Economy

Here's How Legalization is Affecting Weed Prices

The marijuana legalization movement is driving down the cost of cannabis nationwide, a new report from researchers at Pardee RAND Graduate School and Carnegie Mellon University found.

In the 24 states that have legalized marijuana, either for medical or recreational purposes, users are able to access higher quality weed and a greater variety of products than most would be able to find on the black market, which is generally cheaper because it's untaxed. Black market weed prices vary from state to state, but legalization is driving down those costs nationally as well due to competition. 

Nevertheless, legalization efforts across the U.S. are causing cannabis prices to decline, researchers found. In Washington, which legalized recreational marijuana in 2012, weed prices are dropping by 2 percent each month, price data from the state's Liquor and Cannabis Board shows.

Washington

The reason for the decline is simple: While marijuana is generally cheaper on the black market in legal states, that's because drug traffickers are competing with legal dispensaries for cannabis customers. And unlike illegal dealers, dispensaries don't need to worry about legal risks posed by prohibition and they also "benefit from economies of scale that push production costs down," the Washington Post reports. (It is worth noting, however, that legal dispensaries are still violation federal laws banning cannabis). 

There are advantages and disadvantages to declining weed prices in legal states.

State sale and excises taxes on marijuana are based on the price of cannabis, so if weed costs are declining by 2 percent each month in Washington, for example, the state is earning less money from legalization. At the same time, lower prices mean less business in the black market and lower law enforcement costs.

As an added bonus, legal weed is bringing in millions in tax revenue that's being invested in public services and education in states such as Colorado, as ATTN: previously reported.

RELATED: Here's How Much an Ounce of Weed Costs in Your State