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?


Medical marijuana dispensaries have recently been legalized in Denver. There are hundreds of them, prominently displaying pot leaves and advertising their services. They're located in shopping districts and strip malls and so on. It might make an interesting test case.


Another interesting bit was Kevin Nealon's anxiety of being put 'in the system'. He felt he could be targeted later since he had to get a prescription and provide identification to be put on file. He felt more secure buying anonymously through an underground source.


Even if weed is legalized there will always be dealers, because there are people afraid of being tracked for buying marijuana. They don't want it to come back and bite them later on in life.

Chris Blalock

She also puts the heat on Doug, mentioning that the medical facilities are required by law to keep his name on a list - potentially hurting his chances of being re-elected. Even a legal vice has social connotations...


In the short term, buyers may be afraid of being put 'in the system'. I would imagine that over time, assuming legalization were to stay around, that fear would dissipate and it would be no different than walking into a store and buying a bottle of liquor or going to a pharmacy for a prescription.


The difference between medical legalization and total legalization is: who cares is someone is tracking you if it is fully legal. Nobody cares about your name being tracked when you buy alcohol. You lose the stigma of smoking an illegal substance as opposed to smoking a legal substance ie. cigarettes; being a marijuana smoker would no longer be a big deal. It would be like finding out your senator drinks a glass of scotch a couple times a week.


How about the way Stringer Bell (The Wire) economically deals with inferior drug supply?

(best stuff starts at 01:58)

David L

I'm sure there will always be a contingent of conspiracy theorists who are afraid of being outed as (gasp) pot smokers. But if legalization causes a) prices to drop by half, b)quality to double, and c) availability to be ubiquitous--as in the Netherlands--I have a feeling that contingent of low-elasticity potheads will be pretty small. Especially if there continue to be legal penalties for black-market procurement.


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...

Ian Kemmish

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.)


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?


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


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.


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

The Analyst

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?


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)


In California you can get your medical cannabis card through private companies (i.e. MediCann) that are not required to supply your name to the state or government. Your information is not tracked. But who cares anyways, everyone smokes pot! It will be legal soon...


selling pot is not that difficult and many suburban retailers never come across gangsters like Nancy does. Its a fictional, comedic TV show, man, it doesn't need to be accurate. It isn't a documentary.

Porn is private. Pot is a social activity much like booze. It will become accepted over time if it is "fully legal"

No Cocaine

Sorry to tell you but pot is being accepted and has been for quite some time with the general public...


I like the legalization ideas for many reasons. Saving $ on enforcement and jailing 'offenders' is definitely a big one.

The others:

1. Have you ever seen someone smoke so much pot they lose control of their temper and get violent? Now substitute alcohol in the same scenario.

2. If marijuana (or other drugs for that matter) were legal there are two predictable effects that would be socially very helpful: a) Drug cartels and American gangs have nothing to fight about-the cash drives the drug trade and with no cash there is no 'turf' to have a war over. b) Americans famously gravitate toward what is forbidden/mysterious. A great many drugs would be outright rejected if they were legal and sold out of e.g. the post office because users would have an entirely different response to a widely available, federally ignored substance they buy from the government versus a difficult to obtain, highly enforced substance they have to jump through hoops to get. Many/most users have thrill-seeking behaviors that play a role in the fact they are attracted to drugs in the first place.