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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 (36) RSS

Oldest First Unregistered On Registered On Add a comment
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 on July 19, 2012 at 4:09 PM · Report this
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
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
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 on July 19, 2012 at 4:32 PM · Report this
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
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
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
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 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
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
@12- $25-$45/ gram? You need a new guy.
Posted by Bhamjason on July 19, 2012 at 5:25 PM · Report this
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
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
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 on July 19, 2012 at 8:37 PM · Report this

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
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 on July 19, 2012 at 10:48 PM · Report this
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
@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
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
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
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
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

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