Lost Taxes and Other Costs of Marijuana Lawsby Jon Gettman 4. The Price of Marijuana

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There are five sources for determining the price of marijuana.

The most common is the prices of marijuana cited by police in news reports about marijuana seizures. Another common source is a range of prices reported in government reports on marijuana-related trends, such as the NNICC reports cited in the section below on the marijuana supply(24). The problem with these sources is that they are not representative of the average price of marijuana but instead simply indicate the highest price on the market and/or the lowest and highest price on the market. Another problem is that the anecdotal nature of these price quotes make comparison over time difficult. The three other sources of price quotes are a bit more reliable.

The federal government’s System to Retrieve Information from Drug Enforcement (STRIDE) program tracks the prices paid by undercover police officers and informants conducting purchases under police supervision. The STRIDE program provides a data set of prices for illegal drugs at various quantities over a long range of time. Another source of price quotes for marijuana is the National Survey on Drug Use and Health, which among its many questions asks individuals how much marijuana they purchased when they last bought the drug and what they paid for it. Finally, High Times magazine regularly solicits price information on marijuana from its readers and currently compiles and publishes a monthly index on marijuana prices in the United States.

The NNICC reports that prices for commercial marijuana ranged from $50 to $100 in 1985. By 1992 the highest price for commercial marijuana, according to their reports, was $450. For higher quality sinsemilla, NNICC reports a range of $120 to $200 in 1985, increasing to a range of $75 to $650 in 1992.(25)

The STRIDE program provides quarterly data on marijuana prices from police purchases.(26) These prices are not representative of the entire market, but they do provide a reasonable basis for tracking trends and changes in marijuana prices over time. The annual averages listed in Table 10 are for the purchase of 10 to 100 grams, roughly a bit less than 1/2 ounce to just over 3 ounces, from 1981 to 2003. In the 2nd quarter of 2003, the last period covered by the most recent published data from the STRIDE program, the price for a gram of marijuana in a purchase of less than 10 grams was $11.33 per gram.

The National Survey on Drug Use and Health provides another source of marijuana prices. Deriving a weighted average from the total number of grams of marijuana purchased and the total expenditures reported by the survey data provides another price index for marijuana for the years 2001 to 2005.(27) In this index the price of marijuana varies between a low of $5.47/gr in 2002 to a high of $6.69/gr in 2004, and also providing a price of $6.14/gr in 2005.

The prices provided by High Times are a bit greater than these other price quotes. High Times currently provides 4 price indexes. The overall price index averages $344 an ounce ($12.15/gr) for the period January 2005 to August 2007. The remaining indexes reflect three distinct price categories. The most expensive marijuana is referred to as “Kind” and had an average price of $451/oz ($15.91/gr) during this period. The “Mids” category had an average price of $277/oz ($9.76/gr), and the lowest quality category, labeled “Schwag” had an average price of $91/oz ($3.21/gr) from January 2005 through July 2007. According to High Times, mid-level quality marijuana had an average price of $282/oz during 2005, an average price of $269/oz during 2006, and an average price of $272/oz during the first half of 2007.

Table 11 constructs a current price index from the most recent STRIDE, NSDUH and High Times data by converting price data for the years 2003 to 2006 into 2007 constant dollars and taking an average of these four years. The result is a price of $7.87 per gram or $223/oz. This price will be used in a section below that calculates the value of the total annual supply of marijuana in the United States. These annual price estimates have been chosen as the best available data for the 4 years prior to 2007, the years that best coincide with the periods upon which the supply estimates are based.