cases, many involving Mexican organized crime as I’m in the South right off a major interstate highway that spans from the West Coast to the East Coast, so naturally it is a major drug pipeline, and of course according to the DEA we have Mexican cartel members operating in our area, which I don’t doubt. I’ve always been for legalization, at first mainly because I just though it was stupid and unfair and un-American to have the government telling people they can’t smoke pot, but later I started seeing first hand the enormous problems this entirely ineffective prohibition causes. I want legalization to work.

        In my area Mexican pot goes for $25 a quarter ounce, $60 to $80 an ounce, $600 a pound, sometimes more, and less if people drive to Dallas or somewhere else closer to the border where there are tons and tons of this stuff in stash houses. Mexican pot still dominates the market in my area. We have the other stuff, but it costs four or five times as much as the Mexican but is rarely ever even close to being four or five times as good. Mexican definitely trades at a significant discount to indoor grown bud on a THC-content basis in my area. It’s often seedy and compressed so much that seed oil permeates the bud. It’s often nasty moldy crap, but the average household income in my area is something like $35,000 a year. People have no money around here so they shop for good value and try to find cheap product that isn’t so bad to smoke. Mexicans are starting with better genetics these days often (they can mail order seeds too and turn a few seeds into thousands with one small crop) and many are getting better at keeping at least most of their bud from going to seed. If we were to legalize marijuana here and have it selling at stores for $17 a gram or whatever you guys think it’s going to cost in Washington after taxes, we’d have a really hard time getting people to buy it with so much dirt cheap Mexican out there.

        Theses guys making huge bulk purchases in Mexico are paying maybe $25 or $50 a pound. They get it for almost nothing. It costs a lot to get it here. It costs money to distribute it as every time it changes hands somebody is going to make a bunch of money. It costs a lot to transport it across the country, more the farther it goes. But it’s dirt cheap for them to produce and it’s pretty darned cheap for them to produce it in this country too when you consider what they are saving on smuggling costs and the fact that they’ll be growing it out in a national forest somewhere and just paying for their equipment and fertilizers and pesticides and so on and for a few expendable growers who are working cheap considering the risks they’re taking. These drug trafficking organizations are figuring out how to use better genetics and in some cases are getting in on the indoor growing game now. They’re very ambitious people and not stupid. They can adapt to the market. They can improve their product. Right now it’s easy just to sell the cheap junk from Mexico to Southerners and others where their product still dominates. But pretty soon we’ll be legalizing at least medical marijuana down here and we’ll see the market down here flooded with indoor grown bud which will cut into Mexican DTO business in a big way. So they adapt. They produce better product and they sell it in states where it’s legal but being taxed so much that demand is there for a much cheaper product that’s still pretty good.

        Marijuana has to be cheap before taxes for legalization and taxation to work. You want to have both potent premium grade product and lesser weaker much cheaper product that is okay for most people. Taxes are a fact of life and not such a big deal unless they’re so high that they make the product more expensive than it is for consumers today. For the most part, marijuana is cheaper than beer on a per use basis. In my area where people are paying not much more than $3 a gram for Mexican they’re often spending a good bit less than a dollar for a smoking session if they have decent product and aren’t super heavy smokers.

        I think you guys are painting yourselves into a corner with your policies. Not only are you taxing at a super high rate right out of the gate, but you’ve set the system up such that the economy of scale and competition aren’t going to be able to drive pre-tax prices way down. That needs to happen. Ideally marijuana becomes super cheap, leaving plenty of room for super high taxes before consumers are paying more than they pay today. Ideally, consumers pay much less than they pay today at least at first because you want to kill the black market, not create conditions where it will thrive. My fear for you guys is that you’ll have nothing but very expensive premium grade product going through legal channels and you’re going to have an awful lot of people not willing to pay that much who are not opposed to smoking even much lower grade black market product if they can get it cheap enough. Enter the Mexicans, maybe, especially as they start losing business in other states as more and more get medical marijuana. And if not them, others will supply the demand for cheaper product.

        The high taxes probably aren’t nearly as big a problem as your stupid limitations on canopy area for commercial producers though. Less than an acre? You ain’t a farm boy, are you Mark? Again, the only way these producers will make a living is to grow the most powerful product they can possibly grow and charge super high prices for it. There will be no mid-grade product, except by accident. There will be no mass produced cheap product. Consumers will have very limited choices unless they go outside of legal channels where there will be plenty of discount marijuana of various grades.

        1. Probably nobody will ever read this, but I’m glad I came back and re-visited the comment thread here after it moved off the front page. Yours were highly insightful comments, Bill, particularly the last one.

          Academia’s biggest blind spot (and with Mark it’s HUGE), is valuing their own theoretical research over real hands-on experience. They think that any one person’s experience is “small picture” while their research is assumed to present a larger and therefore more accurate “big picture” encompassing everything (that they determine relevant). What they seem to forget is that experience is the “real thing”, while their theory is merely a model based on limited understanding of that real thing.

          You really nailed it on the expertise. I was taught theoretical electronics by “experts” in school, but my understanding of electronics theory grew far beyond that of any of my expert teachers after a few decades of hands-on practical experience. I needed that theoretical training in order to understand how things work well enough to get started, but experience was the “best teacher” that brought me to my current level of expertise. True expertise doesn’t come from sitting around theorizing and crunching numbers through a spreadsheet, it comes from real hands-on experience.

  10. I imagine what you’re saying would be true, if cannabis were actually LIKE tea. It’s not. There is no more hand labor intensive plant anywhere. You might succeed in growing it like a mass production crop, but you won’t end up with anything I’d like to smoke. I’m intimately familiar with the costs and effort that goes into producing top grade. It ain’t tomato’s, but the folks in here in Washington will find that out soon enough.

    1. Well, I admire Bill’s enthusiasm and I like hash. I just don’t think that combining the two is a good idea. Yep, darkcycle is right, decent marijuana is a labor-intensive product. The problem most likely to restrain production isn’t acreage limitations, but issues like labor, quality control, pest management, not to mention financing, etc that depend on how fast our legal and commercial systems adapt to the new realities.

      I do think Bill is being too hard on Mark. He was but one of a number of people consulted and Dr. Kleiman isn’t making decisions for Washington. I don’t always agree with Mark, but I do feel he offers his knowledge and opinions in good faith. People of good faith in ending prohibition are in short supply. Please respect that, even if you disagree with his opinions.

      I also am familiar with hashish production, at least the basics as practiced in the past. What’s most worrisome to me about it and domestic sinsemilla production is the labor issue. Internationally, the US could do more good by making sure those involved in the trade had access to labor education, while increasing the capacity of governments to protect labor rights. I’m not holding my breath there.

      One area where this could be successful, while helping maintain small scale enterprises as many of us favor it is to encourage producer/labor co-ops as a model, as well as making sure that workers in the industry as a whole know their labor rights, have access to labor protections, etc. That’s would be one way for Mark to increase the cost of weed that would meet with my full approval. As a consumer, I’d mind much less making sure the folks trimming the buds got a living wage than I would paying taxes. This also ties into my earlier mention of the economic development possibilities of encouraging localized, artisanal cannabis production. Our economy needs more well-paid workers and this is one one to make sure that happens.

      1. Precisely. I also take issue with Dr. Kleiman’s assertion that there will be a large upswing in heavy use if the price point isn’t prohibitive. Most of the evidence I’ve seen suggests demand for cannabis is aplastic.
        I can tell you this about the current situation though, Washington State’s tax structure is perilously close to being a disincentive to entering the legal market. The current street price is considerably lower than the price likely to be charged in the State pot shops. And most of the people charging into the market have never successfully grown a house plant, so until that learning curve is mastered, the quality is likely to be bunk. Most of the accomplished growers I know are not rushing to get in, and these are not stupid people. My business partner and I are only pursuing it on the assumption that things will change significantly in the very near future to make it more workable. The numbers just don’t work out. And since I’ve been doing this for quite a number of years now, I know my costs.
        The idea that increased enforcement will end the black market is just folly. Comedy in the extreme. 70 years of all out prohibition and the most draconian sentences have failed to eliminate it. I hear that and I just have to shake my head. And the voters of Washington voted to legalize cannabis in part because they believe nobody should be going to jail for a harmless plant. It’s like thumbing your nose at the original intent of I-502.

      1. I get the feeling some of the more vocal people who smoke pot now are like artisan tea drinkers. The average legal pot user may just want a consistent product, just like a Big Mac. They will want a corporate brand name they can rely on.

      2. True. But tea can be grown as a densely spaced plantation crop. Cannabis must be spaced on at least four foot centers. Tea is also perennial, and doesn’t require replanting like an annual. Cannabis has very high nutrient requirements, therefore soil is rapidly depleted and must be replenished with amendments, and those that can’t be sourced onsite need to be purchased. An indoor growers second greatest expense after electricity is soil. Even hydro growers need to clean and treat their mediums, also an expense. Each plant must be trained and cropped by hand throughout the growing cycle, dead leaves need to be removed, again by hand, and through the whole plant cycle. I mean it when I say this is a labor intensive crop. In terms of individual plant needs, there really isn’t anything to compare it to.

  11. If prices fall and there is an increase in heavy use, where are these users going to come from? What are they doing now? For adults, I doubt they will be non-drinkers. So maybe those new users are out drinking too much and a switch to heavy marijuana use is a good thing? If these new heavy users are young people then maybe it’s good that they develop a taste for a safer intoxicant, because they probably would have been problem drinkers. It’s important to remember that an increase in marijuana use may not mean an increase in society’s overall level of intoxication. Marijuana use could replace alcohol altogether, or it could be combined with alcohol and decrease the amount of alcohol consumed to achieve the desired effect. There is the chance that these new users just pile their new use of marijuana right on top of the exact same amount of alcohol they used to consume, but that seems a bit of a strange thing to do in my experience.

    Also, not only is there a chance that taxes won’t be as much as hoped for by the voters, but there is a chance that the combined total amount of intoxication related excise taxes (alcohol and marijuana) decreases. This could happen if, as Mark indicates, intoxication is cheaper by using marijuana, and therefore there is less tax revenue per session of intoxication. And the new consumption of marijuana is comes at the price of the existing consumption of alcohol.

  12. This person has no idea how much trouble it is to grow weed. Also total lack of reference to the actual experience of countries where pot is legal. In Czech Republic, pot is not only cheap, but free. Quite literally. Many many young people grow it, but it’s very hard to buy outside tourist enclaves. People just give it to their friends.

  13. All of a sudden, these doctors prescribing to a hundred people a day are going to have law enforcement or medical licensing boards all over them.


    Because their conduct is no longer just letting people get high. Their conduct is letting people avoid taxes on getting high! And that will not be tolerated. Redde Caesari quae aunt Caesaris.

  14. When I think of early American history, when colonists revolted over excessive taxation of tea, the idea that the proposed taxes on cannabis will wind up too low because “A joint is the same sort of item as a teabag”, gives me pause. Times sure have changed.

  15. Uruguay have opted to keep the price low at $1 per gram with THC between 5% and 12%. The marketing will be a state monopoly (like Nordic alcohol). Users will have to register and have a monthly allowance that may vary with the strength of the products consumed. Uruguay has given priority to killing the illegal trade, and reducing pressure from pushers on young people to try harder drugs, over risks of expanding marijuana consumption. It will be a natural laboratory for the competing predictions here.

  16. “Anyone who’s worried about the price of cannabis is spending far too much time stoned.”

    Thanks for dismissing patients like myself who can’t afford it now, less so based on Department of Revenue projections.

  17. The statement that “a weekly smoker might now be paying something like $100 per year for cannabis, even at current prices” is not accurate. If we estimate that an average medical user will use 1 gram a day, at MINIMUM of $5 a gram that would cost over $1800 a year. Most Washington dispensaries charge an average of 10$ a gram. This results in over $3600 cost a year. These “costs” do not account for transportation and medical permission card costs.

    I would like you to please elucidate how you arrived at the $100 price per year for cannabis. I know I must be missing something.

    1. yeah, I’m not sure the guy who wrote this article is familiar with math. $100 is two weeks worth, tops. And that’s mid, low grade stuff.

  18. holy crap, I guess I can post comments on this site (and not just replys). Just have to scroll allllllll the way down to the bottom of the page first. Noted.

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