The Economics of Marijuana

DESCRIPTIONPhoto: Fabrizio Costantini for The New York Times

We just started watching past episodes of the hit Showtime series?Weeds.? In Year 1, Episode 3, Nancy’s client (Kevin Nealon‘s character) has bought a huge supply of medical marijuana, and doesn’t seem to need her as a purveyor any more.? Nancy’s business is in big trouble. Partial removal of the?ban on selling the product reduced the artificially high market prices that the state had created, and that had benefited illegal suppliers like Nancy.? Nancy responds to the competition by upgrading the quality of her product-relying on her clients’ demand for better weed.? She also uses her locational advantage as a?monopolistic competitor-the medical marijuana store is in the city, while she sells to fellow suburbanites direct from her house.? Who would drive 20 miles to a gas station?? Why drive to the city to a grass station?

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COMMENTS: 40

  1. Michael says:

    Is legal marijuana really that much cheaper? I understand that illegality has a price rising influence; more risk, smaller scale etc. But legality can force the price to rise due to taxes, shop space…

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  2. Ian Kemmish says:

    It’s nice to know that I’m not the only one in the legalisation debate who has realised that traffickers don’t have pension plans and can’t retire!

    However, what really bothers me is how many of them will realise that selling fake pharmaceuticals to the National Health Service is easier and more profitable than the route you suggest.

    (And yes, here in the UK, rural people do drive 20 miles to fill up their cars at the nearest supermarket. We don’t have the anomalously low retail prices for fuel that you do over there, and we do have large price differences between large and small retailers.)

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  3. KarenS says:

    Jeff #6: “who cares is someone is tracking you if it is fully legal. ”

    Not saying you’re wrong, but porn is legal and many people still prefer to pay cash in order to avoid any “tracking”. The question is, is weed more like booze or porn when it comes to consumption behavior?

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  4. Bob says:

    If it were legal, why not just grow it yourself? why buy the milk when you can have the cow for free?

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  5. kc says:

    Oceans of money to drown a plant that nature made? Mountains of money to jail the non-violent user and violent illegal distributor? What will we all do with all that money currently used to achieve questionable prohibition?

    If legal, can’t I just grow a plant in the tomato garden and end the need for criminal distribution networks? The terror of pot plants is no one needs special permission for a mild sedative grown in their back yard or window box.

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  6. dan says:

    As a former suburbanite distributor myself – I didn’t particularly care for Weeds lack of accuracy when it comes to the ‘industry.’

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  7. The Analyst says:

    Bob, since when do everyday folks take time to buy a cow and set up everything that is required to take care of a cow? Sure people enjoy pot, but a grow-operation takes effort, time, and money. Just like a cow, only the people who have time and money, or want to sell the product will grow pot.

    In other words, to go with your metaphor, who the hell would buy a cow?

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  8. Diego says:

    Legalisation, like the end of alcohol prohibition, WILL come around, the question is when. My guess? when socially conservative voters realize their kids will consume marijuana -or harder drugs- one way or the other, but society will profit from the removal of cartels and their corrupting practices (I write from South America, I have first hand experience)

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