The economics of legal cannabis

I’m in Michigan with family, and one of my brothers, a historian who has written a book about marijuana’s journey from Mexico to the United States, tells me that the price of the product here has collapsed in the five years since recreational use became legal. He says it’s possible to get an ounce of high grade cannabis for $50 — it was $516 in December of 2019, when licenses for legal production were first issued.

Another sibling who has a less professional expertise in the product informs me that an ounce of high grade cannabis can easily last a moderate recreational user close to a year, which of course means that high grade cannabis in Michigan is now almost literally free.

The reason for this price collapse isn’t mysterious: Michigan has no limit on the licenses it issues to commercial growers, and the total number of licenses has gone from 273 in 2020 to nearly 3,000 as of this August. The state charges a 10% excise tax on the product in addition to the standard 6% sales tax, but obviously this level of taxation is having essentially no effect on the flooding of the market with enormous quantities of an essentially free psychoactive drug.

This situation raises a couple of immediate questions in my mind:

(1) Is the current economic model for legal cannabis in Michigan sustainable? My historian brother, who teaches at the University of Cincinnati, tells me prices in Ohio, which legalized much more recently, are several times higher. This naturally has led to massive amounts of importation from TSUN. This is technically a federal crime, as is the purchase and possession of cannabis itself, but none of these crimes are currently being prosecuted, so the “smuggling” business is very brisk.

(2) What are the social consequences of making high grade marijuana nearly free? Before anybody gets their knickers in a twist, I’m not advocating prohibition, man, but I think it’s fair to say that a lot of the pro-cannabis rhetoric that accompanied the fight for legalization seriously downplayed if not ignored altogether the downsides of regular heavy cannabis consumption. This is especially germane given how much more potent, and exponentially cheaper, cannabis has become relative to what it was in the days of 8-track players in jacked up Chevy Novas, when prices were in real terms literally 2,000% higher than they are now, for a vastly less potent product.

. . . OK here’s what I’m being told by experts in regard to dosage. The potency of the contemporary $50 an ounce cannabis is such that one hit off a joint is enough to get somebody who smokes only occasionally high off their ass, to use the DSM-V terminology. A joint is roughly ten hits, and there are 28 joints to an ounce, so if somebody isn’t already a quite heavy user, an ounce could EASILY last the hypothetical moderate recreational user a year or more. HOWEVER, I’m told that very heavy regular use builds very high tolerances, so somebody could in fact smoke a couple of ounces a month if they were genuinely high all the time hope you all are too. So it’s complicated but that’s still an extraordinarily low price compared to, say, alcohol, in terms of getting high (or low in the latter instance).