Marijuananomics in California
NPR had a story about the rising average cost of growing marijuana in Humboldt County, Calif., a center of the industry. Costs are rising for two reasons: 1) Much pot-growing has shifted indoors to 24-hour-a-day growing periods, necessitating the use of lots of electricity; and 2) Electricity prices, and the price of the diesel fuel required to run generators in outdoor growing areas, have increased. The supply curve of pot will be shifting leftward. Price will rise in the short run.
The interesting question is what will happen if California passes the Legalize Marijuana initiative in November. If that happens, the demand curve will shift out, tending to raise price still further. But people will be allowed to grow small amounts on their own, and that should keep prices down somewhat; and, if localities allow (taxable) distribution by growers, this could increase supply tremendously. It’s not clear what will happen.