It will take several years of legal recreational use before the effects of marijuana legalization become apparent. Regulating a pot market will have diverse impacts on society as a whole, most extremely positive. One is becoming immediately clear: Weed has never been cheaper than it is currently. Prices are falling and show no signs of stopping.
Steven Davenport, from the Pardee Rand Graduate School, has been analyzing retail cannabis prices ever since Washington State opened its legal recreational markets back in July 2014. Fantastically, prices have since been dropping in every single quarter. Approximately 18 months ago, Davenport reported a staggering 58.5 percent decrease in retail weed prices.
However, he correctly predicted that the price collapse would continue further. Currently, weed sells for approximately $7.38 per taxed gram, which in just three years of a legal market, represents a 67 percent decline in sales prices. For consumers in the future, weed is likely to get even cheaper. There are several reasons for lowering weed prices, which Davenport explains best.
According to Davenport, the cannabis industry will continue to look for ways to reduce weed prices. The simple reason for this is that it is a profitable business model. He said, “Some consumers will prefer higher priced brands, but there will always be a market for the brand that can produce adequate quality cannabis at the cheapest cost.”
More generally, the continuing decline in weed prices after legalization has crucial implications for future drug policies. The experiences of California, Washington, Colorado, and other legal states shows just how incredibly effective banning production and sales is increasing the prices of drugs. For example, it took a decade for heroin’s price to fall just 16 percent, which the legal weed industry did in just eight months.
Importantly, even taxing legal cannabis at high rates does not prevent decreasing prices. In fact, despite high tax rates, legal pot is still cheaper than what it was when it was illegal. Consumers pay for prohibition, as it imposes enormous costs on cannabis growers who, in turn, raise their prices. It is becoming ever clearer that high prices have another role to play than originally thought.
In fact, the high prices of prohibition are among the main reasons why people use illegal drugs less than legal ones, such as tobacco and alcohol. As an example, cannabis is a rare one: Only now can we see the impact of drug legalization in real time.
It seems ever obvious that were the government to legalize the production and sale of illicit drugs, such as heroin, meth, and cocaine, that they would become drastically cheaper for consumers, as well.