Suddenly, legal weed is losing -- but why?

The real problem with Can Legal Weed Win? is that it refuses to ask an obvious question: How is an illegal market cheaper than a legal one? Even granting that legal and illegal weed are near-perfect substitutes, prohibition costs should make the latter more expensive. The basic function of drug enforcement, after all, is to increase costs and thereby reduce consumption on the extensive (number of users) and intensive (number of uses) margins. One international comparison estimates that marijuana prices are 50 percent higher in places with strong enforcement compared with those in which it is decriminalized; another estimate suggests that legalization would lead to a more than 90 percent reduction in pretax wholesale prices. Prohibition also constrains innovation and segments the market. Before legalization, there was only one kind of legal weed; now, there are many—which ought to make the legal market more appealing.

Why don’t these enforcement costs show up in the legal market? The simple answer is that in many legalization jurisdictions, no one is enforcing the rules. Data from Washington and Oregon, for example, show that enforcement of marijuana laws fell dramatically even before legalization. More generally, marijuana possession has been decriminalized in many states since the 1970s, while federal law enforcement has not prioritized it in legalization states since at least 2008. Advocates of legalization point to the high number of marijuana-possession arrests each year—226,000 were reported to the FBI in 2020—but many of those are pretext arrests, using possession to bring offenders in for other crimes. More relevant are marijuana sales arrests: just 23,000 in 2020, roughly 1 percent of all arrests, and down two-thirds since 2011.