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Would Legalizing Marijuana be Bad for the Marijuana Business?

Here's a scene and song from "Woodstock" that I show to my Modern American History class.

A couple of weeks ago, I heard a story on “Marketplace,” one of my favorite NPR shows, that I instantly knew would inspire a blog post someday. (Click here for link. Scroll ahead to 19:45 to hear the story.) The story talked about the potential impact of a proposed ballot measure that may soon make marijuana fully legal here in California. As almost all Californians and many people throughout our nation know, my home state voted a few years ago to legalize the use of “medical marijuana.”  If this new measure passes, a medical referral will no longer be necessary to “light up.” Soon, “Dead Heads” throughout our west coast “Hippyland” may be breaking out into pot-induced songs of celebration and triumph.

So why would a story about marijuana be on a radio show that focuses on economics? It turns out that the legalization of marijuana may actually be bad for the marijuana business. This is particularly true up in Humboldt County, an area that prides itself as the “Napa Valley” of marijuana production. Because marijuana has been “illegal” for so many decades, this has kept marijuana prices artificially high. Its illegality has also added to its novelty status. As the pot-growing center of the ultimate rebel, hippy state, Humboldt County has drawn curious, sometimes weed-loving tourists for decades. If marijuana goes completely legal, its increased availability should reduce prices, and Humboldt will no longer be so unique. Marijuana’s new mainstream status may also lead to increasing regulations, a concept particularly offensive to people accustomed to underground operations. The “freedom” that comes with illegality will be gone. Medical marijuana use has already led to some of these trends, and full legality could be even more “devastating.”

There are so many possible angles for this story that it’s hard to know where to start. So instead of writing a long treatise about one or two key ideas, I am going to mention briefly several topics that could all be the subject of long, in-depth discussions:

1) Who has the power to regulate drugs, individual states or the federal government? It has been a while since I have read the entire Constitution, but I can say with some confidence that drug regulation is not expressly mentioned in the list of Congressional legal powers. Therefore, according to the tenth amendment, this power should be reserved to the states. Of course, the federal government has a long history going beyond the specific powers listed in the Constitution. (The federal government is a big fan, after all, of the “necessary and proper” clause.) So whatever California law may say in the present or future, marijuana is still illegal according to the federal government. At the moment, the President says that he is not going to pursue in an aggressive fashion those who use medical marijuana. In the future, of course, this could change.

2) Drug laws in our country are very arbitrary. Why should alcohol be legal while marijuana is not? You could make a good scientific case that alcohol is more damaging and addictive. (After all, when was the last time that you heard of a fight caused by weed? Bar fights, on the other hand, have a long and rich tradition.)  This seems to be more a product of social convention than of science. If Jesus had turned a shrub into a marijuana plant instead of water into wine, would our drug laws be different?

3) The fact that Humboldt County can pride itself as the “Napa Valley” of marijuana shows that marijuana prohibition is both a joke and a fantasy. If this region’s pot-related fame draws tourists from all over the world, how can that marijuana business be even remotely described as underground? As the experiment of banning alcohol during the 1920’s and early 1930’s demonstrated, people will ignore laws that they do not like (and that interfere with their fun). My grandfather grew up in Chicago in the 1920’s. He says that all kinds of people had stills in their basements. In some neighborhoods, the streets reeked of alcohol, and basement explosions were fairly common. He also said that it was fairly common to see the dead bodies that resulted from the gang warfare between competing bootleggers.  Eventually, the country realized that the negative byproducts of enforcement outweighed any positive effects of (limited) reductions in alcohol use. As any economist knows, if there is demand, suppliers will arise to meet it. And if the product demanded is illegal, it’s often the consumers and general public who suffer.

4) For the “Marketplace” story mentioned earlier, the host of the program interviewed a woman who had long been an advocate for the legalization of marijuana. But instead of lobbying for the passage of this upcoming ballot measure, she spent the whole time talking about the previously mentioned economic concerns of Northern California pot producers. Perhaps the marijuana producers, in spite of their fundamental belief that pot should be legal, should hire her to fight against this ballot measure. After all, they can make more money if the business stays “underground.” If they do this, they will have truly joined the American political system. For decades, special interest groups have been fighting for policies that only benefit themselves. These favors from the government often come in the form of various types of subsidies or of tariffs that protect their businesses from foreign competition. In the mean time, the general public ends up paying higher prices as a result of these policies that few of us even know about. As the host of “Marketplace” astutely realized, the government has been subsidizing marijuana producers for years by keeping their product illegal. If the woman interviewed does not want this job, I’m sure that there are plenty of lobbyists who would be happy to oblige. I wonder if the cigarette companies, pharmaceutical industry, or corn-based ethanol producers can loan a few.
Truth be told, the marijuana issue is not important to me personally. I have never been a pot smoker, heavy drinker, or consumer of any kind of mind-altering drug. I have enough trouble getting my brain to function when it is sober, so the last thing that I need is to pump a bunch of chemicals and crap in there. There are a lot of other Americans out there who also avoid drug use because they think it is stupid. This is why legalizing drugs is unlikely to turn us all into addicts. After all, most Americans today are not cigarette smokers and alcoholics. Others, however, are going to find a way to get high no matter what the government does. I have heard several times over the years that the biggest growth area in drug use involves the use of legal substances. So does this mean that I think that people should be able to buy PCP, LSD, and heroin at the CVS pharmacy? I have some reservations about that idea, although the advertisements would definitely be interesting. It definitely seems illogical, however, for marijuana to be lumped together with these much more dangerous and/or addictive hallucinogens and narcotics.

I can predict with some confidence what Californians will soon decide on this issue. We are, after all, a bunch of liberal freaks out here on the west coast. It will then be interesting to see what both people living in normal states and the federal government have to say about our latest adventure into freakiness.


  1. Hey this is good stuff...witty, funny, good points...or maybe it all sounds great when you're high man.

  2. There's no topic you don't tackle.

    Like nuclear power and wind power, we can look to Europe and see what's going on there. How are things in Holland?

  3. Legalization might also make it easier for addicts to get treatment, reducing the number of people addicted.

  4. Theresa, I'm sure that Holland is populated entirely by potheads, hookers, and (Obama-loving) socialists. After all, the only reason to avoid these "sinful" activities is because they are illegal. I would be a full-time gigolo if it was legal (although my wife might object).

  5. While on the business end the price would go down since there would be no danger. The state could make a fortune taxing the product like cigs and bring in a lot of income.

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  6. I think pot growers and sellers will be initially thrilled at the prospect of growing and selling without fear of arrest. In a few years these independent businesses will react as indignant small businesses do with government interference -- form a conglomerate lobby -- MG&SA, marijuana growers and sellers of America.


  7. Just wondering, Paul, are you ready for moms and dads across our great land to come out of the smokey closet, bong in hand, praising their favorite kief* & kush*?

    --medical marijuana patient

    *Add to Scrabble dictionary

  8. Thanks for the scrabble words. Pot users are already out of the closet. We might as well make it official so that the government can focus on more pressing matters. And CM, you should quickly copyright your acronym.

  9. the only people who would be hurting from the legalization of weed is the "drug dealers", or people that "sling." being a "more-than-just-frequent" potsmoker myself, i think it would be awesome if it was legalized, but at the same time, that runs the risk of it getting tainted. think about it: tobacco was one of the biggest cash crops in the US way back when. people smokes pure tobacco all the time. then, cigarette companies started adding chemicals to make it more addicting. im afraid that if bud gets legalized, companies will start messing with it and ruin what is one of the most glorious things on this Earth.
    another thing that bums me out about this law is that companies can still drug test applicants and fire and/or not hire someone if THC comes up on a drug test. i somewhat understand, but if alcohol comes up, and youre 21 or over, you get hired! now i can say i have been to work a few times when i was a little high, and it didnt affect my work. if anything i got MORE work done in the time i was there! now, i have NEVER gone to work drunk or even buzzed, but i can pretty much guarantee if i was, it wouldnt be pretty. i understand if youre job is to operate heavy machinery, or drive places, and if someone is dumb enough to do those kind of jobs when they are high dont deserve to even have a job.

    thats my little addition to youre blog Mr Swendson. im a student in one of your classes and i heard you talk about this post a few weeks ago and it caught my attention hahah.

    P.S. i dont understand why you have to spread your insane Liberal views all over class. i come to your class to learn about history, not what you think of conservatives and the politicians that are one the "right" side of the political spectrum. keep it to yourself please.

  10. I don't know which insane liberal views you are referring to. On marijuana, you seem to be more liberal than I am. I also give plenty of time to criticizing liberals like Lyndon Johnson and so-called ones like President Obama. I don't know how you can teach a history class without passing some judgment on events that have occurred. Of course, if you do anything but talk about simple, indisputable facts, then people on both sides of the political spectrum might criticize you for being biased (and every student is guaranteed to fall asleep.) If you go back to January on my blog archive, you will find a post with more details about my views regarding political bias and college teachers.


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