Skip to Main Content

CannaBusiness

  • David Bennett posted an article
    The reason why cannabis licenses are limited see more

    The Economics of Scarcity

    The artificial creation of the scarcity of facility licenses increased their value exponentially and created a parallel “license economy” outside of the normal business activity of producing and distributing products and serving customers. Demand outstripped supply of available licenses ten to one. While the normal economic response to scarcity is for the price to go up and the scarce resource is allocated to the buyer willing to pay the most, this was an intentionally created scarcity that the buyers competed for, not by willingness to pay more but by participating in a beauty contest in an idiotic competitive scoring system and 500 page applications.

    348 licenses that were granted immediately became worth millions of dollars each. At least a half a billion dollars in wealth was created out of thin air before the first seed sprouted.

    The scarcity of licenses is a permanent feature of the cannabis market prescribed in Article 14.  With the state having a complete corner on the market for licenses, they control the supply and therefore the price of cannabis products. Businesses must compete for the scarce licenses in whatever manner the department chooses. Every license is in some sense a monopoly and a grant of market share.

    The market conditions created by the scarcity of licenses makes the application process a high risk, high reward endeavor and raises the “bar of entry” too high for most normal businesses. There is no advantage for the patients for there to be a scarcity of licenses and a lack of competition. The scarcity of licenses does nothing to protect the health and safety of society, and in fact, undermines the public confidence in government and the industry by providing opportunities for corruption and patronage politics.