Tracing consequences both seen and unseen.
Justin M. StoddardRent-Seeking Potheads
Posted at 12:59 am on March 28, 2010, by Justin M. Stoddard

I honestly could not initially decide whether or not to post this, as I could not determine if it was a hoax or parody (a la The Onion). But the more I thought of it, the more plausible it seemed.

Outlaw pot farmers in Calif. fear legalization could actually hurt their business:

“The legalization of marijuana will be the single most devastating economic event in the long boom-and-bust history of Northern California,” said Anna Hamilton, 62, a Humboldt County radio host and musician who said her involvement with marijuana has mostly been limited to smoking it for the past 40 years.

Local residents are so worried that pot farmers came together with officials in Humboldt County for a standing-room-only meeting Tuesday night where civic leaders, activists and growers brainstormed ideas for dealing with the threat. Among the ideas: turning the vast pot gardens of Humboldt County into a destination for marijuana aficionados, with tours and tastings — a sort of Napa Valley of pot.

The irony is deliciously delicious…in so many ways. But, foregoing all that, this is basically an issue of rent seeking. People who deal in black-market goods are protected from the ‘legal’ market. Not only do the goods they are producing/trading have an unnaturally high price point, they are shielded from competition from the free market. If anyone can get into the pot growing business, prices will dramatically fall. Some of the former illegal growers will then be priced completely out of the market.

We see this type of rent seeking behavior every day. Groups from manicurists and hair stylists to HVAC repairmen to interior decorators insist on licensure laws as requirements to enter their professions.

Those doing the rent seeking will nearly almost always claim that these types of licensure laws are needed so that only qualified people get the job. It’s a safety issue. Or a quality issue. Or, well, pick your reason.

In truth, it’s none of those. Rent seeking protects jobs using the force of government by way of restrictive fees and time-costing measures. It protects the few at the cost of hurting everyone else by way of decreased competition, higher prices and fewer employed people. You have a limited amount of money and you want to become a florist? Do you have the right license? Have you paid enough fees and attended enough classes? Sorry, you’re now priced out of the market. Some select florists benefit; the aggregate suffers.

But back to the rent seeking pot farmers of Humboldt County, California. Not only are their actions unbelievably immoral, they’re frightfully hilarious. The whole thing reminds me of the Simpsons episode where Homer Simpson is bullied out of the chiropractic market:

Steve: [walks in] Simpson! You’re not a licensed chiropractor, and you’re stealing patients from me and from Dr. Steffi.

Homer: Boy, talk about irony. The AMA tries to drive you guys out of business, now you’re doing the same to me. Think about the irony.

Steve: [grabs Homer by the collar] You’ve been warned. Stop chiropracting.

Homer: Not unless you think about the irony.

As pot legalization becomes more likely, I would expect to see more of this type of behavior. Just remember, the behavior is equally ridiculous when applied to interior decorators or florists, or the nearly other 30% of the workforce that requires licensure.

[Cross-posted at Shrubbloggers.]

Filed under: Drug Policy, Economic Theory, Regulation
Comments: 7 Comments


  1. As an interior designer and architecture student, I see the need for licensure laws, if only to protect people from unqualified individuals who may use unsafe practices. For example, let’s say you want to build a nursing home for people with alzheimers. An unlicensed architect or interior designer may not know that all doors must be self locking, so that patients cannot wander off and get lost, or the proper turning radius for a wheelchair. When this building is built, a patient could escape, leaving the owner liable to a lawsuit. The building could also not work as a nursing home, since wheelchairs cannot go where they need to go since they cannot turn around. A licensed interior designer or architect will have taked exams to prove that they know these things, and therefore these mistakes can be avoided. This is especially important when it comes to fire code and the safety of inhabitants.

    One could argue that the owner should know what they are getting into if they hire an unlicensed architect or designer, but if they are building a business where they expect guests/customers to enter their building, the customer cannot always be aware of the hazards of entering the building, for example if it isn’t built to fire code. They risk real danger if they building were to catch fire.

    Comment by Claire Gillis — 2010-03-28 @ 9:55 am

  2. Claire,
    While I may sympathize with the general thrust of your argument (“to protect people from unqualified individuals who may use unsafe practices”), I believe there may be a better way to approach the problem than mandatory, government licensure. Voluntary industry standards is almost assuredly the correct way to look at this problem.

    For example, if builders (or people who are paying the builders) want only interior decorators who are trained to a particular standard, they could turn to one or several competing businesses that make it their business to certify those standards.

    Therefore, interior decorators with X certification (agreed upon as the industry standard) would be hired.

    This would still price some people out of some markets, but not all. People without the certification could still find employment by those who don’t particularly care if he/she has said certification. (If I were a home owner searching for an interior decorator, for example, I would probably care less about certification than, say, a good portfolio or a sense of taste).

    The needs of nursing home administrators are admittedly much different than mine. In that sense, certification might well be desired.

    Comment by Justin M. Stoddard — 2010-03-28 @ 2:54 pm

  3. Bruce Yandle spoke of the phenomenon of cooperation between to restrict alcohol sales.

    Perhaps we could term this Potheads and Presbyterians?

    Comment by Brian McCall — 2010-03-28 @ 3:03 pm

  4. Edit:

    …cooperation between Baptists and bootleggers to restrict…

    Comment by Brian McCall — 2010-03-28 @ 3:04 pm

  5. You don’t have to look any further than IT to see how an industry setting its own standards works remarkably well without any intervention from government. If you want to advertise yourself as a competent Microsoft Windows technician, then you can take the relevant tests and use that certification to prove to a potential employer that you possess the skills you claim to possess. There’s nothing stopping me from trying to sell myself as skilled in those areas but at the the end of the day, I have to work harder to convince a potential employer to trust me.

    Comment by Greg Kaczorowski — 2010-03-28 @ 3:48 pm

  6. I want to see Phillip Morris advertising packs of joints on billboards.

    Comment by Vroman — 2010-03-30 @ 1:40 am

  7. […] at The Lesson Applied.] — Justin M. StoddardComments (0) […]

    Pingback by The Shrubbloggers » Rent-Seeking Potheads — 2010-03-31 @ 1:24 am

RSS feed for comments on this post.

Sorry, the comment form is closed at this time.

Henry Hazlitt"[T]he whole of economics can be reduced to a single lesson, and that lesson can be reduced to a single sentence. The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups."
Henry Hazlitt, Economics in One Lesson






Recent Entries