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The Starbucks of Weed?

A vertical image of a Starbucks Coffee cup filled with bud, soon patrons in legal states hope to pick up weed the way they pick up coffee.

Economics

The Starbucks of Weed?

Ex-Microsoft Employee Promising Nation’s First “Premium” Cannabis Retail Stores

Fox Business News is reporting the intentions of Jamen Shively, ex-Microsoft employee, to open a chain of “premium” retail stores where customers in Washington, Colorado, and any other state to legalize adult use of cannabis can browse among the top strains of artisan growers.  Shively is quick to caution, however, that governmental regulations will likely delay the opening of the first store for at least a year.

In an ironic twist, Shively and Fox Business host Lauren Simonetti take a couple of moments to banter about the hassle of complying with the bureaucratic red tape inherent in opening such a store – not least of which is the uncertainty over what, if anything, the Obama administration will do to stop such businesses from opening.

Shively may be overly optimistic. In the interview, he claims that the US illegal recreational pot industry is already valued at $100 billion, and that fully legal cannabis will be a $200 billion market domestically; but these numbers don’t align with the best available data.  According to Marijuana Legalization: What Everyone Needs to Know by Caulkins, Hawken, Kilmer, and Kleiman (2012), the retail market for illegal marijuana in the US is more likely in the range of $15-30 billion (p. 30) – still sizeable, but nowhere near what Shively claims.  Even more off is Shively’s prediction of what will happen to the market in the event of full legalization; instead of doubling the size of the market, such a change in law would almost certainly cause the price of pot to plummet to a fraction of its current price (p. 166), and it’s highly doubtful that the increase in consumption because of legalization (if, indeed, there will be any at all) could make up for such a drop in price.

Despite the overhype, this is a significant event.  If business interests can join Libertarians, the youth, and racial minorities adversely affected by punitive pot laws in demanding change from the White House, that Change may indeed be right around the corner.

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