Demand will set pot price as fair, and likely lower

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.