When Oregon lawmakers created the state's legal marijuana program, they had one goal in mind above all else: to convince illicit pot growers to leave the black market.
That meant low barriers for entering the industry that also targeted long-standing medical marijuana growers, whose product is not taxed. As a result, weed production boomed — with a bitter consequence.
Now, marijuana prices here are in freefall, and the craft cannabis farmers who put Oregon on the map decades before broad legalization say they are in peril of losing their now-legal businesses as the market adjusts...
The key issue there is that the profit opportunities for new growers attracted a lot of additional supply, leading to decreased profits for all. Usually, we think of barriers to market entry as being a bad thing, and indeed they are from the consumer's perspective - they decrease competition and lead to higher prices. However, from the perspective of the sellers, barriers to entry are a great thing because they provide the sellers with some amount of market power - that is, some power to raise the price above their costs.
So, how did Oregon get into this situation? The Herald story explains:
The oversupply can be traced largely to state lawmakers' and regulators' earliest decisions to shape the industry.
They were acutely aware of Oregon's entrenched history of providing top-drawer pot to the black market nationwide, as well as a concentration of small farmers who had years of cultivation experience in the legal, but largely unregulated, medical pot program.
Getting those growers into the system was critical if a legitimate industry was to flourish, said Sen. Ginny Burdick, a Portland Democrat who co-chaired a committee created to implement the voter-approved legalization measure.
Lawmakers decided not to cap licenses; to allow businesses to apply for multiple licenses; and to implement relatively inexpensive licensing fees.