MARIJUANA PRICES TEND TO DROP FOLLOWING LEGALIZATION

SEATTLE One impact of allowing large-scale production and sale of recreational marijuana to the public has become abundantly clear: Legalized marijuana is getting very cheap very quickly.

Marijuana price data from Washington State’s Liquor and Cannabis Board was aggregated by Steve Davenport of the Pardee RAND Graduate School and Jonathan Caulkins, a professor at Carnegie Mellon University. Both retail prices and wholesale prices are plummeting, said Davenport, and prices “are now steadily falling at about two per cent per month. If that trend holds, prices may fall 25 per cent each year going forward.”

Prohibition imposes many costs on drug producers. They must operate covertly, forgo advertising, pay higher wages to compensate for the risk of arrest, and lack recourse to civil courts for resolving contract disputes. Legal companies endure none of these costs and benefit from economies of scale.

How cheap can legal pot become? Says Caulkins, “It’s just a plant. There will always be the marijuana equivalent of organically grown specialty crops sold at premium prices to yuppies, but at the same time, nofrills generic forms could become cheap enough to give away as a loss leader — the way bars give patrons beer nuts.”