Can Legal Weed Win?

May 30, 2022
In this lucid and pragmatic analysis, U.C. Davis economists Goldstein (The Wine Trials) and Summer extinguish overheated predictions about the potential size and profits of the legal marijuana market. Claiming that many investors “have lost most of the money they ever invested in weed,” the authors examine the forces working against legal marijuana, including the persistence of the illegal retail market, where prices are as much as 50% lower; burdensome regulations and compliance standards, including child-proof packaging, safety and potency tests, and safe waste disposal protocols; and long waiting periods for expensive state and local licenses. Throughout, Goldstein and Summer debunk urban legends and offer counterintuitive advice, claiming, for instance, that the psychoactive differences between Cannabis sativa and Cannabis indica are hard to distinguish (despite budtenders’ claims to the contrary), and that national legalization (which they predict will happen within 30 years) will put many existing retailers in high-priced and strictly regulated states like Massachusetts and California out of business by increasing interstate competition and lowering retail markups. The authors’ practical advice for growers, retailers, and investors includes advocating for local standards to be applied to out-of-state weed and cultivating the reputation of locally grown marijuana. Jargon-free and data-rich, this is a clear-eyed analysis of a hazy market.