© The Financial Times Ltd 2015 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
I have been a client of weed dealers in North America since the mid-1980s and no matter who the vendor, the price has remained $10 a gramme. I don’t think anything in 25 years has stayed fixed in price like weed has.
Dealers might have some power to increase prices, as it’s illegal, and there are some significant barriers to entry, such as getting arrested. But if I don’t like the prices, it’s pretty easy to grow some on my own, because it “grows like a weed”, even if it might not be as good as the dealer’s Cannabis sativa.
So how did we end up at $10 a gramme?
P.S. I meant to email this sooner, but was pretty baked and forgot to hit send …
The nominal price rigidity you describe is remarkable and unusual. If the price of weed had increased in line with US consumer price inflation, you’d be paying $20–$25 a gramme now. So I agree, it is a puzzle.
My guess is that the illegality of the market gives a push towards the price stickiness you have encountered. Buying and selling cannabis is hazardous and there must be a benefit to a situation where nobody haggles over the price.
Still, the nominal price wouldn’t stick like that unless supply and demand were at least roughly in balance at $10 a gramme. And I confess, I am perplexed. My own research, which has been purely academic, suggests that prices vary between £20 and £250 an ounce in the UK, roughly £1 to £10 a gramme. Since the price stability you describe is not matched in other markets, could it be purely fortuitous?
Whatever the reason, this could be a handy discovery. In hyperinflationary times, people turn to tobacco or coffee as more stable currencies. If quantitative easing gets out of hand, you have found a stable currency for the 21st century.
Questions to email@example.com
Copyright The Financial Times Limited 2015. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.