Wouldn’t it be the ultimate irony if Proposition 19 in California is passed and the cost of pot goes up?
I see several reasons this could actually happen
- Increased in-state demand. Once legal, there is a set of the population who will begin to partake that wouldn’t risk it otherwise – this one is iffy since we presumably would have an increase in supply as well.
- Taxation – they are looking at a 10% tax on the stuff. Just to maintain the current price, the retail value has to go down at least 9% to allow for a 10% tax not affecting the final price.
- The unions are licking their chops here. Anyone every see a unionized labor force lower the price of the goods they are involved in?
“The marriage of the cannabis-hemp industry and UFCW is a natural one,” said [UFCW local 5 president] Rush. “We are an agriculture, food-processing and retail union, as is this industry.”
- Increased out-of-state demand. I’ve yet to see any good discussion on how the economics of a product that is easily shipped across state lines but is black market in one state and publicly available in another will work. I could even foresee a serious pot draught in CA due to the growers wanting the best price for their product (out of state) until the CA price comes up to match it. Money follows the contours of its environment, just like water.
- California could impose tariffs on foreign (i.e. Mexican) pot to protect their market and subsequent revenues.
- The typical elevated cost due to the risk of incarceration will not go away. The DEA is still raiding medical marijuana establishments even though Obama said they wouldn’t.
Assuming all these factors come into play, it is conceivable that the ultimate retail price of pot in the state of California after legalization could be higher than the black market out of state price just to maintain the same margins for the growers.