REINVENTING THE SQUARE WHEEL. WATSON,

Ontario’s decision to run its new above-ground marijuana market the same way it runs its liquor business — hog-tied in regulation and rent-seeking — was, alas, sadly predictable. In fact, I predicted it, sadly, on this page four years ago. Not that I can claim originality for the forecast that Ontario would control its system tightly and hand over the rents from voluntary exchange to public sector unions, who will run the business much more expensively and inconveniently than private-sector competitors would do.

For anyone familiar with the history of central- Canadian government since 1945, and maybe even as far back as the Family Compact of the 1810s through the 1840s, it was obvious that’s how things would go. By contrast, the alternative of allowing any competitor into the business who is “fit, willing and able” to supply safe marijuana? You’ve got to be kidding! That’s what the Americans would do. This is Canada. We aren’t about life, liberty and the pursuit of happiness. We do peace, order and suffocating government.

The one remaining hope for Ontarians, apart from a change in government, is that more sensible — i.e., more market- oriented — options in neighbouring provinces will undermine the new Ontario regime. A new study from three economists at the University of Oregon suggests cross- border shopping for better dope deals can have big effects. They looked at legal marijuana sales in the state of Washington just before and just after the legalization of pot in neighbouring Oregon. After Oregon legalized, sales in Washington outlets close to the Oregon border dropped 44 per cent.

That big reduction suggests lots of Oregonians had been driving across the state line and buying weed to take home with them. (As most purchases were not for the minimum amount they could buy, they probably weren’t staying in Washington to smoke it.) The results of the study imply several things for us. The first is that after legalization marijuana consumption may end up being bigger than many people are predicting. All those Oregonians crossing to Washington to buy pot suggests people have a preference for safe, legal purchases — as Washington was offering — over black- market buying even in such a relaxed state as Oregon, where illegal marijuana reportedly has long been a major cash crop. When white- market purchases are available in this country, white- collar people may be more likely to indulge.

The s t udy also shows that governments can keep close watch on the marijuana business even if they don’t actually operate it. The Washington State Liquor and Control Board oversees the industry but does not participate in it. The economists who wrote the study — Benjamin Hansen, Keaton Miller and Caroline Weber — make use of detailed WSLCB data that tracks, down to the gram and dollar, the production, wholesaling and retailing of marijuana, which has quickly become a billion-dollar business, bigger than Washington’s liquor business. It’s always possible unscrupulous operators will try to fudge the numbers, of course, but audits are random and penalties for falsification include destruction of inventory and loss of licence, so they have a strong incentive not to.

The study also shows that cross-border trade can be important, even into a jurisdiction where marijuana is still illegal, as it was in Oregon for roughly a year after Washington legalized. In our case, marijuana will be legal in all provinces and territories, so law-abiding Canadians from out- of- province needn’t suffer the inhibitions Oregonians may have felt when smoking Washington dope at home was still illegal.

Unfortunately, two factors will discourage crossborder trade in marijuana between Ontario and Manitoba, on the one hand, and Ontario and Quebec, on the other.

The first is that not a lot of people live in far Western Ontario who could go to Manitoba to buy their marijuana, assuming Manitoba had a more competitive system. Many more people live in eastern Ontario and could go to Quebec to buy their supplies. But will Quebec take a saner view of production and distribution? That province’s annoying self-image as cooler, looser, more sophisticated and less hung- up than its Anglo-Saxon counterparts down the 401 suggests it will. Of course, offsetting the self- conscious Gallic superiority complex is the fact that no province is more dominated by unions than Quebec and, like Ontario’s, Quebec’s unions associate the smell of sweetgrass with big rents.

The second complicating factor is the brazen and shameless refusal of our various provincial potentates to allow trans- Canadian trade, not in anything, really, but certainly not in substances whose marketing they believe they have the right to control, such as eggs, milk, chicken, cheese, beer, wine, liquor and now cannabis. We thought we might be getting the Age of Aquarius. Instead, we’re getting supply management all over again.

TWO FACTORS WILL DISCOURAGE CROSSBORDER TRADE IN MARIJUANA BETWEEN ONTARIO AND MANITOBA, AND ONTARIO AND QUEBEC.