Can legal weed businesses compete with black market?

In the City Journal’s podcast 10 Blocks, journalists Malanga and Lehman address the challenges associated with marijuana’s local “tolerated black market”—and why two-thirds of some states’ sales remain under-the-table. Rules, regulations, and added costs are a deterrent to many sellers; and law enforcement in/beyond CA rarely shuts down illegal businesses.

(0:52–1:22) Brian Anderson: Steve… Your recent piece for [City Journal] looks at what’s going on in California and Oregon with regards to the legalization of pot. So, shortly after legalizing the drug for recreational use, both of these states saw their black markets absolutely explode. Now, this was contrary to what the advocates of pot legalization had predicted.

(2:24–3:10) Steven Malanga: Initially, when the black market didn’t go away, the justification—I guess you could say the explanation—was that governments were regulating this marketplace, and they’re charging taxes, and they’re charging registration fees. There are all these regulations that marijuana growers in particular have to follow, and that it’s just simpler to be part of the black market. Some of the investigations in places like California and Oregon have found—and in Colorado, too—that essentially, marijuana growers who were doing a bang-up business before legalization don’t want to become part of the system…

(5:23–5:56) BA: Charles, you’ve written on this persistence of the black market, as well, recently, in a review of a book that’s recently been published that’s called Can Legal Weed Win? The culprit, as you explain there, is in part the lack of law enforcement. So, these illegal pot businesses on every level (cultivation, distribution, drug dealing), they’re not shutting down as Steve was just saying; but part of the reason is that nobody is shutting them down.…

Listen to the whole thing here.

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