Marijuana

The Benefits of Unregulated Pot

California's "wild west" demonstrates the domesticating power of capitalism.

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Last September the Washington State Liquor Control Board published a 43-page list of proposed guidelines for the sale of recreational marijuana. A few days later, Colorado issued an even longer set of rules, 136 densely packed pages in all.

In the realm of legal, commercialized cannabis, a new age is upon us: the age of pungent regulatory skunk. To prove how committed they are to freedom, personal choice, and the pursuit of herbally induced happiness, Washington and Colorado are imposing consumer purchase ceilings, retail sign limits, mandatory packaging requirements, and taxes.

What about California? Seventeen years after deciding that marijuana should be at least as permissible as Vicodin, California still has no statewide regulations governing the production and distribution of medical marijuana. Since the U.S. Department of Justice has suggested it will not meddle with pot legalization in states with "strong and effective regulatory and enforcement systems," California is increasingly characterized as a dysfunctional laggard.

The onetime medical marijuana trailblazer, concluded a September article in the SF Weekly, is "being left behind, stalled out while other states innovate and attract entrepreneurship." In The Huffington Post that same month, Diane Goldstein, a spokesperson for Law Enforcement Against Prohibition, voiced similar concerns: "In California, it's been the wild, wild west. The laws have been too vague, and when the laws are too vague, it allows people to undermine the law-both the bad apples in the industry and law enforcement."

But how accurately does a phrase like "the wild, wild west" describe what has taken place in California? A previously forbidden sector of commerce has evolved into an increasingly professionalized multibillion-dollar industry, complete with a robust retail infrastructure, a lucrative trade in equipment and supplies, trade shows, media outlets, educational institutions, and a surprisingly vast supply of entrepreneurial stoners who seem to get at least as buzzed by marketing, product innovation, and event management as they do by a few puffs of Platinum Skywalker. All without any regulatory hand holding from Sacramento.

Recently I visited CW Analytical, a commercial laboratory located in an industrial part of Oakland, across the street from a Mother's Cookies factory. Inside the lab, a technician in a white lab coat hovered intently over a table adorned with an array of small plastic vials partially filled with green liquid. CW Analytical offers voluntary quality assurance services to dispensaries, edibles producers, growers, and consumers who want to analyze the potency and safety of their cannabis. It tests products for microbiological contamination and pesticide exposure, and it offers a range of other services designed to bring transparency, consistency, and reliability to the industry.

In 2007 another Oakland-based lab, Steep Hill, pioneered this aspect of the pot trade. Today there are enough labs spread throughout the state to support a trade organization, the Association of Commercial Cannabis Laboratories. According to Robert Martin, who co-founded CW Analytical and heads the association, only around 20 percent of the state's dispensaries currently get their product tested at facilities like his. There have been some questions regarding the accuracy, competence, and impartial status of the labs that have set up shop. Yet the laboratories are another example of the industry's gravitational drift toward order-and another indication of medical marijuana's exceptional status in our current hyper-regulatory climate.

We live in an age of pervasive government intervention. The Code of Federal Regulations has added 43,504 pages since California first passed Proposition 215 in 1996. Yet while this bureaucratic bulwark was growing as thick as the Great Wall of China, our nation's largest state, which doubles as the world's eighth-largest economy, was permitting the sale of a substance that had been illegal for 60-plus years. In theory, this wild, wild west should have exploded into chaos, or at least something a little more raucous than a bunch of entrepreneurial Ph.D.s monitoring the fungus levels of freshly cultivated Lemon Kush.

Yes, there has been drama over the years: NIMBY complaints, dispensary bans, and, of course, federal raids. But the most visible manifestations of California's medical marijuana industry have been hydro stores in strip malls, advertisements in alternative weeklies, and $12,000 trim machines. While the threat of federal intervention and city-wide regulations have played significant roles in the industry's evolution, capitalism arguably has been its most functional regulator.

Take the labs. In California provenance is king: Any heirloom radish without a pedigree is suspect. Consumers want to know where it was grown, who grew it, and the nutritive profile of its mulch. With cannabis, the value of detailed information is even greater than it is for most crops. THC levels can vary greatly depending on growing conditions and techniques. Cannabis is susceptible to mold and fungi, and growers often use pesticides and other potential contaminants.

This uncertainty created a business opportunity for entrepreneurs such as Martin. Somewhat surprisingly, consumer demand for more comprehensive information about the latest harvest of Sour Diesel is not yet particularly strong. If it were, then surely more than one in five dispensaries would be regularly testing their products. But the demand for detailed information about heirloom radishes-not to mention Napa Valley cabernets-wasn't always so great either. Over time, organic evangelists and entrepreneurial farmers created that demand. That's the same path the cannabis industry is following today.

To make CW Analytical's service attractive to dispensaries, Martin, who previously held executive-level quality assurance and food development positions at Kraft Foods and Dreyer's Ice Cream, is doing everything he can to make it affordable. According to Martin, CW Analytical will run all the tests necessary to determine a sample's potency and safety for $120 a pound, or roughly 25 cents per gram. (In dispensaries, the retail price of a gram generally ranges between $10 and $20.)

The labs have a strong incentive to standardize testing methodologies, share best practices, and continue expanding the range of services they offer. Unless they can make themselves crucial to consumers and dispensaries, they won't survive.

"In the beginning, all of the edibles were wrapped up in cellophane and sold to you just like that," Martin notes. "There were no allergen statements, no caloric impact statements, nothing but a brownie full of pot. God knows how much pot, though, so you only better eat a little bit. If you ate too much, you could be very uncomfortable. It could send you to the emergency room with an anxiety attack."

After decades of working in the food industry, Martin places a strong emphasis on uniformity and clarity. "This started out as a cottage industry, and cottage industries sometimes stick with what works over what's best," he says. "We're trying to get our clients to put the milligrams [of THC] per dosage on their labels. We're trying to get everyone to think in terms of serving sizes, and making their products the same way every time. People need to know that when they buy a certain product, it's going to produce the same effects every time."

Now the cellophane packaging of the late 1990s has given way to labels that resemble those of any supermarket food item. Legalization opened the door for more aggressive marketing and easier information sharing, and these forces naturally foster a more standardized environment.

Over time, even if California maintains its semi-resigned commitment to laissez faire, market forces will eventually drive more dispensaries to engage the services of third-party services such as testing laboratories. "When liability becomes a real issue for all these businesses, they'll be testing everything like every food company does today," Martin says. "They want to make sure that they have data in-house to prove that their product was leaving their shelves clean."

Government regulation would surely hasten this process. But the move toward greater transparency, more information, and an emphasis on product safety and consumer empowerment has been animating California's medical marijuana industry since its inception. As legislators and industry advocates alike insist that legal marijuana requires detailed codes and regulations and high-level governmental coddling, California's experience suggests otherwise. In the wild, wild west, at least, reefer madness proved no match for the domesticating influence of capitalism.

NEXT: Peter Schiff Asks: Will Walmart Shoppers Support "Everyday High Wages"?

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  1. A price of $10 a gram (4,536 an lb $283 an oz) seems a tad high. But I don’t live in CA. Or know where to even buy the stuff. I just read about it.

    1. 283 an oz seems like what my friends in colorado have been saying

    2. That’s reasonable, actually. In Berkeley in the early 2000s, that was the going price for a gram of good stuff (and $40-50 for an eighth). Prices were similar throughout NorCal; prices were less in SoCal but their pot sucked. Clearly, I do not know these things from personal knowledge……..

      The fact that prices have NOT gone up (while I’m sure quality has) in over a decade is the surprising thing to me…

      1. 40 per eighth is the going rate.

        1. That’s in the Bay Area.

          Why are you surprised that quality has gone up but prices haven’t? That’s generally one of the positive effects of competition that we free marketeers harp on over and over.

          1. Eh…inflation, as well as the costs of quality testing, rent, lawyers, those $12,000 trimmers (trimming was done for free by a roomful of stoners just excited to be involved in the process back then). Taking all that into account, I would still expect to see some upward pressure on prices. But, yes, I’m wrong… and happy to see that I am.

    3. With apologies to P.J. O’Rourke, if you thought marijuana was expensive before, just wait how expensive it is once it’s legal!

    4. My freelance dispensor in so. Cal gets $20 for 1 1/2 gram of “the good stuff” and $20 for a quarter-ounce (7 gram) of the ordinary stuff. Medicinal is $40 to $60/eighth, and my local regulated dispensor delivers.

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  3. “There were no allergen statements, no caloric impact statements, nothing but a brownie full of pot. God knows how much pot, though, so you only better eat a little bit. If you ate too much, you could be very uncomfortable. It could send you to the emergency room with an anxiety attack.”
    —-
    That sounds like Dolores Park in SF on a Saturday… from what I’ve heard.

  4. I know this is about pot, but it lumps in with Reason’s call for an end to the ineffectual war on drugs. I see that this President just commuted the sentences of 11 people convicted under crack cocaine offenses, under penalties that have since become too harsh. But nonetheless, he commuted those sentences. Maybe a step in the right direction by the federal government? Think any current Tea Party person would have done similarly? I’ll give you Rand Paul, but even there I have my doubts, because that kind of act does not sit well in red-state America.

    1. The Tea Party takes no position on this issue. The Tea Party wants limited government.

      1. But Reason does, and it is a strong supporter of the Tea Party. Just pointing out that this President is taking a small step in the direction Reason would like to go, and its a step most Tea Partiers in Congress would not take. But you tell me, do you think Gomert, Bachmann, Gingrey, Huelscamp, or pick any of them…do you think they would have commuted the sentences of crack cocaine users because the penalties were to harsh?

    2. Jesus H. Christ, you are a TEAM piece of shit. Just type “BOOOOOSH!!!11” to save space next time.

      1. Don’t read it if you don’t like it.

  5. Most people like this “Benefits”.

  6. Just think of all the jobs that will be created by the California Ministry of Cannabis Control. We have a State Liquor Control Board here in PA, and it employs thousands.

  7. A correction:

    “our nation’s largest state, which doubles as the world’s eighth-largest economy”

    California is neither, actually. Alaska is the largest (663,267.26 sq. mi.), Texas second (268,580.82 sq. mi.), California third (163,695.57 sq. mi.). Furthermore, even if we presuppose that California is its own sovereign nation for this comparison, it still ranks 12th behind Canada. It is the largest state economy though ($1,735,360,000,000), with Texas coming in 2nd ($1,149,908,000,000 – 16th as a nation) with New York in third ($1,016,350,000,000 – 18th as a nation).

  8. The current murky state of California regulation of pot is just fine. Once it is completely legalized liberals will not be able to resist regulating and taxing it to death.

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  10. Am I the only one who is confused when libertarians praise the proliferation of government regulation?

    With marijuana, where there was one regulation (don’t do it), now there are many regulations (you can do it, if you follow the following several hundred – and counting – rules).

    1. I think they might be something like libertarian-lite. Or something.

  11. years after deciding that marijuana should be at least as perm

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