Most people aren’t spending that much money on marijuana even with high black market prices. According to the government surveys, which granted are probably not entirely accurate, “current marijuana smokers” tend to consume around 7 grams of marijuana per month. Other countries have done similar surveys and have come up with similar averages for “current smokers,” those reporting use in the 30 days prior to the survey. That much pot could cost over a hundred bucks if people are smoking the super pricey stuff, but what we can see from the average potency of seized marijuana is that most people aren’t smoking the super potent, super expensive stuff. They’re smoking the much cheaper lower potency “commercial grade” marijuana. According to narcotics officers in my town, they’re able to get that stuff for $400 to $600 a pound where I live now, and they usually pay more than established dealers because they don’t have time to develop much of a business relationship with these guys before they bust them. I’m a public defender, and I’m hearing from my clients that ounces (28 grams) of the cheap commercial grade stuff are going for $50 or $60 or so.
It is a lot cheaper to smoke commercial grade pot than it is to drink. Even the expensive stuff is still pretty cheap to use because it doesn’t take much of that stuff at all for people to get a buzz. A quarter gram of the potent expensive stuff is enough to get most just stoned out of their gourds, past the point where smoking any more will get them any higher, so most are probably using less than that in one sitting. If it’s a super pricey $140 a quarter ounce, a gram is only $20 worth, so a quarter of a gram is only $5.00 worth, which is around the price of a six pack of beer.
Even the expensive stuff is relatively cheap. There’s not much incentive there for people to grow their own. When marijuana is legalized, the cost of it is going to drop through the floor. We’ll see modern agricultural methods employed in producing it on a massive scale. Producers may have to pay taxes and regulatory costs and so on, but then again they won’t be losing huge amounts of their product to drug seizures and crop eradication programs like they do now. Workers in the industry will no longer have to be paid such high wages because there will no longer the risk of arrest and imprisonment.
I’ve handled thousands of pounds worth of drug mule cases. These mules hauling a couple of hundred pounds worth of weed in their trunks get paid a good bit more for that load than a truck driver hauling a legal load gets paid for making a run. When it’s legal they’ll be able to ship it in truck loads in the tens of thousands of pounds and pay only a tiny fraction of current shipping costs, and not have to worry about a good bit of their product seized by law enforcement along the way. The cost of producing and distributing the product will drop through the floor. I can’t think of any reason why finished product will have cost any more than a few dollars a pound to produce. The only way to keep prices up to anywhere near their current levels will be to tax the hell out of it. Provided the taxes don’t go too high, there shouldn’t be much of a black market for homegrown weed.
I think what we will see are licensed shops that carry a wide variety of product. Consumers will like having all the choices. Consumer tastes will change, and they’ll demand higher quality, better smelling, better tasting, less harsh smoke. There will be favorite brands, brand loyalty. People aren’t going to want crappy homegrown Joe Blow grew in his back yard any more than they want homebrewed beer, homegrown tobacco, or rot gut moonshine whiskey. They’ll want their store bought product that they know has been produced and handled according to regulated safety standards. The lion’s share of the product consumed will have gone through legal channels.
I’m amazed by what I read about these marijuana clubs in California. People with medical marijuana cards are allegedly spending $20 and $30 a gram for pot in these clubs. The people running these operations are getting rich. These people with their marijuana cards could legally grow their own in California. I know it’s still against federal law but the feds aren’t busting small closet/backyard grows out there. They’re trying to make a few higher profile busts. Why are these people paying so much money for pot when they could easily get away with growing their own? If it was fully legal and grown on a grand scale it would probably be a good bit cheaper than what these people are paying so they’d have even less incentive to grow their own than they do now.
Sorry to be late addressing your last post.
Maybe it’s just my interest in landscaping, but growing marijuana would seem much easier and convenient than brewing beer. Additionally, it doesn’t have to be very good to tolerate. I think most would tolerate a couple of hits off a bug eaten under dried plant more tolerable than 3 to 4 sour beers every night. I see there’re lots of online guides making both look easy to produce, but brewing just comes off to me as kind of a mess. Maybe apartment dwellers would see it differently…
The typical marijuana smoker you mention of 7 grams per month is consistent with what I read. I think a quarter ounce a month is daily use if put in a pipe, much less if the smoker’s rolling joints, bingeing or sharing with friends. I see estimates counting users from 14 to 25 million in the US. But I’m sure you know that we can’t just assume 20 million people smoking 7 grams a month will be paying those $30 a gram prices at government licensed smoke houses. For instance, if coffee were both illegal and hallucinogenic, I’m sure a few legal Starbucks could get $30 and up for cups of coffee, but that doesn’t mean we could extrapolate that to revenue potential of today’s number of coffee drinkers.
Let’s make some assumptions from what we know. In the 1980s, a quarter ounce of good marijuana was about $50. I have no idea what today’s price is so I need to go with that for now.
- 7.grams per month = $50.00 per month
- $50.00 per month * 12 = $600 per year
- $600 per year * 20 million US users = a $12 billion anual US market.
Assuming sales to minors will be illegal, let’s say they account for 10% and will still be buying off the black market or growing their own.
- $12 billion dollars less 10% = $10.8 billion
Every tax has an optimum level for revenue generation. For instance if taxes were just 10%, there’d probably be next to no black market and no reduction in usage. But if they were 100% of current prices, most of the dope might still be purchased legally. Lets assume that if taxes were 50% of the current price ($25 per quarter ounce), half the pot smoked illegally now would be purchased legally. We could both make arguments that it would be higher or lower, but for now let’s go with that.
- 50% of a $10.8 billion total market = $5.4 billion legal market.
- A 50% price reduction in a $5.4 billion legal market = $2.7 billion in legal sales.
Some portion of those $2.7 sales is going to go to production, administration and profit. Let’s assume 20%.
- $2.7 billion sales less 20% for expenses = $2.16 billion in tax revenue.
We can play around with the assumptions and bring $2.16 billion in tax revenue up or down, but it’s not going to change dramatically. But that’s not the end of the story because as good capitalist, we know that price, legalization and availability have an affect on usage. I’m not aware of anything with flat sales after its price is cut in half (especially if it’s also legalized). Let’s assume usage increases just 25%
- $2.16 billion in tax revenue * 25% = $2.7 billion in tax revenue.
Is $2.7 billion really significant motivation for legalizing pot? What are the other costs? A 25% increase in usage = 5.4 million more smokers (or some lesser amount at greater levels.) Let’s say that just 5% of that are chronic smokers who’d not otherwise have become alcoholics or junkies on something else. That’s 27,000 more people not contributing to society and becoming liabilities. It’s 27,000 lives that are ruined for just $2.7 billion a year. That doesn’t sound like a bargain to me. It just sounds like social decay.
Granted, I read there’s an additional $10 billion spent on marijuana law enforcement and incarceration yearly, but not all of that’s going to be recoverable. It’s not as if police and jails will cost $10 billion less a couple of years following legalization. Bureaucracies and fixed cost have a way of absorbing a large portion once their scope retracts.
Still legalization of dope is not a big issue with me. I could list a half dozen more reasons for legalizing it that chip away at any reason for keeping it illegal, but one of them isn’t revenue enhancement. I think the cost to society from the lives destroyed and productivity lost would more than make up for what little tax revenue is generated.