Of course, outdoor farming is probably not the most likely outcome.  Suppose all of the 5,000 metric tons were provided by indoor growing with a yield of 546 pounds per house.  Such domestic production would require about 20,000 houses (or less since the indoor production would mostly be sinsemilla, whereas most of the 5,000 metric tons would be commercial grade).  20,000 houses is a lot of houses, but there are about 75 million owner-occupied houses in the U.S., so 20,000 is just 0.027% of the total; widespread indoor marijuana cultivation would not exacerbate homelessness or solve the hang-over from the recent housing crisis.  Indeed, a recent news article reported that there were 200,000 vacant homes in the U.S. just among those that had been constructed recently.[32]  

It is harder to speculate about possible spill-over effects on Mexico, if California-based production induced crop substitution there, but these calculations suggest that environmental considerations would be a relatively minor factor in an analysis of the social-welfare effects of marijuana legalization.


References

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Establish and Produce Asparagus. San Joaquin Valley North: University of California Cooperative Extension.  Available at http://coststudies.ucdavis.edu/files/asparagusvn2007.pdf.

Bouchard, M. (2008). Towards a realistic method to estimate cannabis production in industrialized countries. Contemporary Drug Problems, 35(2/3): 291-320.

Bouchard, M., Nguyen, H. (Forthcoming). Professional or amateurs? Revisiting the notion of professional crime in the context of cannabis cultivation. In T. Decorte, G. Potter, and M. Bouchard (Eds). World Wide Weed: Global Trends in Cannabis Cultivation and its Control. London: Ashgate.

Caulkins, Jonathan P. and Peter Reuter (forthcoming).  How Drug Enforcement Affects Drug Prices.  In Crime and Justice –A Review of Research, vol. 39, ed. Michael Tonry. University of Chicago Press.

Cervantes, Jorge. Marijuana Horticulture: The Indoor/Outdoor Medical Grower's Bible. Singapore: Van Patten, 2006. Print. 

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Edwards, Logan. Gro Great Marijuana: An Uncomplicated Guide to Growing the World's Finest Cannabis. Los Angeles: Sweetleaf, 2006. 

Ehrensing, Daryl T. (1998).  Feasibility of Industrial Hemp Production in the United States Pacific Northwest.  Oregon State University, Station Bulletin 681, May.  Available at http://extension.oregonstate.edu/catalog/html/sb/sb681/.

Fortenbery, T. Randall and Michael Bennett (2004).  Opportunities for Commercial Hemp Production.  Applied Economics Perspectives and Policy.  26(1):97-117.

Gieringer, Dale (1994).  Economics of Cannabis Legalization.  Hemp Today, pp. 311324.  Available at http://www.canorml.org/background/mjeconomics.html.

Gieringer, Dale (2010).  Personal correspondence (May 28th, 2010).

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Company creates new marketing opportunity . Retrieved February 21, 2010, from

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Moeller, Kim (2010).  An Analysis of Costs and Profits in Two Copenhagen Cannabis Markets.  Paper presented at the 4th annual conference of the International Society for the Study of Drug Policy, Santa Monica, CA, March, 2010.  

Molinar, Richard H., Michael Yang, Karen M. Klonsky (2005). Sample Costs to Produce Cherry Tomatoes. Fresno, CA: University of California Cooperative Extension.  Available from http://coststudies.ucdavis.edu/files/tomatochsjv2004.pdf

Narcotics News (2010).  Website accessed March 3, 2010.  http://narcoticnews.com/Marijuana‐Prices‐in‐the‐U.S.A.php.

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Retrieved January 2010, from National Drug Intelligence Center: http://www.justice.gov/ndic/pubs37/37035/public.htm#Top

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Toonen, M. R. (2006). Yield of illicit indoor cannabis cultivation in the Netherlands. Journal of Forensic Science, 1050-1054.

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[1] We cite primarily Cervantes (2006) and Edwards (2006) since they are readily accessible books.  We endeavored to cross check statements in those books with various web sites and blogs.  Still, mere repetition of a statement in multiple non-refereed sources is no guarantee of accuracy (cf., Reuter, 1984); at best it means we are capturing some nebulous community’s conventional wisdom, but not necessarily objective facts.    

[2] Indeed, there are already media reports of declining wholesale prices (e.g., ), although official price series are more stable.

[3] Thanks to Josh Swiss for this analysis.  

[4] This assumes 24‐hour light for the first 30 days and 12‐hours of light for the remaining 60 days.  That’s 1,440 hours of light per harvest.  40 watts per square foot (mid‐range from Edwards, 2006) times 25 square feet conveniently gives 1 kwH per hour of lighting.  Electricity prices from US Energy Information Administration (2009).    

[5] Amortizing equipment costs at 20% per year is a common practice in budgeting greenhouse operations for legal crops (e.g., Ohio State University Extension, 2008), but it has not specific empirical basis with respect to marijuana growing equipment in particular; it is a good example of a parameter grounded in judgment not data.   Assuming four harvests per year is typical of indoor operations, allowing 30 days in the clone/vegetative and 60 days in the flowering stage.  

[6] One source of confusion in the literature is whether yields are quoted per square foot of flowering plants or per square foot of total growing area (including area for clones and plants in the vegetative state).  We presume Toonen et al.’s yields pertain to all area with plants, but there are four harvests per year.  Some estimates are based only on the part of the grow area with flowering plants, but then assume six harvests per year since the plants only spend 60 not 90 days in that area.  

[7] This upper end guess is an obvious candidate for improvement in a refined analysis.  

[8] Often some of the compensation is in-kind or the labor is provided by someone with an ownership stake in the marijuana being processed.  The $20 - $25 figure is meant to reflect instances in which the compensation arrangements reflected a straight wage.

[9] 10.5 pounds * 453.6 grams per pound / 100 grams per person = 47.6.  One could refine this calculation.  The actual average is just shy of 100 grams, and the 10.5 pounds would likely all be sinsemilla, whereas the ~100 gram average is based on some mix of grades, including some lower quality.  On the other hand, grams consumed per person per year might be higher after legalization.  For the purposes of this present argument, greater precision would not change the basic argument.  

[10] We stress the word “guess”.  We found no formal survey or estimate, but home gardening of legal plants (vegetables, flowers, etc.) is common enough to support multiple magazines, a cable television network, gardening clubs, and garden supply companies. The National Garden Association claims that 83% of American households participated in some sort of do‐it‐yourself indoor or outdoor lawn and gardening activity (http://assoc.garden.org/press/press.php?q=show&id=2617&pr=pr_nga), but that is a much broader definition than what is relevant here, which would be serious indoor gardening enthusiasts.  

[11] E.g., this is the rate implied by Tooney’s (2006) figures, discussed further below.

[12] http://www.businessweek.com/news/2010‐05‐24/california‐house‐prices‐rise‐on‐fewerforeclosures‐update1‐.html.

[13] One disadvantage of greenhouses is that they might be more vulnerable to being burglarized.  Sellers of expensive illegal drugs (cocaine, heroin, etc.) are robbery targets because their drugs have high value per unit weight (akin to why electronics and jewelry make better theft targets than furniture) and the drug sellers cannot call the police.  It is not clear how this would play out for greenhouse‐produced marijuana post‐legalization.  If wholesale prices are in the range of $350 per pound, that is more valuable per unit weight than a laptop computer but less than a cell phone.  It is also not clear whether greenhouse operators would feel free to call the police or whether greenhouse operators’ property insurance policies would cover theft of marijuana.  We ignore this issue of burglary risk in part because it is so hard to quantify and also because in the end we base our postlegalization cost estimate on production in houses, not greenhouses.   

[14] This is for the modern double polyethylene style greenhouse.  Classic glass‐pane greenhouses are more expensive, on the order of $30 per square foot to build, and so are now less commonly built. 15 Both figures are for total area of the greenhouse, amortizing at 20% per year.  OSU (2008) assumes

[15] % space utilization so the costs per square foot utilized for plant growing are about 10% higher.

[16] Carnegie Mellon Heinz College student Leigh Halverson did the initial analysis for this section.

[17] To clarify: None of the production cost estimates factor in “risks and prices” (Reuter and Kleiman, 1986) compensation for the effects of law enforcement.  However, some might more readily believe that federal law enforcement could look the other way with respect to production done discreetly in a residential house, where the activity is invisible to passers‐by, but have a harder time ignoring open farming visible to anyone driving down the road.  Large scale green house operations present an intermediate case in terms of flagrancy/visibility; it is not obvious from the road what is being grown inside a greenhouse, but the presence of some sort of agricultural activity is unmistakable. 

[18] Carnegie Mellon Heinz College student Andrea Meyer contributed to this and the following section.   19 Cannabis is sometimes described as including three variants: Cannabis Indica, Cannabis Ruderalis, and Cannabis Sativa. Cannabis Indica and Cannabis Sativa can both produce marijuana, hashish, and hashish oil, but only Cannabis Sativa is used to produce hemp.

[19] Fortenbery and Bennett (2004) review of  the literature is slightly more positive, arguing that it could compete with row crops if not specialty crops, particularly if technological innovation in harvesting and processing reduced their labor intensiveness.    

[20] High yield per square foot is particularly important today, when avoiding detection by law enforcement is a paramount concern.  It would remain important for house‐based cultivation after legalization not only because of the risk of federal enforcement but also simply because of cost.  The calculations above show that rental costs per square foot are more than a hundred times greater for a residential house than for a farm field.  

[21] (2500 – 575) * 2.5% / [(2500 – 575) * 2.5% + 575 * 10%] = 46%.  Cannabis quality from the user’s perspective depends on more than just THC content, but we do not have information on whether the other psychoactive chemicals in cannabis are even more or not so much concentrated in buds as is the THC.  

[22] Domestic U.S. marijuana production focuses on high‐grade types; most commercial grade marijuana is thought to be imported.  

[23] These are round numbers that are roughly consistent with University of Mississippi (20XX) potency data. They list  sinsemilla buds’ potency as 10.81%, which is presumably an amalgam of indoor and outdoor grown buds.  The 2.5% THC content for leaves is what the University of Mississippi reports for “marijuana” leaves; for the small number of “sinsemilla loose leaf” observations they report a higher average potency of 4.12%, so using 2.5% may be conservative.  25 At the assumed THC contents, 575 * 10% + 1925 * 2.5% = 105.6 pounds of THC, which is the amount of THC in 105.6 / 15% = 704 pounds of sinsemilla that is 15% THC.  $20,000 production cost / 704 pounds = $28.40 per pound.  

[24] Carnegie Mellon Heinz College student Alex Brant contributed original research to this section.

[25] Machines like the Twister are not cheap at $14,500.  However, if an operation producing 500 pounds per year amortized that investment over 4 or 5 growing seasons, the amortized cost per pound falls below $10.

[26] Research for this section was done by Carnegie Mellon Heinz College student Leigh Halverson. 29 Arguably the true comparable is more like $1.50 ‐ $2.00 per pound because storage, insurance, and shipping are not included in Table 3’s estimates.  

[27] There are already media reports of sharp price declines, e.g., a May 15, 2010 National Public Radio report (available at http://www.npr.org/templates/story/story.php?storyId=126806429) which describes “hard times” in California’s traditional marijuana growing regions. 

[28] As Appendix C reports, ounce prices for sinsemilla in California are typically on the order of $350 - $400, and Narcotics News (2010) cites $3,000 - 4,500 per pound as a price for “high grade” marijuana in

San Francisco.  http://www.narcoticnews.com/Marijuana‐Prices‐in‐the‐U.S.A.php, accessed March 3,

[29] .

[30] Gettman’s (2007) is the only one that is much larger, at 9,830 metric tons.  5000 metric tons is probably substantially larger than post-legalization, indoor production because that production would be almost all sinsemilla quality, whereas currently the majority of consumption is of lower commercial grade. 

So 5,000 metric tons of sinsemilla grade would more than triple US THC consumption

[31] http://www.ers.usda.gov/StateFacts/US.htm

[32] http://www.bloomberg.com/apps/news?pid=20601109&sid=au67GKPyS_Dg

 

Article Index

Of course, outdoor farming is probably not the most likely outcome.  Suppose all of the 5,000 metric tons were provided by indoor growing with a yield of 546 pounds per house.  Such domestic production would require about 20,000 houses (or less since the indoor production would mostly be sinsemilla, whereas most of the 5,000 metric tons would be commercial grade).  20,000 houses is a lot of houses, but there are about 75 million owner-occupied houses in the U.S., so 20,000 is just 0.027% of the total; widespread indoor marijuana cultivation would not exacerbate homelessness or solve the hang-over from the recent housing crisis.  Indeed, a recent news article reported that there were 200,000 vacant homes in the U.S. just among those that had been constructed recently.[32]  

It is harder to speculate about possible spill-over effects on Mexico, if California-based production induced crop substitution there, but these calculations suggest that environmental considerations would be a relatively minor factor in an analysis of the social-welfare effects of marijuana legalization.

 
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