Impact of Legalizing Marijuana in California

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Would Legalizing Marijuana be Bad for the Marijuana Business?

A few months ago, I heard a story on one of my favorite NPR shows: “Marketplace.” (See bottom of post for link.) It talked about the potential impact of a proposed ballot measure that may soon make marijuana fully legal here in California. As 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 an economics program? It turns out that the legalization of marijuana may actually be bad for the marijuana business. This is particularly true 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 and has enhanced ts 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 of 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.

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Sterling Sage 6 years ago from California

Thanks for this well-written and very timely hub. I have a similar one and I'm linking it to yours.

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