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Thursday, July 19, 2012

If Pot Were Legal, It Would Be Basically Free

Posted by on Thu, Jul 19, 2012 at 3:51 PM

Matthew Yglesias looks at a new book on the prospect of legal pot, which claims that marijuana legalized at the federal level could be given away like sugar packets:

...the authors note that “production costs for crops that need to be transplanted, such as cherry tomatoes and asparagus, are generally in the range of $5,000-$20,000 per acre.” That implies costs of less than $20 per pound for high-grade sensimilla and less than $5 a pound for mid-grade stuff. Another way of looking at it, suggested by California NORML Director Dale Gieringer, is that we should expect legal pot to cost about the same amount as “other legal herbs such as tea or tobacco,” something perhaps “100 times lower than the current prevailing price of $300 per ounce—or a few cents per joint.”

This would make pot far and away the cheapest intoxicant on the market, absolutely blowing beer and liquor out of the water. Joints would be about as cheap as things that are often treated as free. Splenda packets, for example, cost 2 or 3 cents each when purchased in bulk.

Yglesias observes that this could either be a boon or a detriment to the pro-legalization argument. I can imagine critics of legalization painting terrifying images of deranged shop keeps blowing pounds of weed through industrial fans onto the heads of children walking down the street. But, whatever. This is FUCKING INCREDIBLE.

 

Comments (45) RSS

Oldest First Unregistered On Registered On Add a comment
1
Ah, c'mon.

Big companies would take over, and pot would become as expensive as other legal intoxicants, like booze and cigarettes.

Posted by judybrowni on July 19, 2012 at 3:56 PM · Report this
Matt the Engineer 2
Depends on they legalized growing it yourself. I won't pay $100 for a bag of basil even if I really loved basil. I'd grow my own for pennies.

I'd actually recommend we don't legalize growing at first. Part of the benefit of legalization is the tax revenue side.
Posted by Matt the Engineer on July 19, 2012 at 4:03 PM · Report this
Matt the Engineer 3
Can you ask Frizzelle to unlock comments on the post below this one? I want to tell Alexie why he's wrong.
Posted by Matt the Engineer on July 19, 2012 at 4:08 PM · Report this
Fnarf 4
The problem with this argument is that if there are no profits in it for growers -- if their painstakingly grown stuff sells for less than the cost of the electricity to power the lights (in the northwest) or the pickers to pick it (in CA) -- they're not going to grow it at all. So availability collapses, and the price heads up again.

In addition, there is no conceivable legalization scheme that doesn't involve massive taxes, probably ten or a hundred times higher than tobacco taxes. Asparagus? Yeah, right.
Posted by Fnarf http://www.facebook.com/fnarf on July 19, 2012 at 4:09 PM · Report this
5
indeed Fnarf, T.A.X. - tax the living hell out of it to keep it expensive and route all that profit margin into government instead of into organized crime
Posted by myr on July 19, 2012 at 4:11 PM · Report this
evilvolus 6
@4 - Exactly. The "it's basically a weed" argument fails on both a supply/demand level and a hard-working hydroponic grow level.

Take the current price, remove the risk premium, apply a taxation premium. I see little reason why the price would shift dramatically in the long run.
Posted by evilvolus on July 19, 2012 at 4:19 PM · Report this
7
I hope that they do tax the Hell out of marijuana once it becomes legal. If it costs 5 cents to grow a joint then it should be taxed at least 95 cents on top of that - and it still would be one of the cheapest intoxicants on the market. Legalize MJ and balance the budget from the profits.
Posted by Schweighsr on July 19, 2012 at 4:22 PM · Report this
8
Correction... If pot were legal, SHITTY pot would be basically free.
Posted by AK Rob on July 19, 2012 at 4:25 PM · Report this
Fnarf 9
@3, they're not locked; they're just on the article, because it's a pointer to an article in the newspaper section, not a Slog piece. You can comment to your heart's content on the article.
Posted by Fnarf http://www.facebook.com/fnarf on July 19, 2012 at 4:32 PM · Report this
10
This argument mostly demonstrates how selling pot at a dollar or two a joint would be a wildly profitable endeavor. Even if home growing were legal, most people wouldn't bother if they could just walk down to the corner store and buy a weekend's supply for ten bucks.
Posted by Proteus on July 19, 2012 at 4:33 PM · Report this
Matt the Engineer 11
@9 Yeah, there must be something wrong with my browser. Clicking on the picture does nothing, and clicking on the link just led me to the blog post without comments. I found that hovering over the picture showed me the URL, and I found it from there.
Posted by Matt the Engineer on July 19, 2012 at 4:45 PM · Report this
COMTE 12
High-quality organic, outdoor-grown weed from Oregon already sells here for about half that of local indoor-grown, so there's already downward pressure on cost. And being able to grow more in the - literal - open would help to bring production costs down even farther, since at least some growers would no longer need to rely on expensive hydroponic equipment, and concurrent high electricity consumption.

In any case, I don't think most people would complain much if the cost of legal weed went up slightly from the normal $25-$40/gram, due to much easier availability. And I imagine this would still leave growers with a healthy profit margin, which, even if less than now, would itself be offset by the literal overnight elimination of operational risk.
Posted by COMTE on July 19, 2012 at 4:48 PM · Report this
13
Asparagus is a perennial and shouldn't be compared to tomatoes. Goldy the Gardener must be exploding about this block quote.
Posted by tomma on July 19, 2012 at 5:06 PM · Report this
14
Like @1, I have my doubts.

Betcha $1billion that Monsanto, Altria, ADM, et al already have large test farms, draft marketing campaigns, lobbying efforts underway, and genetic patents ready to file the second the door is open.
Posted by Mr. Happy Sunshine on July 19, 2012 at 5:09 PM · Report this
ScienceNerd 15
I love asparagus almost as much as I love weed. I'd be willing to pay asparagus prices for weed others grow. But mine... well mine would be free. :)
Posted by ScienceNerd http://stanichium.tumblr.com/ on July 19, 2012 at 5:12 PM · Report this
Matt the Engineer 16
@14 so what? Do you expect companies not to try and sell products, expecially a product this profitable? I'll take even Monsanto over drug gangs.
Posted by Matt the Engineer on July 19, 2012 at 5:14 PM · Report this
17
I'm gonna need two creamers and 3 joints with my morning coffee then. Oh well...
Posted by Jonathank5 on July 19, 2012 at 5:14 PM · Report this
Dougsf 18
For such commodities, the final price to the end user is dominated by the cost of production.


Not only is the basis for his premise not accurate, his own sentence contains a clue ("commodities") as to why. Even if it were the case that simply best-case-scenario production costs determine pricing (when is that true?), marijuana grown for consumption isn't corn or wheat or even tobacco, it's avocados.

One of the best cases for legalization beyond the benefits of removing it from the black or grey markets are in its revenue potential—taxes and the potential decent wages for unskilled laborers (hey, I said potential).
Posted by Dougsf on July 19, 2012 at 5:15 PM · Report this
Reverse Polarity 19
I've been saying this for years. If you take all the illegal narcotics bullshit out of this, pot should be no more expensive to grow than any other farm crop—which is what it is. It shouldn't cost more than broccoli. Sure, tax it, because the government will be involved in regulating it like alcohol and tobacco. But it still shouldn't be all that expensive. Even taxed, it shouldn't cost more than cigarettes. Tobacco is heavily taxed, and still highly profitable.
Posted by Reverse Polarity on July 19, 2012 at 5:16 PM · Report this
20
@12- $25-$45/ gram? You need a new guy.
Posted by Bhamjason on July 19, 2012 at 5:25 PM · Report this
21
Before you get too excited, take a look at the alcohol market. All of the same factors apply to booze. In theory, grain alcohol should be incredibly cheap, and indeed, denatured alcohol, which is not subject to liquor taxes, is pennies on the dollar compared to the stuff you buy in the store. The good stuff on the other hand, is pretty expensive. I'm guessing it will be the same for weed.
Posted by matt! on July 19, 2012 at 5:36 PM · Report this
22
Tomatoes and asparagus are silly comparisons, particularly because you can't transplant asparagus, it needs 2-3 years to get established.
Maybe better to compare it to those tiny plastic clamshells of fresh herbs; an individual wee packet of fresh oregano is kind of expensive but acceptable if you don't grow your own; the price per pound that's listed in the micro print on the shelf tags shows the completely outrageous prices; I think basil comes in at about $100/lb.
Nobody gives away free packets of fresh basil or oregano, that I know of, anyway.
Posted by alight on July 19, 2012 at 5:50 PM · Report this
23
Such a bullshit article. Just because it doesn't cost anything to produce doesn't mean the prices are going to be low.

The Government won't regulate it the same as sugar packets so why would he even draw the comparison. It's silly.
Posted by michael bell on July 19, 2012 at 5:55 PM · Report this
Xenos 24
@Fnarf et al: If you read the article, Yglesias makes the salient point that the government would not likely set the taxes to a confiscatory rate since that would just encourage a black market. High rates, sure, but not that high.
Posted by Xenos on July 19, 2012 at 7:31 PM · Report this
Doctor Memory 25
While these numbers are largely BS for the reasons many people have already gone over, there is certainly some price premium for pot that's a result of it being on the black market, which is the reason that California's recent legalization ballot question was not necessarily popular amongst Mendocino County's pot farmers. The money quote from a former grower there: "[prohibition] is the government's best agricultural price-support program ever."
Posted by Doctor Memory http://blahg.blank.org on July 19, 2012 at 8:37 PM · Report this
COMTE 26
@20:

I have a "new guy" (although, in reality, not THAT new); that's how I know outdoor-grown OR bud is so much cheaper than local indoor-grown.
Posted by COMTE on July 19, 2012 at 8:42 PM · Report this
Just Jeff 27
Is anyone keeping an eye on local pricing given that you can't let a fart without it being overwhelmed by the waft from a new neighborhood Cannabis Collective now? If the argument holds nationally, it should hold locally as well.
Posted by Just Jeff on July 19, 2012 at 8:53 PM · Report this
28
It's not any fucking harder to grow pot than any other crop. Sure your hipster varietals are going to be $$$ for what ever nonsense they think makes it awesome, but then there is rum that costs a fuckton too. Doesn't mean that a gallon of gut rot before tax is more than a few bucks(pretax) or that it won't get you just as drunk.

That's the problem with any tax scheme. Unless the penalties for cultivating outside of the regs are steep it is far to easy for people to just grow for themselves or their friends. I can't make whiskey easily but I can grow a plant no problem and unlike Tobacco one plant gets you pretty far. Nothing really wrong with that aside from the lost revenue, but still.
Posted by giffy on July 19, 2012 at 10:28 PM · Report this
Fnarf 29
@22, except that you don't have international competitions to see who can grow the best basil or oregano, with million-dollar prizes, and there aren't hundreds of named varieties of herbs or asparagus. I don't even smoke weed, but I know about Lemon Haze, Pineapple Express, Vanilla Kush, Sour Diesel, LA Cheese, White OG, Chocolope, ad infinitum.

Now, consider that the same exact seeds from a famous variety will turn out very differently in different growing conditions, just like wine grapes -- not just better or worse but locally different -- and the opportunities for extreme price competition are immense. Though I have a suspicion that a large part of the market will be for heavier and heavier stupefying indicas, where one hit induces a two-day total couchlock. The thing I hated most about smoking back when I did that, but very popular. People will still pay for that.
Posted by Fnarf http://www.facebook.com/fnarf on July 19, 2012 at 10:48 PM · Report this
30
will people smoke GMO pot? or pot grown with Pesticides?

will they have to be labelled as such?

what about the marketing? Sodapop is a good comparison - the cost of ingredients is about 5% of the price of soda, all the rest is Distribution, Marketing, Profit, and Taxes.

what would regular cigarettes cost with out the sin taxes?
Posted by Cassette tape fan on July 20, 2012 at 12:11 AM · Report this
blackhook 31
we should expect legal pot to cost...100 times lower than the current prevailing price of $300 per ounce—or a few cents per joint.

Just as a point of reference, in late 2005 I bought a joint at the Bulldog Cafe in Amsterdam for 3.5 euros (about $4). I assume it was taxed to the hilt. Why wouldn't similar pricing be in effect here?
Posted by blackhook on July 20, 2012 at 3:53 AM · Report this
32
@31 The author was looking at a fully legal market, like say we have for tomatoes, where anyone can grow them. Amsterdam is only partly legal.

They also were not looking at taxes.
Posted by giffy on July 20, 2012 at 8:39 AM · Report this
33
Now in Amsterdam, unfortunately, it's partly legal to its citizens, but illegal for tourists.
Posted by neo-realist on July 20, 2012 at 9:33 AM · Report this
34
Industrially manufactured beer, liquor, and wine are all incredibly cheap "at the tap". The majority of their costs are in marketing and distribution. The same will apply to legal weed. In addition to taxes, it's going to cost somebody a shit ton of money to become the Coca Cola of marijuana, costs which the consumer will pay for.

I'm for legalization, but I will miss the "bespoke" nature of underground weed. Regulation and industrialization will focus on consistency and in all likely hood will limit potency (every try to buy Everclear outside of Montana?). Get ready for legal weed that sucks.
Posted by Westside forever on July 20, 2012 at 10:08 AM · Report this
35
I've made the same argument for a long time in various online forums. The pot heads go ballistic about it, but it's backed up both by Economics 101 and by research.

As long as "legalization" includes the right to grow your own, there is no way the state will be able to collect significant tax revenues, nor will the price be anything remotely close to what it is today. The only way the state can "tax the hell out of it" is if they operate a cartel just like the current ones.

Google the following search term inside the quotes: "Estimated cost of production for legalized cannabis." You will get a Rand Corporation research paper on the subject. It shows that if pot were grown in California's central valley like any other agricultural commodity, growing cost would be $2.80 an ounce for 15% THC marijuana, and further processing would be $10 an ounce. So you'd start with $13 pot, which implies a retail price of maybe $25.

Now, for Econ 101. If producer A tried to charge $35 an ounce, he'd lose business to producer B. And producer C might find ways to cut costs, introducing $8 pot. That's how the economic system works. Taxes are governed by similar principles. if government tried to put, say, a $20 an ounce tax on pot at retail, then you'd have people growing their own at home.

In fact, given how easy it is to grow pot, even at a retail price of $25 an ounce, in a legal environment you'd see a whole lot of home growing. Heavy users would especially grow their own. The cost of processing, i.e. picking, separating, drying, packaging, and shipping, would be avoided, along with much of the cost of growing. Why pay $25 an ounce when you could do it at home for a few bucks an ounce?

There are at least 40 million gardeners in America. Roughly 6%-7% of the population smokes pot at least once a month. Apply that to gardening, and you start with a potential home-growing population of 2-1/2 to 3 million people, if pot is legalized. The only way these people will be price gouged is if growing pot remains illegal, which it would under the false "legalization" proposition on Washington State's ballot this fall.

True "legalization" of marijuana would allow home growing, and the free distribution of seeds and starter plants. Anything less than that is not "legalization." If pot was really legalized, the price would crash. There'd still be pot at the store, just as there is still lettuce at the store. But store-bought dope would be much, much cheaper than it is today.

Every time I read something from some pot head who tells a tale of the painstaking care that growers now pour into their dope grows, I laugh my ass off. Read the Rand study. The overwhelming majority of the cost of growing dope is connected to the need to conceal the activity. Remove that constraint, and growing high-quality dope will be easy and cheap, rendering the final product damn close to free.
More...
Posted by Mister G on July 21, 2012 at 12:47 PM · Report this
36
@22, except that you don't have international competitions to see who can grow the best basil or oregano, with million-dollar prizes, and there aren't hundreds of named varieties of herbs or asparagus. I don't even smoke weed, but I know about Lemon Haze, Pineapple Express, Vanilla Kush, Sour Diesel, LA Cheese, White OG, Chocolope, ad infinitum.

I'm not clued into the oregano contests, but right here in the Pacific NW you have all kinds of competitions for growing dahlias, complete with shows and prizes that attract international attention. There are more varieties of dahlias than there are of marijuana.

Whenever I read the claims of horticultural genius from the dopers, one thing becomes hilariously clear: Pot growers have bamboozled themselves and their stoner customers into believing that dope growers are the only gardeners out there. I do realize that there's a reason they call it "dope," but do you realize just how utterly stupid you look when claiming unique gardening skill or experience?
Posted by Mister G on July 21, 2012 at 12:52 PM · Report this
37
p.s.: I cited dahlias for four reasons. One is that the climate here is well suited for them, just as it's well suited for growing dope. Second is that I'm familiar with the dahlia subculture. Third is that dahlias and dope are about equally hard or easy to grow, requiring similar skills.

Fourth, and most important: Genetics is the biggest factor, by far, in plant quality when it comes to dahlias or anything else. Give your dahlias enough water and enough sun, keep pests and competing plants away, and apply some fertilizer, and you'll have nice flowers. In many cases, you'll have some nice dahlias even if you do nothing at all. Same for dope.

Legalize it for real, and you'll have high-quality "volunteer" dope sprouting all over the place within a few years. Why high quality and not the ditch weed of yore? Because people will be planting hybridized plants, and those plants will be seeding. The stuff you pick by the roadside will blast you out of your gourd, because it'll come from good stock.

Anyone who listens to the uber-grower propaganda is an ignorant fool.
Posted by Mister G on July 21, 2012 at 1:00 PM · Report this
38
what would regular cigarettes cost with out the sin taxes?

About a buck a pack. The price would be that high because a cigarette is actually a highly sophisticated manufactured product. Marijuana is a simple commodity.
Posted by Mister G on July 21, 2012 at 1:02 PM · Report this
39
Is anyone keeping an eye on local pricing given that you can't let a fart without it being overwhelmed by the waft from a new neighborhood Cannabis Collective now? If the argument holds nationally, it should hold locally as well.

Marijuana isn't legal locally. I can't go to a nursery and buy seeds or starters. If I grow it at home, it can be seized. The same would be true if the faux-"legalization" proposition passes this fall.

Today, you have "dispensaries" operating in legal limbo. Legal under state law, illegal under federal law. Same with the so-called "collective gardens," many of which are vertically integrated, ownership-wise, with the "dispensaries."

So when you pay $250 and up per ounce from the "dispensary," you are buying something that probably cost the owner no more than $30. If it cost him any more than that, then he's simply not much of a businessman.

I don't smoke dope, but I have heard that, even with the current constraints, dope prices are dropping both here and in Oregon. Apparently, there's lots of discounting going on at the "dispensaries." If you REALLY "legalized" it, trust me, the "dispensaries" would be out of business in a year.

The faux-"legalization" proposition will tighten up a lot on the "dispensaries" by banning vertical integration, and by putting the state directly in charge of a growers cartel, while keeping home growing illegal. The end result will be higher dope prices and continuing illegal status.
Posted by Mister G on July 21, 2012 at 1:14 PM · Report this
40
I don't think most people would complain much if the cost of legal weed went up slightly from the normal $25-$40/gram, due to much easier availability

As someone who does not smoke dope and actively disdains and disrespects the fools who do, I must say that I will be laughing my ass off if you people actually think you're better off paying those prices for something you could easily grow yourself for free.

Leave it to a dope head to think $25-$40 a gram of marijuana is anything other than an absolutely shameless ripoff.
Posted by Mister G on July 21, 2012 at 1:18 PM · Report this
41
Nobody gives away free packets of fresh basil or oregano, that I know of, anyway.

Funny you should say such a thing. I have basil, oregano, bay leaves, thyme, sage, rosemary, and parsley coming out of my ears. One of these days I'm going to stick it on Freecycle.
Posted by Mister G on July 21, 2012 at 1:21 PM · Report this
42
Before you get too excited, take a look at the alcohol market. All of the same factors apply to booze. In theory, grain alcohol should be incredibly cheap, and indeed, denatured alcohol, which is not subject to liquor taxes, is pennies on the dollar compared to the stuff you buy in the store. The good stuff on the other hand, is pretty expensive. I'm guessing it will be the same for weed.

As is typical for the dopers, you've done no thinking.

No one grows alcohol. They make it. Even bulk grain alcohol is a manufactured product. And it's not especially easy for an individual to produce. It needs specialized equipment (a still), and manufacturing is dangerous. Not only do stills have a tendency to explode, but the boiling points of ethanol and methanol are sufficiently close to each other that you can be killed by a "successfully brewed" batch.

All of that, plus the bulk nature of the end product, and then the further steps needed to turn commodity alcohol into something you'd want to drink, makes self-production fundamentally non-comparable to growing marijuana, which is no harder than growing dahlias or tomatoes.

Even brewing beer or making wine, which are easier than making liquor, are a lot more cumbersome and iffy than growing marijuana.
Posted by Mister G on July 21, 2012 at 1:32 PM · Report this
43
It means that there's a lot of room for taxation. The government could get a very nice haul from a tax rate that leaves it cheaper than it now is, but much more expensive than it would be untaxed.
Posted by I have always been... east coaster on July 21, 2012 at 8:53 PM · Report this
44
This is also a good reason for stoners and pot patients alike to go to the mattresses to get full legalization. Think how much money they'd save, even if it were taxed at 1000% it'd still be dirt cheap. Nobody would ever have to smoke crappy swag again.
Posted by I have always been... east coaster on July 21, 2012 at 8:56 PM · Report this
45
Fully legalized dope will yield trivial tax money. No more than a half-billion a year, nationwide. Probably much less.
Posted by Mister G on July 22, 2012 at 12:45 PM · Report this

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