Why Legalization Prices Crash
Back in 2012, researchers at the RAND Drug Policy Research Center put out a book called “Marijuana Legalization: What Everyone Needs to Know.” It contained some startling findings.
RAND researchers calculated that 90% of the prohibition price of pot could be attributed to the so-called “risk premium”— the extra amount shoppers pay to cover the risk of arrest, fines, and prison for growers, distributors, and sellers.
This old risk premium, coupled with high demand, drove the price of cannabis to silly heights by the late ‘90s. A pound of dried, cured OG Kush from California went for $5,000 per pound. Eighths in college went for $60. That was the standard price. Today, illicit outdoor farmers report that they’re lucky to get $500 a pound. A pound contains 128 eighths. You do the math.
Legal pot would become so cheap, RAND predicted, that one day it would be given away like ketchup packets at a burger joint.
State-legal markets opened in 2014 in Colorado and Washington, followed by Oregon and Alaska. Today, ten states and Washington DC allow adults 21 and over to possess and consume cannabis. Seven of those states have licensed, regulated sales up and running.
Californians will tell you that legal prices rise after legalization, because of increased regulatory costs, coupled with limited legal supplies. But that quickly changes.
State licensing allows growers to switch from small-scale, hand-crafted, sometimes-medieval farming to automated, industrial agriculture.
This year, Oregon sits on a surplus of legal cannabis so big it’ll take Oregonians six and half years to smoke it all, according to the Oregon Liquor Control Commission. Oregon has about 1,000 licensed growers, with 1,200 more applications pending. Oregon licensees grew 2,000 tons of pot in 2018, and Oregon prices have fallen 36%