For two years, recreational marijuana use has been legal in Washington state, and while the sale of the drug has been filling public coffers with tax revenues, the prices for pot has been decreasing considerably.
As of March 2016, the price of legal marijuana in Washington was $9.32 per gram, according to the Washington Post, citing data from the state’s Liquor and Cannabis board. The wholesale price was $2.99 per gram.
According to a report from KUOW News, in September 2014, pot was selling for about $25 per gram. By August 2015, the price on marijuana dropped by more than 50% to $11 per gram.
According to Steve Davenport of the Pardee RAND Graduate School, who helps aggregate data from the Washington’s cannabis board, prices went up after the drug was legalized but that the surge was linked to increased demand and limited supply. Since then, prices have been coming down at a rate of 2% per month, he told the Post, and they could possibly shrink 25% every year.
Professor Jonathan Caulkins, of Carnegie Mellon University, who works with Davenport, told the newspaper, “It’s just a plant.” He said the drug could become so inexpensive that certain types might be given away for free.
“There will always be the marijuana equivalent of organically grown specialty crops sold at premium prices to yuppies, but at the same time, no-frills generic forms could become cheap enough to give away as a loss leader – the way bars give patrons beer nuts and hotels leave chocolates on your pillow,” he said.
The news out of Washington State has been echoed in Colorado, another state where marijuana is completely legal. In June 2015, an eight of an ounce of cannabis (roughly 3.6 grams) cost between $30 and $45 – notably less than the $50-$70 it was going for the previous year.
As prices on marijuana is on a downward trend, there could be positive and negative consequences for states. Since cannabis is taxed by sale, falling prices mean each sale results in fewer income for the state government. On the other hand, cheap marijuana could end up getting more people to stick with purchasing legal pot instead of risking the black market. Fewer drugs moved illegally, could mean fewer costs for law enforcement.
Even though pot prices clearly fell last year, new businesses continued to be established, according to KUOW.
“The fact that prices are falling, and people are still entering the business – it’s confusing to me,” Tracey Seslen, an economics lecturer at the University of Washington’s Foster School of Business told KUOW. “Standard theories of economics would only suggest entry into an industry when people see that it’s profitable.”
Perhaps one reason that people keep trying to enter the marijuana business is that it’s becoming easier to do so. Over the past two years, the number of banks and credit unions willing to do business with cannabis shops increased from 51 in March 2014 to over 300.
Although federal law still prohibits banks from handling cash derived from marijuana trade, the Treasure Department has stated that it will not go after banks if they are certain that businesses are complying with state marijuana regulations.