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March 04, 2014 1:07 PM Nonprofits and Co-ops as Legalized Pot Alternatives

By Ed Kilgore

As noted earlier today, Mark Kleiman thinks federally regulated but state-run pot distributors could be the answer to a legalized cannabis system that eliminates federal-state conflicts in law enforcement, prevents large-scale illegal activity, and also keeps prices high enough to discourage abuse.

But what if that federal-state “grand bargain” cannot be executed? In that case, argues Carnegie-Mellon’s Jonathan Caulkins in another piece for the Washington Monthly’s March/April/May issue, states exploring legalization might want to look at some other models:

There is a spectrum of options for legal supply, ranging from none (prohibition with no medical exception) to for-profit enterprise subject only to standard business regulations. The pros and cons of the extreme positions have been well discussed. Prohibition produces black markets, arrests, and imprisonment; private enterprise promotes greater consumption in all forms, including greater abuse.
Colorado and Washington have chosen to swing from close to one end of the spectrum (prohibition except for a quite permissive medical system) to close to the other end (for-profit enterprise subject to standard regulations plus some regulations particular to marijuana). They have skipped over several viable intermediate alternatives.

One of those, explains Caulkins, is simply to limit cannabis distribution and sales to nonprofit organizations with a public health rather than a profit-maximization mission:

Placing the cannabis industry in the hands of nonprofits committed to fostering public health would rejigger the incentive structure. For-profit corporations seek to grow sales and, as with alcohol and tobacco, the greatest revenues come from the most vulnerable populations; 40 percent of past-month marijuana users today meet clinical guidelines for substance abuse or dependence (on marijuana, alcohol, and/or some other substance). Nonprofits, by design, operate under different prerogatives. They are not inherently interested in expanding sales or streamlining production, since their mission is to serve the public interest, not to maximize shareholders’ profits.
The usual knock against nonprofits is that they do not operate as efficiently as do for-profit businesses. But that hardly matters, because after legalization marijuana production costs will be very low. A typical heavy user can be supplied annually by three square feet of greenhouse space (at forty grams per harvest, four harvests per year), and professional farmers’ annual costs for comparable crops run between $5 and $20 per square foot. Outdoor farming would be even cheaper; all of the marijuana currently consumed in the U.S. each year could be produced on about 10,000 to 15,000 acres—or about a dozen modest Midwest farms.

A second and less complex approach, which in fact is compatible with a quasi-legalization scheme assuming the federal government keeps its current laws (but doesn’t enforce them) is a co-op production model:

The co-op model might be described as “grow-your-own plus share-with-others.” Alaska effectively legalized grow-your-own when its supreme court ruled that growing up to twenty-five plants was protected by the state constitution’s privacy rights, and Colorado’s 2012 proposition, in addition to legalizing large-scale commercial production, allows any adult to grow up to six plants.
One issue with grow-your-own, however, is that not everyone has the time, inkling, or skill to grow marijuana. While growing marijuana would not challenge a professional farmer, it is trickier than growing carrots, and it suffers from the zucchini problem. One productive plant produces more than the average user can consume, but one plant that dies produces nothing. So grow-your-own is feast or famine. Furthermore, some users like variety, and they may not be able to grow all of the strains they would like to consume. Co-ops solve that problem by allowing each registered member to grow one plant or grant that growing right to another member. Members could share or trade within the co-op.

The co-op model has worked elsewhere (notably in Uruguay and Spain), and is similar to the system now utilized in some states for the production of medical marijuana.

[P]ermitting co-ops could take a sizable bite out of the black market. More than half of marijuana users already report that they most recently obtained marijuana for free or by sharing. Others paid, but bought from friends or family. Just 7 percent reported buying from someone other than a friend, relative, or family member. So retail marijuana distribution already operates via an informal co-op model. Shifting to a formal co-op system would simply mean that product would come from co-ops, rather than black market criminal operations.

The big lesson here, as with Kleiman’s state pot shop proposal, is that we are drifting into a legalized cannabis regime that virtually guarantees the emergence of big commercial producers, distributors and marketers, and the kind of abuse that will likely produce a backlash and a lot of political manipulation. Federal and state policymakers should explore alternatives now, before they all go in up smoke.

Ed Kilgore is a contributing writer to the Washington Monthly. He is managing editor for The Democratic Strategist and a senior fellow at the Progressive Policy Institute. Find him on Twitter: @ed_kilgore.

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