legalize marijuana?

Great Debates
81

Re: pricing-- certainly the market could control (exclusive of taxes). By analogy, consider a different agricultural product that can be grown either small scale or in large, mechanized operations. Let’s look at wheat, and the commercial end product, bread. Consider the contributors to the ultimate price:

Farmers have a huge investment in land, equipment, etc. and a direct yearly additional expense to plant, grow, and harvest the crop.

Then the crop goes to commodity market, involving transportation and storage.

Next more transportation, plus milling and further storage.

Bread making requires further transport and ‘value added’ to combine with other materials (eggs, shortening, etc.) plus investment in equipment (mixers, ovens) to produce the product. And of course slicers, bagging machines, and such.

Next we market the product, involving graphic designers, aritsts, and ad campaigns. And of course the firm that produces and prints the plastic baggie, and the guys that make twist ties.

We transport the finished product to market at the local grocery store, and amortize shelf space for it.

Let’s not forget a reasonable profit margin for each and every entity along the lengthy path above (as well as those I’ve omitted).

When all the built in costs are served, and everyone makes his necessary profit, this product (bread) retails for less than $2 a pound in my local grocery.

The path from grown marijuana to packaged joints or bulk bags cannot be too different from that of wheat into bread. I suspect that, if only market forces were operative, the street (retail) price of the final product would also be less than $2 a pound. And, like bread, the quality of mass market reefer would be reasonable (but not too high) and very consistant.

That’s my market analysis.

82

CannyDan I think the issue here is the fact that even though mj could be produced and ultimately retailed for pennies per ounce, consumers are currently paying hundres of dollars per ounce. what do you do with that? why charge $2/lb when the product currently retails for upwards of $3000/lb?
I believe pricing would be reflective of quality. it isn’t as simple as ''pot is pot". there are strains developed for different types of high, flavor, potency etc. not unlike alcohol: a wine conisseur would not likely be satisfied with a 3 dollar bottle of boone’s farm. but even for the cheap stuff, why market it so low? let the growers/distributers/retailers make a huge margin, then a big fat tax to keep prices comparable to where they are now. the original idea was the big tax earmarked at 50% going to drug education and the other 50% going into the general fund, which we all know is greatly stretched. I believe most adult smokers will gladly pay the current rates to smoke legal pot in the privacy of their own homes. why leave billions of dollars ‘on the table?’

83

You can make 50 gallons of beer a year, for your own personal consumption, and you’re not supposed to share with your friends. 50 gallons is 10 batches, or 20 cases. If you’re drinking a case a week (which is not that much for the dedicated homebrewer), you run out halfway through the year.

Putting a grow limit on home marijuana production would be nigh-unenforceable, with the caveat that you can see the plants from the air if you bother to look for them. Putting a brewing limit on how much beer you can make is also nigh-unenforceable, because the only way to tell how much beer somebody is making is by tracking all sales of malted barley, which would be a good trick.

I don’t think comparing marijuana to brewing to demonstrate why people could grow their own is kind of unfair, because a reasonable homebrewing setup fits into the average closet. Then again, I recall stories of people with UV lights in their closets back in college… hmmm…

84

Price probably would start high and get lower eventually (like the users of product itself).

Entry would be slow, and for big companies, risky- they would justify a high price by the reputation risk their company may take. I’d imagine that initially, the current illegal and medicinal suppliers would be the only suppliers. This boutique setup and some inertia in the price would keep it high for a while. Not as high as current, but maybe 50% of the price- whatever the supply chain considers to be its “risk multiplier”.

However, legal retail sale takes many of the middlemen out of the process. If you could just sell weed out of a head shop or tobbaconist- you don’t need the underground distribution for the “last mile”, and you don’t need the cut they take.

I guess you could just look at what has happened in Amsterdam, but I confess that I have little understanding of the economics there.

85

drboomhauer, I wasn’t arguing for or against taxes to support education or medical treatment of addicts, both of which I think would be a good use of such tax funds. I was merely demonstrating that even a much-manipulated agricultural product with a lengthy chain from grower to ultimate consumer still results in a very inexpensive product.

In a free market, there will (eventually) be mass marketers targeting the “Big Box” level of retail sales (where price is the paramount concern) as well as niche sellers who can and will command premium prices for a premium (or perceived to be premium) product. All of that will be perfectly fine with me. I think **stolichnaya ** sees this too.

As for using taxes to artificially maintain prices at or near those of the illicit marketplace, I don’t think that will be a good idea. IMHO, the biggest social benefit of legalization would be to break the illicit trade. From major cartels through corrupt politicians, even corrupt governments, on to the street level dealers who become role models for youth (Get an education? Get a real job? HAH! Sell dope and get bling!), the horrors are manifest. Murders, street wars, gang recruitement, all are fueled by the huge profits of illegal drugs. And of course our law enforcement and legal systems are clogged with petty possession cases, leaving neither time nor attention for “real” crimes.

(Name your own “real” crimes - crimes against people, terrorism, whatever. All are underfunded and under enforced because of our preoccupation with ‘drug crimes’.)

In the global “War on Drugs”, enforcement doesn’t work; prohibitions do not work. The drug trade is estimated at, what, $100 billion a year? and we spend about $10 billion fighting it? No question which side is going to come out on top of this battle. Good or evil are not an issue when the economic resources are so out of balance.

Far better, again IMHO, to legalize it all and let the dealers have to compete with legitimate businesses. The price will crash, and only efficient, well run, almost certainly legal businesses will be able to remain. (Bribes and expensive legal help are a price of doing business for an illicit dealer, but much less so for a legitimate one.) Street dealers, drug “lords”, gang members, all will have to go back to school and clean up their acts to be able to get real jobs even in the drug business!

I think that this effect of legalization is so overwhelmingly important that I’d not jeopardize it by the imposition of a heavy tax burden.

86

I wouldn’t imagine that big companies would go in slow and cautious. about 5 yrs ago I owned a tanning salon, about the time supply companies figured out that hemp seed made the best lotions. they started putting a big pot leaf on all hemp products, and soon everything with that logo literally flew off the shelves. in fact it was so much that everything (t-shirts, handbags, sunglasses, bumper stickers) sold so quickly that people would come in and ask if we were “selling those shirts…” I was in a salon last week and saw that nada has changed in that respect.
if a big company makes the decision to get in to growing and marketing cannabis, I can’t imagine them quietly and slowly breaking in. this all just our opinions now though, and it could really go either way.

87

I’d be suprised, though, if those hemp products were marketed under the elite brands coppertone, noxzema, etc. They’re probably relatively small suppliers. The demon weed still has negative associations largely associated with its illegality.

Until the real big players get involved, the true rock-bottom will not be found. But for those who currently pay black-market prices, it will still be a huge drop, even with smaller companies being the only participants at first.

I wonder sometimes if the tobacco companies are in part holding out for legalization- they have the infrastructure and distribution chain, they are already saddled with the reputation and tax difficulties- they would make a bundle on legal weed.

88

cannyDan you have several really good points. I just don’t see the powers that be allowing legalization followed immediately by the price falling to 10 or 20% of what they are now. I’m sure the only way we’ll get full legalization is with a ‘plan’ for taxation and pricing. I predict those last few lawmakers to change their side of the issue, to finally support taxation and regulation instead of the failed war on marijuana, will in no way stand by and watch the price go so low.
an average smoker will smoke about an ounce per month, so quite obviously if you could buy a pound for even $10, jeez people would buy out of curiosity or just to have on hand to offer guests (the way some non drinkers keep wine on hand)
it is this reason that I believe a big tax plan is actually a selling point for legalization, not just for the potentially tens of millions of dollars per state but to help regulation and keep use to a manageable level. I know what you are saying and it would be really nice if our lawmakers would simply do the right thing, instead of the politically popular thing. but for now the drive to legalize has to be as calculating as the effort is to keep our prohibitionist state. most pro-marijuana groups are willing to throw in the kitchen sink at this point just to get key politicians to negotiate, and paying ridiculous rates of taxes and fees to the point of the final price being roughly equal to the current price, well, doesn’t look that bad.

89

coppertone and noxema make grocery store sunblock. we are talking about salon-grade tanning accelorators, 2 different things. anyone reading this, wherever you are in the country pick up a phone and call a successful tanning salon. ask about the top accelorators, if they include hemp then ask the prices. lotions and accelorators, a giant industry. you just don’t hear about it as much because they are wholesaled and sold at retail salons as opposed toa product advertised to the public on tv and radio. some 10 oz bottles of accelorators sell for up to $100, average is probably $30.

90

So, boutique producers, specialized audience, high prices. My point exactly.

The “salon-grade tanning accelerator” industry is dwarfed by the “grocery store sunblock” industry, and prices and marketing risk-taking reflect that.

91

but boutique produced and high priced lotions are at a runaway growth rate, as opposed to the same ole’ $8 coppertone they’ve been selling for a few decades now. doesn’t that say something about the trend?
I don’t have the numbers on this, so I don’t mean to talk out of turn–but are you sure about grocery store sunblock dwarfing the salon lotions? if I were guessing I would say it was the other way around. granted we are talking about smaller companies and distributors, but every small town has a few tanning salons, and they actually make their real money from lotion sales, not tans. most salons sell an awful lot of accelorators, I would bet in numbers of bottles sold the high grade stuff waaaaay outsells the shelf stuff.

92

stolichnaya, I agree that legalization won’t happen without serious payola-- and payola to a politician is taxes. (Visible payola I mean-- not the other kind.) And so taxes are certainly part of the rationale for legalization.

But the amount of taxes, that’s the issue. If the price of drugs at consumer level doesn’t drop enough to break the hold of the illegal marketers, then we realize little actual social benefit. Seems that there’s enough room here though for both.

Street weed, today’s prices - approx $2,000 per pound
Street weed, legal commercial variety - I speculate $2 per pound (like bread)

Even if we quibble about the “2”, that’s three orders of magnitude difference. Take, say, one of those zeros for taxes. Billions! And let the price bottom out by legal competition eliminating the other zeros.

Remember that we also expect to see a substantial reduction in police, law enforcement, court, and prison expenditures. What percentage of these are now devoted to drug enforcement? More billions upon billions!

Combined, this should be enough for even the most acquisitive politician’s pet pork. I’ll be happy to be on the negotiating team.

93

I’ve read that fully one third of our court’s cases are for simple mj possession. factor the recovered jail/prison space and the fact that our judicial system would be freed up–it becomes staggering.

94

I’ve heard rumors that tobacco companies own trademarks on all the popular pot names, like Tiajuana gold. Might be interesting to look up.

I’m sure they would price the stuff based on extensive marketing studies. I’d guess that they would introduce brands at several price points, and see what falls out. You might find that the market assumes anything too cheap is junk, or you might find price consciousness. It would be an interesting experiment.

95

cannydan we could use you! I think that is what is so frustrating about this whole issue. the average thinking person can clearly see the point but people fall a little short in becoming organized.

96

Thanks, drboomhauer. I used to be organized. But then I used to have both hair and brain cells. Lately, regrettably, all are becoming somewhat rare.

97

I’m sure you have nice hair.

98

lol

99

If we can convince politicians and voters to legalize marijuana based on the tax revenue, I’m all for it.

But I don’t see how we could artificially maintain the price at anything close to current, illegal street prices.

I’m guessing the price would have to come down to something closer to the price of culinary herbs & spices, or tea.

For instance, I can grow my own oregano, thyme, etc. I could grow my own chamomile tea. But I can get those things at the store for about $5/oz, in a cute little jar. I found someone selling a pound of chamomile flower tea bags on eBay for $35. So I could see the price settling in somewhere around there.

OTOH, there’s the price-per-high, or price-per-experience. There’s an Indian restaurant here locally which will rent you a hookah and some flavored tobacco out in the patio dining area for something like $15-20. People happily pay that. People go to happy hour and spend $15-20 on a couple few drinks.

So there is a ton of tax revenue to made on pot, even if the bulk grow-your-own price drops pretty low.

100

I don’t think it will ever be legalized, at least I hope not.

The most often overlooked problem is addiction. Before long the drug owns you. You spend a lot of time just thinking about the drug. That is true even with cigarettes. How many times have I seen people standing outside in the cold smoking their cigs. The drug owns them, dictates their behaviour.

Then comes the denial, “I can quit anytime I want.”

Drug habits are self-defeating, why do it in the first place. Is your life so empty of fun, pleasurable things to do that you engage in harmful practices. Go out on a date instead.