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Marijuana Legalization: California Pot Price Could Drop to $38 an Ounce, Rand Study Finds

Submitted by Phillip Smith on (Issue #639)

If marijuana were legalized in California, prices could drop dramatically, consumption would increase (although how much is anyone's guess), and tax revenues could either wildly exceed published estimates or come in much lower, according to which sets of assumptions hold true, the RAND Drug Policy Research Center said in a report released Wednesday.

The report, Assessing How Marijuana Legalization in California Could Influence Marijuana Consumption and Public Budgets, assumes the cost of indoor marijuana production at no more than $300 to $400 a pound. Under legalization, the retail ounce price could drop to as low as $38 pre-tax, the researchers found.

"There are several reasons to anticipate such a sharp decline," the report said. "First, we anticipate that workers' wages will fall because employers will not have to pay a risk premium to employees for participating in an illegal activity. Second, there will be greater ability to use labor-saving automation, especially in the manicuring stage. Third, production at the level of an entire grow house, or several houses operated together, permits economies of scale not available to grows kept small enough to avoid attracting the attention of not just federal but also local law enforcement. Fourth, assuming that growers avoid attracting federal law-enforcement attention, they will face minimal risk of arrest and forfeiture."

The authors caution that pricing estimates depend on a number of variables, including whether an excise tax is imposed, the degree to which it is collected or evaded, and the degree to which regulatory burdens impose economic costs on producers.

Current retail pot prices in California are from $250 to $400 an ounce for high grade weed, so a $38 ounce is about an 80% price reduction. Such a reduction is assumed to increase the rate of consumption, but as the authors note, "the magnitude of the consumption increase cannot be predicted because prices will fall to levels below those ever studied."

Consumption could also increase because of non-price factors, such as loss of stigma or advertising campaigns. The authors said they "could not rule out" consumption increases of 50% to 100%, which would bring consumption to levels not seen since the late 1970s, the heyday of pot smoking in America.

The state Board of Equalization estimated that legalization could generate $1.4 billion a year in tax revenues, based on the $50 an ounce tax envisioned in legislation sponsored by Assemblyman Tom Ammiano (D-San Francisco). The marijuana legalization initiative, Proposition 19, however, does not include provisions for taxation at the state level, only at the local level, and only if those localities decide to allow taxed and regulated marijuana production and sales.

Those considerations, as well the abovementioned factors of level of taxation and tax evasion and the response of the federal government mean revenue estimates vary wildly and could be dramatically lower or higher than the board's $1.4 billion a year estimate.

"There is considerable uncertainty about the impact that legalizing marijuana in California will have on consumption and public budgets," said Beau Kilmer, the study's lead author and a policy researcher at RAND. "No government has legalized the production and distribution of marijuana for general use, so there is little evidence on which to base any predictions about how this might work in California."

But a fella can dream, can't he?

Permission to Reprint: This content is licensed under a modified Creative Commons Attribution license. Content of a purely educational nature in Drug War Chronicle appear courtesy of DRCNet Foundation, unless otherwise noted.


maxwood (not verified)

"Consumption" will NOT rise dramatically.

This is a little complex, but try to understand it. As soon as there is no more fear of possessing or of openly using the cannabis itself, users will also not be afraid to possess or carry a 25-mg.-serving-size one-hitter (chillum, kiseru, midwakh or sebsi, featuring a 1/4", 6.0-mm.- or 5.5-mm.-inner-diameter screened crater and a long, flexible drawtube). Make your first ones using free instruction info at "Make Smoke Pipes out of Everyday Objects".

Appropriate, low-dosage equipment used to be the most risky to have on hand, as it would be used for evidence to arrest you, get confiscated along with your car, etc. This was all to the benefit of cigarette paper companies, because many users were cowed into settling for a hot burning overdose "joint", "spliff" or "blunt", so easy to hide, so easy to dispose of, even though it wastefully burned away insane quantities of good cannabinoid that a one-hitter would have vaporized instead.

So after cannabis is legal, and 25-mg.-one-hitters, vaporizers, cannabinoid e-cigs etc. are also unambiguously legal along with it, replacing the 500-mg. joint, cannabis use will drop substantially in quantity per user, more than offsetting the addition of many informed new users starting in with new safe low-dosage-delivery utensil technology worthy of today's new one-toke herb. Best of all, there will be a drastic drop, possibly more than 90%, in carbon monoxide inhalation by users compared to what was thought necessary in the $igarette genocide era soon thankfully behind us!

Fri, 07/09/2010 - 3:33pm Permalink
Malkavian (not verified)

Surely consumption is driven by demand. According to all the surveys it's not like any sincere demand today goes unsupplied. Will the amount of people who want to use suddenly rise like that? That's highly unlikely and the experience from other more easy going countries around the world suggests that people do not go overboard just because it cheaper or because anyone of age can go in a coffee shop and buy the stuff.

Over time I would not be surprised if there were an increase among the decent, hard working and insanely law-abiding citizens. And so what? Most people don't really want to smoke cannabis during working hours anyway, and if they do they're already doing it. Legal status and prices have nothing to do with it, but being responsible has. For a lot of people it would even be a good deal healthier to enjoy a bit of cannabis instead of alcohol or whatever else they use at this time.

Max Wood: excellent points. I too believe that much more responsible patterns of use will emerge, and a lot less people will accidentally inhale too much because they're bending over backwards in heroic attempts at adapting to these inhuman laws.

LOL, like a friend of mine once told regarding a trip to Holland: "Then there was that day when I accidentally smoked a bit too much and I had to crash on a bench in the park [note: parks are SAFE in Holland, it's a very civilized country!]. Then suddenly I snapped out of my rest because a police officer was shaking my shoulder. Startled me a bit, but before I got scared the police officer just asked if I were ok. I told him I'd smoked a bit too much but otherwise was fine. Then the police officer just said 'OK, that's fine, have a nice day.' Then the officer left."

I don't think I have to contrast that with what would've happened in the USA.

Fri, 07/09/2010 - 7:01pm Permalink
TrebleBass (not verified)

What about when marijuana (and all other drugs) were legal for the entirety of american history (and most of human history), before a hundred years ago? Did we have any kind of statistics back then, or at least a way to gauge the levels of use?

Fri, 07/09/2010 - 9:15pm Permalink
TrebleBass (not verified)

And even if levels of use were to rise dramatically, wouldn't it still be possible that that would have an impact on the level of alcohol consumption (lowering it)?

Fri, 07/09/2010 - 11:04pm Permalink
Cranberry sauce (not verified)

In reply to by TrebleBass (not verified)

i know that if it were legal, i would stop drinking entirely (thats why my fingers are crossed for this to happen, i dont want to be an alcoholic)

Mon, 07/12/2010 - 7:02pm Permalink
Greeple (not verified)

You'd better believe that consumption will increase among the stoners who already smoke everyday. The eighth they smoke is now an ounce.

Fri, 07/09/2010 - 11:05pm Permalink

My bet is closer to $3.80 an ounce; I think the grow-your-own provision will completely make cannabis a low-price commodity market.

@maxwood: I also see the e-cig/personal vaporizer model as the likely future of consumption (a good thing), though I disagree about usage rates. I think even if individual usage drops, wider prevalence will more than make up for it.

Fri, 07/09/2010 - 11:54pm Permalink

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