De­mand will set pot price as fair, and likely lower

Waterloo Region Record - - Insight - PETER SHAWN TAY­LOR

You save by buy­ing bulk – and this law of shop­ping logic holds for il­le­gal as well as le­gal prod­ucts. Which means some­one in Cam­bridge is ei­ther a very sharp ne­go­tia­tor, or a pot-smok­ing liar…

As part of the in­sti­tu­tional prepa­ra­tion for the le­gal­iza­tion of mar­i­juana, Statis­tics Canada is cur­rently col­lect­ing reams of data on the pot econ­omy.

This is nec­es­sary to en­sure the re­li­a­bil­ity of na­tional ac­counts when le­gal weed be­comes a re­al­ity, as sales will oth­er­wise show up as a huge, im­me­di­ate spike in con­sumer pur­chases.

To avoid ar­bi­trar­ily skew­ing its GDP statis­tics, Stat­sCan must es­ti­mate the size of the un­der­ground pot econ­omy all the way back to 1961, thus en­sur­ing there's no sharp break in the data. As part of this mas­sive project, Stat­sCan has launched a de­light­fully-named, crowd-sourced web­site to keep track of the cur­rent price of weed.

Stat­sCannabis al­lows pot con­sumers to anony­mously en­ter the date, price, quan­tity and qual­ity of their pur­chases to cre­ate a broad-based es­ti­mate of cur­rent prices prior to le­gal­iza­tion.

The head­line num­ber re­veals an av­er­age price per gram of slightly less than $7.00. Users in the Ter­ri­to­ries pay the most, no sur­prise given trans­porta­tion costs. How­ever, the cheap­est is not B.C. ($6.96/g), which has a fa­mous rep­u­ta­tion for home­grown pro­duc­tion, but Que­bec ($5.88/g). What's more, the re­ported price has fallen sub­stan­tially over the past cou­ple weeks.

The first re­port from Stat­sCannabis put the av­er­age na­tional price at $7.43/g. This week it's $6.97. The change prob­a­bly re­flects more com­pre­hen­sive data, rather than an on­go­ing sale.

Since this in­for­ma­tion is avail­able by city, it's also pos­si­ble to look at lo­cal be­hav­iour.

Here the im­mutable laws of sup­ply and de­mand are on full dis­play. Buy one or two joints and lo­cal buy­ers pay as much as $9 a gram. Water­loo Re­gion con­sumers who re­port buy­ing 28 grams (an ounce) or more at a time, how­ever, say they're pay­ing around $5 or $6 a gram.

Then again, some­one in Cam­bridge claims they got a sin­gle gram of high qual­ity stuff for just $4 on Jan. 26. A savvy ne­go­tia­tor, per­haps.

The big­gest sin­gle lo­cal pur­chase listed on Stat­sCannabis was in Kitch­ener: 120 grams of medium qual­ity weed for $450, or $3.75 a gram. That's about half the na­tional av­er­age price. Smart shop­ping, dude!

And on a per capita ba­sis, Water­loo ap­pears to have the most con­sumers, a statis­tic likely in­flu­enced by its large univer­sity pop­u­la­tion. (Stu­dents or pro­fes­sors?) Be­yond cur­rent prices and lo­cal pref­er­ences, how­ever, Stat­sCannabis of­fers some other in­ter­est­ing ob­ser­va­tions on the broader pot econ­omy.

In 1961 mar­i­juana cost about $5 a gram, ris­ing to $12 in 1989. Since then, in­creased sup­ply and im­proved ef­fi­ciency within the black mar­ket has pushed the price down to the cur­rent rate of around $7. This de­spite am­ple en­force­ment ef­forts of po­lice.

“Know any­thing else whose price as fallen steadily since 1989, ex­cept com­put­ers?” asked McGill Univer­sity econ­o­mist Wil­liam Wat­son re­cently.

Given that pot smok­ers have ben­e­fit­ted from a dra­matic price drop over the last three decades when it was a pri­vate, black­mar­ket in­dus­try, what will hap­pen to prices now that it's about to come un­der govern­ment con­trol?

Ot­tawa is propos­ing a na­tional price floor of $10 a gram, in­clu­sive of a 10 per cent tax. While that may be roughly in line with the cur­rent price for a sin­gle joint, it's far above the bulk rate.

The le­gal­iza­tion of mar­i­juana thus makes for an in­ter­est­ing case study in what hap­pens to a com­pet­i­tive in­dus­try when govern­ment de­cides to get in­volved – prices go up and con­ve­nience goes down.

Con­sider the dif­fer­ing ways in which pot will be sold across the coun­try.

Hav­ing just al­lowed beer and wine sales in gro­cery stores, On­tario has de­clared it is lock­ing up the en­tire pot re­tail­ing busi­ness for it­self with LCBO-style stores. "This ap­proach will en­sure that there will only be one le­gal re­tail dis­trib­u­tor of cannabis in On­tario," the govern­ment pol­icy state­ment reads. Why is that a con­cern?

This move of­fers no ben­e­fit to con­sumers. It will, how­ever, ap­pease pub­lic sec­tor unions up­set over the re­cent loss of their liquor sell­ing mo­nop­oly. It also means pot avail­abil­ity will be un­der con­stant threat of strike ac­tion − just as liquor once was − to the pre­sumed ben­e­fit of union salaries.

Other prov­inces have taken dif­fer­ent ap­proaches. In B.C., for ex­am­ple, pri­vate stores will com­pete with govern­ment pot re­tail­ers. In Al­berta, the pri­vate sec­tor has been given full con­trol of the store-front sec­tor; the Al­berta govern­ment is only get­ting di­rectly in­volved in on­line sales.

As weed be­comes a le­gal prod­uct no dif­fer­ent than al­co­hol, surely it makes sense to al­low con­sumers to ben­e­fit from a sim­i­larly com­pet­i­tive mar­ket.

But at the pro­posed price and given the pro­posed level of govern­ment in­volve­ment it seems doubt­ful the black mar­ket will be erad­i­cated – one of the stated goals of le­gal­iza­tion − since the il­le­gal stuff will likely be much cheaper and eas­ier to get than the reg­u­lated prod­uct.

One fi­nal ob­ser­va­tion: most prov­inces have im­posed strict rules prevent­ing booze and pot from be­ing sold in the same store. The same goes for cig­a­rettes and pot. Why the hang-up about one-stop vice shops? Is con­ve­nience an­other sin?

Peter Shawn Tay­lor is ed­i­tor-at-large of Maclean's. He lives in Water­loo and is not a par­tic­i­pant in the mar­i­juana econ­omy.

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