Oscar, you said right here that the cost would probably go up:

"What part of taxing the pot do you not understand? Cost going down. Are you kidding me? The cost would most likely go up."

" I never said it would affect usage. That's your delusion entirely. "

I'm not sure where I supposedly said that you did say this. I said that you were now arguing that a reduced cost would *not* raise usage, which is a distinct argument from saying that the cost would rise.

"
Free market economics is a mathematical model that simplifies reality. It carries some validity under certain conditions, i.e. price is the prime motivator, there is a large number of suppliers and buyers, the product is not complicated and it's easy to change supplier. In the case of pot, where the prime motivator is recreation or addiction rather than price, then no free market economics doesn't apply as much as in some other situations. "

Free market economics doesn't assume that "price is the prime motivator." Demand comes from a lot of motivations and utilities, and it responds to price. For example, free market economics can be used quite successfully to analyze the sale of televisions, which is also a situation where the ultimate utility derives from entertainment.

Actually, utility of a good NEVER derives from mere price*. You're just confusing concepts.

*Except, of course, in a local sub-market where the price becomes too low with respect to a larger context, when something can be bought and sold at a profit. This is really still a different thing from the utility function that ultimately drives value, however.

Yeah semck. I use different arguments to respond to different issues. That's not "changing your argument" as you called it. What's your point with this?

My point was simply that you abandoned your initial position that I was actually arguing against. You did raise another interesting set of questions, but it wasn't the set with which you initially contradicted me. This was worth pointing out for clarity, since if you move on to a whole other topic and I don't observe the fact, we can end up just talking past each other. I take it that we now both agree that I have established that the cost would not go up.

Well, we don't know for certain if it would or not. It is possible that the black market cost would go down (easier to produce, less risk in handling and selling, etc. as I pointed out above) making the legit cost with taxes be higher than black/grey market.

Draug,

There is virtually no posited reason why the black market cost would go *up* -- so the cost would, at the very worst, stay the same. (You put up with the intangible costs of risking an illegal activity, etc., and you buy illegal pot from somebody who gets the same profit margin as now, or probably a little better for the reasons you say).

The cost *might* go down, since it's not that likely that the taxes would be as great as the substantial intangible costs of illegal behavior.

I said the black market might go down, Semck. Please read more carefully.

I'm thinking the legit competition would drive black market prices down, but then black market costs would be lower due to the reduced risk of growing and distributing.

Draug -- no, I saw what you said and I was agreeing with almost all of it. Just not the first sentence. You say, "we don't know for certain if it would or not," where this (in context) refers to my statement about cost going *up.*

The point is -- for all the reasons you say, and that I reiterate, we can be pretty certain that it would NOT go UP. It might or might not go down.

Ah! I thought you were referring to the cost of legit stuff. We don't know for certain what exactly would happen there. The government could tax it so high as to make it hard to buy to try economic stifling of drug use like they do with tobacco, in which case the taxed shit could be more than the current illegal prices. I'm saying there isn't enough info to know what tax levels would be implemented and what it would do to the cost of pot to the average consumer.

Ah, right.

Yes, in theory, there is no limit to how high the taxes would go, so it could (in theory) be arbitrarily expensive to get legally. But the cost shouldn't go up from now, when it's already illegal, and there is no reason the black market price would rise, as we've both observed.

Yeah, black market would most likely go down (capitalism at work) unless the taxation issue makes legit stuff too expensive.

And if the government started pushing the effort to shut down the trade of illegal pot just before making it legal, they could increase the cost of doing business illegally and artificially inflate the black market price so they could then come in with the previous black market price or even slightly higher and say "See, our weed is cheaper than the black market".

And there I was thinking semck believed in free market economics. I guess I was wrong about that.

If pot becomes legal then the demand for black market pot drops sharply. Less demand means lower price according to FME. The price of production may go down as well, but given the lower sales price and the lower volume it is highly unlikely that the illegal pot business will be even nearly as profitable as it is now. Criminal organizations will probably just move on to trafficking women and guns.

Yes, that's true. But if they're going to ramp up law enforcement efforts over the long term (which would be necessary for the effects to be permanent), then one of the strongest arguments for legalization vanishes.

Case in point. When the prohibition on alcohol was lifted, the mafia pretty much lost their business of selling booze.

Oscar,

You're committing a simple fallacy in your most recent post. "Black market pot" and "Pot" are not separate products, whose price curves can be compared in isolation. Black market pot is the same product, but with an additional large cost -- the risk and other negative effects of dealing with the black market -- and a missing cost, namely taxation.

If taxation is set so high that the cost of legal pot is higher than illegal pot (including the ancillary, illegality costs), then there's no reason to suppose that demand for black market pot would actually go down.

So you see, I do believe in free market economics. I just know how to analyze them properly.

"Case in point. When the prohibition on alcohol was lifted, the mafia pretty much lost their business of selling booze. "

Yes, but that's because the cost of legal booze was far lower than that of illegal booze (if you count the attendant risks).

If there had been a $100 a bottle tax on legal booze, then the mafia would have sailed right along as it was doing.

And either way, the cost of booze does not rise.

"If pot becomes legal then the demand for black market pot drops sharply"

Maybe, maybe not. Again, we don't know what price point or hoops people would have to jump through to get the legal stuff. Do they make it 21 only? Do they tax it so high trying to get people to stop? There are many factors involved in a controlled substance versus non-controlled ones like TVs. Look at tobacco. There is little if any price difference between brands of cigarettes because state governments have set minimum prices for alcohol and tobacco. I guarantee the states would do the same for pot. I would agree it will drop some, but pot is also one of those things where users have a preferred "name" and if the government starts controlling the quality, those users who like "Iris Indigo Tarantula" (name made up as I'm not a pot smoker and couldn't tell you a real one) will still want their IIT.

http://media2.policymic.com/a060cd6bcc1368152a332a5579ae9ee9.gif

Well, I live somewhere where you can buy pot legally and I promise you the number of people that buy it illegally is close to zero. Why would you go deal with criminals for a product you might just as well buy legally for an affordable price? Seriously dude, if you legalize it the criminals have no business with it no more.

I know I got into it late, but thank you guys for keeping this a civil discourse, even when a little heated off and on, it has remained civil and productive. My compliments to all involved in keeping it that way.

@Oscar - The point is we don't know what would happen to the price with federal taxation when they got involved.

"Well, I live somewhere where you can buy pot legally and I promise you the number of people that buy it illegally is close to zero."

Then you live somewhere where the taxes didn't come anywhere close to making up for the risks and hidden costs of black market dealing. In other words, a place where the cost did not rise with legalization.

The cost of marijuana should fall as it's legalized. What we've observed despite this factor is that marijuana use in states which have legalized it has not increased significantly. This is because of a lurking factor -- legal and social stigmatization as a result of marijuana being kept illegal. When you're addicted to something that you're not legally allowed to possess and use, you have very strong disincentives toward seeking treatment that might be traceable back to you. This keeps addicts in the shadows, afraid of seeking treatment and makes them less willing to get help. When you start treating addiction as a medical problem instead of a legal problem, you create an environment that favors addicts seeking treatment and getting off the stuff altogether. That leads to less use, everything else held constant.

Oscar - may I ask where you live? IF it is in one of the legal states, just wait. If the feds get involved in legalizing it, that price *will* go up. Guaranteed.

Yeah sure, semck, if you tax pot so much that you would have to spend $200 each time you want to get high then there would probably still be a black market for it. However, presumably the taxation would be similar to alcohol and tobacco (why wouldn't it?) which means taxes are high compared to the sales price, but the sales price including taxes would still be quite affordable even on a small income. Again, legalize it and there is no business for criminals.

I don't live in the states Draugnar.

"However, presumably the taxation would be similar to alcohol and tobacco (why wouldn't it?) "

Why wouldn't it? Because the government would still want to stop the use of it and would likely tax it into oblivion. It would become a financial war on the drug itself, not the cartels.