Since you asked, II.

John Bass wonders what legalizing pot would add to the ag economy. Again, I have no idea, but again, I’ll jump in with an estimate.

Prof. Kleiman at UCLA studies drug policy; here is his post on whether legalizing pot would stimulate the national economy. He writes: “the illicit cannabis industry in the U.S. generates revenues of about $10 billion per year”, which he thinks is negligible on the national scheme of things. That isn’t necessarily the case for California ag though, which could be a regional beneficiary.

Analysis:
1. California would grow most of the nation’s pot. We have a lead in this, don’t we? Although I think I’ve heard stories about hemp thriving in the south and midwest, with plants escaping and growing by the roadside. So perhaps pot would grow well throughout the country, and the south and midwest would want in on that ag product. Nevertheless, there is evidence that industries grow around first movers, and California has cornered the market on types of produce (lettuce, almonds) before.

2. But Prof. Kleiman thinks that criminalization inflates the value of the pot industry; his guess is about six times. So, a legal pot industry would be more like ($10B/6 =) $1.7B.

3. California ag annual ag revenues are about $36B, $37B. Pot would add a nice buffer, but it isn’t a transformative crop. It is, in fact, like almonds ($1.8B) or wine grapes ($2.24B). 

4.  It’d be nice to get a third high value crop for people to talk about, so that the conversation isn’t invariably almonds or vines.  I believe pot is an annual, which would offer nice flexibility for row crop farmers.  But as an ag crop, instead of an illicit product, I think it would have large but not disproportionate benefits for the California ag industry.

5.  Finally, if we’re introducing a new product into the ag world, and one that has always come with regulation, I wish a permitting system could be structured to accomplish a goal.  The federal tobacco program issued quotas to tobacco farmers, guaranteeing minimum prices.  It created a monopoly structure and it kept the price of tobacco artificially high, but farms lasted for generations farming 7-10 acres of tobacco.  The only crop I know of that keeps a tiny farm profitable in California is strawberries for direct roadside marketing.  If someone wanted, say, a robust and stable farming community along the east side of the Valley that provided living wages for small farms and their workers, that person might think that the way marijuana cultivation was legalized could help accomplish such a goal.  Given that the crop is currently criminalized, perhaps a regulatory structure for growing it wouldn’t seem so burdensome.  I don’t see why the default should be to go straight to the opposite end of the spectrum, and treat pot just like any other crop.

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