Report From the Front Lines — the Marijuana Wars

Big Red Car here.  So The Boss was in Colorado, Steamboat Springs to be exact, just when the legalization of recreational marijuana took effect, locally known as Green Wednesday.

Does the idea of stoned snowboarders worry you?  Uhhh, guess not since — as someone pointed out — it is likely this is NOT a changed condition.

In any event, I apologize for using the word “stoned” as that may be interpreted as a pejorative term and that is not fair given that the use of marijuana in Colorado is not only condoned, it is perfectly legal.  Folks should not be ridiculed for engaging in perfectly legal behavior.

Handy facts

So The Boss has conducted some research, some first hand on the ground research.  [No, The Boss has not actually been smoking weed in Colorado but remember, as I have already said, it is now perfectly legal so it would be no big thing if he did.]

So Colorado morphed from legal medical marijuana — camels’ nose under the tent some might say — to perfectly legal recreational marijuana.  Above, you can see what it looks like up close.  No stems, no seeds, just buds.  Just a high quality agricultural product and nothing more.

A Colorado native can buy up to one ounce per day while a visitor can only buy a quarter ounce per day.  There has been some discussion that a Coloradan could buy an ounce per day per location.  But who really knows?

The packaging seems to have settled in at 1/8 ounce of marijuana which appears to be a handy size given the price constraints.  This is about a $50-65/package (1/8 ounce packaging) and there is a bit of confusion as to whether that is before or after taxes.

The pricing algorithm got sorted out pretty damn quick — $400/ounce is the going rate as of day 3 of the experiment.  This is a bit more pricey than the previously prevailing $200-250/ounce prevailing price for medical marijuana.  Medical marijuana continues to trade at a bit of a discount to street legal weed.

Take all of this pricing information with a grain of salt because everyone is feeling their way through the demand side of the equation which appears to be fairly robust.

Taxes?  Did you say something about taxes?  Well, the State of Colorado is collecting a sales tax of 25% (well, technically, that is a 15% excise tax and a 10% sales tax) on each sale.  Chaching, State of Colorado!  Colorado expects to collect approximately $70MM in new taxes.

There are those who might meanly opine that $70MM of new revenue may be dwarfed by the actual cost of the growth of the social safety net in Colorado but let’s not dampen our short term enthusiasm.

Pricing equilibrium — a short term fleeting concept — will sort itself out shortly.


You have to be 21 years old to legally buy marijuana in Colorado and you cannot smoke it in public.  The notion that your older brother might just be willing to buy you a bit of marijuana or that a native might be willing to be a strawman for a tourist is not a foreign concept already.  Coloradans are friendly folks, no?

One of the oddest things about marijuana is the notion that introducing a carcinogenic hot smoke into your lungs as a delivery mechanism may not completely healthy.  One aging hippy was noted to have said — “Hell, marijuana smoking is worse than cigarette smoking.”  Really?  A health hazard?  Nahhhh.  Use sun screen?

There seems to be some considerable speculation that criminal elements may try to compete solely on price.  This would be tantamount to bootlegged cigarettes which are justified on the basis of a bit of tax avoidance.  The public is considered to be fairly flexible as to where they obtain their marijuana and to patronize an otherwise local business seems quite plausible.

In any event, the price of marijuana is going to have some considerable impact on demand and those economists who are willing to provide a superior price point may do well.  We shall see.

From an operational perspective the term “one hit high” pertaining to the qualitative aspects of specific strains of marijuana seems to applaud the potency of modern marijuana and its THC content.  This indicates that it only takes a single hit to get, well, high?

The banks will not handle deposits or give checking accounts to marijuana retail outlets because the recreational sale of marijuana is still a Federal offense.  Yes, it is hard to believe but the Federal government does not really care what the citizens of Colorado want as it relates to marijuana.  They are protecting those bank charters.  As a result, speculation is already rampant that robbing marijuana stores may be a lucrative business for enterprising local criminals.  We shall see.

Of course, there are those who will be tempted to point out that our President was a founding member of something called the Choom Gang while in high school and is apparently quite the devotee of marijuana — medical or recreational.  Who knows how these type of things really work.

So there you have it, a report from the front lines of the marijuana wars.



12 thoughts on “Report From the Front Lines — the Marijuana Wars

    • .
      The States think there is a near term revenue windfall but have not taken into consideration the impact on the social safety net.

      I will predict that for every dollar of incremental revenue there will be $4 of additional costs somewhere.

      More and more people detached from reality cannot be a good thing for any society. This is what it would look like if we were purposely thinning the herd, no?


      • Interesting point–legalized gambling may well be the forerunner of leaglized pot–disproportionate effect on poor and middle-class, addiction balanced against increased tax revenues, massive state regulation schemes to restrict access–I used to be an income tax preparer and had two compulsive gamblers for clients–they most emphatically did not look like the folks in the casino ads! Very scary folks.
        With pot, what I think will happen is the market will become oversaturated quickly unless the states restrict supply by restricting outlets, as they do for liquor and casinos; if the market is too large prices and thus tax revues drop–many of the assumptions used by state governments for revenue projections assume pot will not drop in price, while many economists argue that the price will likely drop about 80% once the transaction cost imposed by its illegality disappears. A state would also have to have a much more robust enforcement mechanism to keep illegal pot out so that the legal–that is, taxed–pot remains a source of income–it’s not unlike booze, and I imagine that only large corporations like tobacco and liqour companies will make money.
        Since my own drugs of choice are restricted to caffeine, red wine, scotch and bourbon, and reading Musings of the Big Red Car, I am not directly concerned. But it’s an interesting issue–I can see why jeff is “morbidly fascinated” by it.

        • .
          Great points all. I suspect behind the scenes much of the brainpower is the nascent hippies of our times who are now in the position of power and think — “Hey, a bit of pot didn’t hurt me, right?”

          There is no question that the pot market will become over sold and $400-500 per ounce is not going to prevail beyond the novelty stage. Medical marijuana — a pretty good head fake if nothing else — is still priced at $200-250 per ounce.

          In addition, this is a price point at which the “competiton” — the illegal competition — is simply going to compete on price. These chaps do not play nice and they have guns. Nobody is really thinking about this aspect right now.

          I also suspect that the manner in which pot is packaged — loose — will quickly morph into something different that will take the focus off the cost per weight. It will be no time before cigarette makers are simply making marijuana cigarettes. This is after all how it is often actually used.

          The costs of enforcement and the social safety net costs will ultimately overwhelm the incremental revenue. That is a safe prediction.

          The potency of modern marijuana is really something. It is 10+x as powerful as legacy illegal marijuana. The “one hit high” is a reality. People are going to become much, much more intoxicated and a bit of marijuana is going to go a long way.


      • “This is what it would look like if we were purposely thinning the herd, no?”
        Should just about do it, unfortunately as you note the increase in social “safety net” costs will create chaos…

  1. You might find these two articles of interest:
    I’m using these two (along with a few other sources) in class this week and next–my students have to find out who their Missouri state representative is, research them, and prepare a letter explaining where the student stands on legalizing MJ (either medical or recreational or both) in Missouri. I tell them truthfully that I have no opinion on the subject. This legalization business is far more complex than it appears. My sense is that corporations will be the ones who really make this work. You might also read Emily Brady’s recent book Humboldt, about the illegal and medical marijuana industry in california–the biggest fear the growers have is legalization because their business model is based on the scarcity created by the drug’s illegal status.

    • .
      I have a morbid interest in the legalization of marijuana and the growing of marijuana ever since the legalization of medical marijuana in Colorado. I am fascinated by the plant genetics implications of perfecting such a short growth cycle plant.

      It is easily one of the worst ideas ever formed.

      We simply do not need any more people disconnected from reality intellectually and unable to function physically. This combination foreshadows a completely new wave of dependency both physically and politically.

      The potency of marijuana through natural selection and the delivery system — hot carcinogenic smoke in one’s lungs — are the big differences and game changers.

      I am resigned to its eventual legalization though I am still confident that a “bad idea held by a majority does not become a good idea” under any circumstances.

      The notion that the illegal marijuana suppliers — a particularly violent group who are quite content to take matters into their own hands — are going to sit by idly and let this happen is nonsense. They will compete on price, steal the proceeds and visit violence upon those who have tinkered with their industry.


      • I raise some of the same issues when students advocate it–why, I ask, do we need one more way to be disconnected from the world around us? They usually do not have much of an answer besides “well, it’s better than booze.” To me, not much of a response. But perhaps we are just too old. You really ought to read Emily Brady’s book–best, Mike

        • .
          Having known each other at a similar age, I can actually understand and appreciate that answer. I personally can’t get over the delivery mechanism — hot gaseous carcinogenic smoke.

          Old? Not likely. Wise? Perhaps.

          Be well, BR.


          • Actually, I can understand the attraction of pot over meth–I live next to the meth captial of Missouri, jefferson County–how people can consume stuff made of a whole bunch of indutrial chemicals and made in someone’s garage is completely beyond me! Best–

          • .
            If anyone really thought that marijuana would wean folks from meth, I would be beating the bass drum and handing out samples.

            What is more likely is that widespread use of marijuana will lead to lowered inhibitions and the desire to try something a bit grander — crack, coke, heroin, meth.

            I attended a memorial for a fine young man from a fine family whose introduction to heroin came on the buzz of marijuana. It — the introduction — and the young man were both short lived. An enormous tragedy.


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