Why Marijuana Legalization Isn’t A Big Deal (Yet)


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Marijuana is officially legal in both Colorado and Washington, but it’ll take time to feel the full effects.While the changes are important for the lives and behaviours of users, the biggest potential impacts of weed legalization are still in limbo.

“Legalizing personal consumption is not earth-shattering — Alaska has it,” public policy expert Jonathan Caulkins told BI. “Legalizing for-profit commercial production for non-medical use? No jurisdiction in the modern developed world has ever done it.”

How the market actually plays out — and who benefits most from it — depends on the choices state regulators make as they draft rules for growing, processing, retailing and possessing marijuana as well as the reaction of federal law enforcement. 

The retail market
If the feds allow a moderate retail market to develop, Caulkins said the prime beneficiaries would be certain individual retailers, the subordinate industries that support the for-profit weed industry, and the states (in the form of tourism).

Caulkins told us that once companies are able grow marijuana fairly openly, the wholesale price of the drug would drop sharply and “mum and Pop” growers would either have to “go in whole hog and look more like a farmer” or leave the industry.

Business acumen will also come into play as dispensaries — both legal and medical — compete with each other on the retail market.

Marijuana cannabis coffee shop house in Amsterdam
A coffee shop in Amsterdam

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“If a semi-seedy corner dispensary has a well-run operation next door that brings with it marketing savvy and managerial efficiency, it’s toast,” Caulkins said.

Whether weed retailers can sell products such as coffee or food in their stores remains to be seen, and the sale of multiple products in impact which retailers win or lose in 2014.

The other entities posed to benefit from the for-profit industry are the members of the industry clusters, or those local companies that create products that support the marijuana industry.

“In the long run, if it eventually becomes legal, a lot of the value creation is not going to be in producing a single joint,” Caulkins, who coauthored Marijuana Legalization: What Everyone Needs to Know, said. “A lot of the economic activity might be in [areas such as] producing bundled products like brownies [and] in support industries like selling grow lights.”

The tourism boost
The biggest beneficiaries could be the states themselves since they will be able to offer something that the other 48 states cannot.

“Napa Valley [in California] generates important economic benefit from people coming and doing winery tours. The winery’s sale of the wines is one part, but the people actually coming to Napa Valley is another part,” Caulkins said. “So Washington and Colorado could well derive economic benefit from people coming in from other states to visit the dispensaries.”

In the end, Caulkins said, the marijuana industry will not be a big industry for the nation but could be significant if concentrated locally or regionally. 

“There’s Silicon Valley for high tech, there’s Broadway for New York City, and the idea is that Washington and Colorado — by passing the propositions first – might become the long-run industry cluster home,” Caulkins said.

SEE ALSO: What You Need To Know About Getting High In Colorado And Washington