Can Legal Weed Win? The Blunt Realities of Cannabis Economicsby Robin Goldstein and Daniel Sumner (2022, University of California Press, 211 pp., $24.95 HB)

California has the world's largest legal marijuana market -- and it's in trouble. The Prop 64 initiative that legalized weed in the Golden State in 2016 was written without serious input from people already in what was a thriving gray market and, along with a very high tax and regulatory burden and a local opt-out option, its structure wreaked havoc on players in the already-existing industry.

Now, seven years later, the gray market has largely gone away, but the black market still dominates, accounting for 60 to 70 percent of all marijuana sold in the state. Can California's legal marijuana industry survive, let alone thrive? And can the legal market ever drive out the black market?

Maybe not, the authors Can Legal Weed Win? argue in a brisk and cheeky tome that throws gallons of cold water on projections that legal marijuana is going to be a gold mine, either in California or nationally. Economists Robin Goldstein, director of the UC Davis Cannabis Economics Group and Daniel Sumner, a Distinguished Professor of Agricultural and Resource Economics apply the cold, hard principles of the dismal science to the effervescent economics of marijuana market prognostication, and the results are sobering indeed.

Using a multitude of data points from the Weedmaps dispensary and product tracker to great effect, the pair of pot economists are able to come up with figures on nationwide average retail prices ($40 an eighth ounce before taxes), the cheapest retail states (Washington, Oregon, Colorado) and a panoply of other fascinating figures. They also examine costs of doing business, such as complying with regulatory requirements and the cost of energy (especially relevant for indoor and greenhouse operations that account for the majority of legal weed).

It's bad news for the California legal marijuana industry, especially once federal legalization occurs and, presumably, a national marijuana market emerges. That is because California has high regulatory and energy costs, making it uncompetitive with lower-cost states, such as Oklahoma and, once legalization arrives in them, other Plains States.

Where there may be a place for California weed is in the high-end, location-driven market, where labels like Humboldt-grown or Sonoma sun-grown can provide the cachet to hold onto some premium market share. But if you're going to go boutique, you've got to have some mystique. Kern County Colas probably are not going to cut it.

Goldstein and Sumner also share some deflationary thoughts about the potential size of a legal national market -- especially the amount of dollars it can generate. In contrast to industry touts and giddy prognosticators who have projected that the current national legal market of about $20 billion a year will grow to $85 billion or even $130 billion by 2030, the pot economists look further out -- to 2050 -- and project that the dollar size of the market then will most likely be smaller than it is now.

That is because even though the size of the consumer market will dramatically increase, the price of weed will even more dramatically decrease. They attribute that prediction to four factors: the impact of national legalization, a legal national and even international weed trade, technical innovation, and the application of agribusiness techniques (scale, specialization, financing, and management improvements). Trade and efficiency are going to drive prices into the ground, maybe not as low as the $20 a pound producers can get for dried organic parsley or the $10 a pound that fancy tea fetches but much closer to $100 a pound than the much higher pound prices used to make those rosy projections.

As Goldstein and Sumner sum up: "Prices will fall. Be ready."

As for winning over the black market, that may be the only way to do it -- with prices so low there is not enough profit for black marketeers to compete. Because otherwise, if legal prices remain higher than black market prices (as they are now), most consumers are going to stick with that guy they've been getting weed from for years.

This is a fun book. It is irreverent and breezy but based on hard numbers and the laws of economics, and it is full of strategems to try to survive what is going to be a turbulent industry. If you are interested in how legal marijuana works, you want to read this book; if you are in the marijuana business or thinking about investing in it, you need to read this book.

Last November, Maryland voters made it abundantly clear that they wanted marijuana legalization by approving a referendum to that effect. On Wednesday, with the signing of enabling legislation by Gov. Wes Moore (D), the legislature and the executive branch have enacted the expressed will of the voters, laying the groundwork for a state system of taxed and regulated marijuana sales.

They had to hustle to get something in place before the legalization of marijuana possession goes into effect in July, and with the passage of Senate Bill 516/House Bill 556, they have done so. It did not happen without a bunch of wrangling at state house, as the House and Senate modified the bills and then had to compromise to reach agreement, but now it has happened.

"The criminalization of marijuana harmed low-income communities and communities of color in a profound way," Moore said at a signing ceremony Wednesday. "We want to make sure that the legalization of marijuana lifts those communities now in a profound way." The new law will "ensure that the rollout of recreational cannabis in our state drives opportunity in an equitable way," he added.

Here are key provisions of the new law:

• A new, independent Maryland Cannabis Administration will be responsible for regulating the program.
• Sales will begin on July1, with existing medical marijuana dispensaries being licensed to sell to the adult recreational market. Licensing of additional marijuana businesses will come no later than July 1, 2024.
• Licenses will be capped at 300 retail shops, 100 processors, and 75 growers. Additionally, there will be 10 retail, 100 processor, and 100 grower licenses for "microbusinesses."
• Retail marijuana sales will be taxed at 9 percent, with 35 percent of those revenues going to a community reinvestment fund. Counties, the Cannabis Public Health Fund and the Cannabis Business Assistance Fund will each get five percent of revenues. Localities cannot impose additional taxes.
• Applicants claiming social equity status will have to have 65 percent ownership by people who lived at least half of the last decade in disproportionately impacted areas or who attended public school in one of those areas for at least five years. Social equity applicants will be eligible for a Capital Access Program to provide low interest loans and promote industry opportunities. Additionally, beginning in 2025, existing medical marijuana dispensaries that form "meaningful partnerships" with social equity applicants will be eligible for grants for which $5 million will be appropriated each year.
• Delta-8 hemp products will no longer be sold in the open market, but will have to be sold through licensed marijuana businesses.
• Medical marijuana patients will see the number of plants they can grow double from two to four, but only patients will be able to grow their own.
• New marijuana retailers will face geographic restrictions. They will have to be at least 1,000 feet apart from each other and cannot be within 500 feet of a school, childcare facility, playground, recreational center, library or public park.
• To avoid monopolization, a single business will not be able to operate more than four retail shops.
• Marijuana smoking will not be allowed indoors at consumption lounges, but only outdoors.
• Smoking will not be permitted indoors at on-site consumption facilities, but people could do so on outdoor patios at licensed facilities.

And Maryland now hops with both feet on the legal marijuana bandwagon.

It is tough times for the West Coast's small-time legal marijuana growers. In California, they are being battered by low prices, a tax and regulatory environment that favors larger operations, and a thriving black market. Next door in Oregon, small marijuana farmers are facing similar issues and are especially buffeted by falling wholesale prices. The pound of weed that earned an Oregon farmer $1,470 two years ago was going for $696 last month, a more than 50 percent decline since 2020.

Another obstacle small operators in both states face is being unable to sell their products outside of their own states. Since marijuana remains illegal under federal law, such sales are prohibited. But now, a pair of congressmen representing the two states have filed legislation that seeks to provide some help for beleaguered small growers by removing barriers to interstate sales.

On Wednesday, Reps. Jared Huffman (D-CA) and Earl Blumenauer (D-OR), founder and chair of the Congressional Cannabis Caucus, filed the Small and Homestead Independent Producers (SHIP) Act to allow small farmers and producers to operate across state lines -- once the end of federal marijuana prohibition is achieved. The bill specifically aims to support the smallest family farmers.

The bill says: "A small cultivator of marijuana and a small manufacturer of a marijuana product may ship and sell marijuana or a marijuana product to an individual located in that State or another State in which possession of marijuana or the marijuana product is lawful by that individual, using the Postal Service or any private or commercial 10 interstate carrier."

It defines "small cultivators of marijuana" as those growing less than one acre outdoors, 22,000 square feet of canopy in greenhouse operations, or 5,000 square feet of indoor canopy. "Small manufacturers of marijuana" are defined as those producers of edibles, tinctures, salves, or concentrates who gross less than $5 million per year.

"Too often, the federal government falls behind, and the gears of Congress work too slowly to keep up with the pace of a changing economy," said Representative Huffman in a press release announcing the bill. "Under my bill, folks in our state will be able to ship their products straight to consumers when the antiquated federal prohibition on cannabis is finally repealed. As large, commercial cannabis operations squeeze out local producers from the market, this legislation is critical for farmers to survive and expand their small businesses. We cannot leave our smallest family-farmers behind under full legalization."

Representatives of small growers said being able to sell direct to consumers would be a major benefit for them. The Origins Council, founded in 2019 to promote sustainable development within California's "legacy" marijuana growing regions and to promote appellations for such areas much like the ones adopted by the international wine industry, is on board.

"The direct-to-consumer model is a necessary resource for any small-scale craft-producing community that is deeply tied to the land on which it creates -- whether it produces wine, whiskey, cheese, beer, cannabis, or honey," said Genine Coleman, Executive Director of Origins Council. "The legacy cannabis community that has worked so long in the shadows should have the opportunity to join the ranks of other artisan producers across the United States and enjoy the privilege of connecting personally with their adult customers. As is always true with each step cannabis takes towards legality, the greater community stands to reap enormous benefit in the process."

So are groups representing small marijuana farms in Humboldt, Mendocino, and Trinity counties, California's original Golden Triangle.

"For small craft producers in nearly any context, direct-to-consumer shipping is the critical tool that enables a diversified market to survive and thrive. Cannabis is no different," said Ross Gordon, Policy Director of Humboldt County Growers Alliance (HCGA) and Policy Chair of The Origins Council. "The SHIP Act moves the conversation beyond the question of who can get a license to cultivate cannabis and addresses the practical reality of building an equitable and accessible market for small cannabis producers."

"As a legacy cannabis producer and family farmer located in the heart of the Emerald Triangle, I see the direct-to-consumer retail pathway as the only future of my small farm, and indeed -- of all rural communities like my own whose cultural heritage is rooted in craft cannabis cultivation and artisanal medicine making," said Karla Avila, owner and operator of Flowerdaze Farm in Trinity County and Executive Director of the Trinity County Agriculture Alliance.

The bill is also being endorsed in California by the Mendocino Cannabis Alliance, the Nevada County Cannabis Alliance, the Sonoma County Growers Alliance, and the Big Sur Farmers Association. Outside of California, it's supporters include the Massachusetts' Farm Bug Co-op, the Maine Craft Cannabis Association, the Vermont Growers Association, and the Washington Sun & Craft Growers Association.

But it is not going to happen until marijuana is legalized at the federal level, a prospect looking increasingly dim in this Congress. Whether progress comes in the next Congress will depend to a large degree on the results on November's mid-term elections. If the Democrats can hold the House and increase their numbers in the Senate, the odds are good. If not, not so much.

The Biden White House sent its first National Drug Control Strategy to Congress on April 21. It breaks positive new ground by explicitly acknowledging harm reduction measures to prevent overdose and blood-borne diseases among drug users. At at the same time, though, it also relies heavily on the destructive and counterproductive pursuit of failed prohibitionist drug policies -- and funds more law enforcement much more heavily than harm reduction.

The strategy comes out just weeks after the Centers for Disease Control and Prevention (CDC) reported that drug overdose deaths hit an all-time high of 106,000 in the year ending last November. The administration is responding with what it calls a "whole of government" approach to the crisis.

"The strategy focuses on two critical drivers of the epidemic: untreated addiction and drug trafficking," the White House said. "It instructs federal agencies to prioritize actions that will save lives, get people the care they need, go after drug traffickers' profits, and make better use of data to guide all these efforts. Saving lives is our North Star, and the 2022 National Drug Control Strategy calls for immediate actions that will save lives in the short term and outlines long-term solutions to reduce drug use and its associated harms, including overdose."

While the strategy includes long-familiar categories such as drug treatment, prevention, supply reduction, and criminal justice and public safety, it also emphasizes an evidence-based approach, "building a recovery-ready nation," and for the first time, harm reduction.

"The Biden-Harris Administration's efforts focus on meeting people where they are and building trust and engagement with them to provide care and services," the White House said. "Specifically, the strategy calls for greater access to harm reduction interventions including naloxone, drug test strips, and syringe services programs. It directs federal agencies to integrate harm reduction into the US system of care to save lives and increase access to treatment. It also calls for collaboration on harm reduction between public health and public safety officials, and changes in state laws and policies to support the expansion of harm reduction efforts across the country."

The strategy calls for "the coordinated use of federal grant funds for harm reduction," and the administration last year broke new ground with a $30 million grant program for harm reduction providers. But in a sign of continued reliance on traditional law enforcement priorities, the strategy also envisions a $300 million increase for Customs and Border Patrol and another $300 million increase for the DEA. Those figures were released as part of the White House's FY 2023 budget released last month.

"Responding effectively to the illicit production, trafficking, and distribution methods of domestic criminal organizations and Transnational Criminal Organizations (TCOs) is a significant challenge and remains a Biden-Harris Administration priority," the White House said.

That kind of talk suited mainstream Democrats just fine.

"Illicit drugs cause immeasurable pain and loss in our communities. As the Chairman of the Senate Caucus on International Narcotics Control, I've pressed for an updated federal plan to tackle them," said Sen. Sheldon Whitehouse (D-RI). I've been clear that the plan must include a more coordinated approach to cracking down on drug trafficking and transnational criminal organizations, especially the ways in which they launder and protect their ill-gotten gains using US rule of law and financial networks; and more and better cooperation with our international partners to reduce the supply of precursor chemicals used to manufacture illicit drugs and to levy tougher sanctions against transnational drug syndicates. I'm pleased to see my priorities reflected in this new strategy, and I look forward to working with the Biden administration to deliver on those priorities."

Whitehouse also lauded the strategy's "tearing down barriers to treatment, including expanding access to life-saving naloxone and medication-assisted treatment; improving our data collection systems to better understand the effects of our intervention efforts."

Reform advocates offered praise -- sometimes lukewarm -- for the administration's tentative embrace of harm reduction, but blasted its reliance on tired, failed drug war paradigms.

In its analysis of the strategy, the Washington Office on Latin America (WOLA) called it "a major step forward" and lauded the administration for "focusing on ensuring access to treatment for substance use disorders and highlighting the crucial role of harm reduction services." But WOLA also noted that, "when measured against the scale of the nation's overdose problems and the urgency of the needs, Biden's new plan appears quite timid."

WOLA also warned that the strategy's "positive innovations regarding investment in treatment and harm reduction strategies risk being undermined by a continued commitment to the kinds of policies that have exacerbated the present crisis and that continue to absorb the lion's share of resources, namely, drug criminalization at home and wildly exaggerated expectations for what can be achieved through supply control efforts abroad."

Similarly, the libertarian-leaning Cato Institute called the attention to harm reduction a "positive," but noted steps that it did not take, such as making the opioid overdose reversal drug naloxone available over-the-counter and repealing the so-called Crack House Statute that stands in the way of federal approval of safe injection sites.

"On a negative note," Cato observed, "the remainder of the new report calls for doubling down on interdiction, border control, and other law enforcement measures aimed at curtailing the supply of illicit drugs -- as if repeating the same failed strategies of the past half century, only with more gusto, will somehow work."

So there it is: The Biden administration's first crack at a national drug strategy deserves kudos for its embrace of harm reduction and evidence-based approaches, but beyond that, it is pretty much more of the same old same old.