Has Canada Accidentally Boosted Black Market Cannabis?
In an attempt to tightly control the national supply of cannabis, government has given black market cannabis a new niche: medical cannabis patients.
Despite a consistent supply of legal cannabis, many medical cannabis patients are still buying their goods from illegal markets. What happened? Wasn’t legality supposed to up-end the backdoor transactions?
As it turns out, the implementation of medical and recreational cannabis access has not been perfect. According to the New York Times, illegal dispensaries in Vancouver, Canada outnumber their legal counterparts. Part of the reason for the proliferation of non-legal outlets for cannabis has to do with government regulations and rules.
In Canada, each province sets its own rules and there are a limited number of legal dispensaries that can be open. As any student in Econ 101 can tell you, artificially constraining the supply of a good does two things: 1. It inflates the price and 2. It increases the presence of substitutes. In the case of cannabis, this has played out in a textbook-perfect manner
Firstly, the available supply of cannabis is far below what the Canadian market demands. Dispensary owners can’t keep product on their shelves. As more and more people see the effects of medical and recreational cannabis firsthand, without any legal stigma and a lessening social stigma, they’re eager to try it out.
But because of government interference, the market is operating at an inefficiency. Instead of allowing the invisible hand to determine how many cannabis shops should be open in any given town, the government has mandated the number — and surprise! — it isn’t adequate to meet the need.
So discerning consumers of medical cannabis have three options: go without their treatment, try a different kind of cure, or visit the black market. All three avenues are happening, and all three have a different bad side effect for Canadians and the cannabis trade.
For cancer patients, seizure victims, and chronic pain sufferers, going without treatment isn’t much of an option. It’s a quality of life issue, and no one in good conscience can tell people who are hurting that they should just wait another few weeks for a new shipment of medicine — especially when there’s a ready supply elsewhere.
Secondly, as many users in California have discovered the hard way, the government-imposed tax on cannabis products pushes the price of legal cannabis so high that some consumers are simply priced out of their treatments. Thanks to the Golden State’s heavy tax grab and a mile-long list of regulations for shop owners and dispensaries, it’s often much cheaper for cannabis users to find a black market dealer instead of buying their cannabis legally.
This is what happens when substitute goods run rampant. Because medical cannabis isn’t a new good, but rather a lawful replacement for a product already on the market, it needs to disrupt the traditional way of cannabis purchasing if it wishes to up-end the current way of doing things. And so far, it hasn’t accomplished that goal.
Any small business owner knows that customers will only switch to a new business if they have incentives to do so. Those incentives can be anything that provides value: a bigger selection, a better product, a more convenient way to pay, a better shopping experience, or a smaller price. In theory, legalized cannabis was supposed to offer all of these.
Finally, medical patients and recreational users were going to have the freedom to shop when it was convenient to them, instead of when their dealer was home. They were going to be able to choose from a plethora of options — and know full well that what they were being sold was actually the correct strain. They would have the knowledge of doctors and professionals to guide their purchasing. It was going to be easy to get edibles, tinctures, vape pens, and baggies of cannabis, so that users could experiment with new methods of consumption and ingestion. And, best of all, it was going to be free from long arm of the law.
But that’s not what’s happening in the U.S. or Canada. While there have been great strides — just look at all the money Colorado has raised for schools! — the black market continues to thrive because the legal operators can’t quite compete.
Until legal shops can offer a consistent supply of medical-grade cannabis at a competitive price, there’s little chance that consumers will make the jump to government-approved dispensaries. It’s time to make a change for the better, and kick the dealers to the curb. All it takes is some scissors to cut through red tape.