The definition of an institution can be ambiguous. Webster defines it as a society or organization founded for a religious, educational, social or similar purpose. For the purpose of this column we consider three types of institutions: government, academic and corporate. They are the thought leaders, market leaders and mainstream actors from outside the industry that are stakeholders in the effects of an economic outcome.
Certainly in the states where marijuana is legal, the government institutions are well-defined stakeholders. California, Colorado, Washington and Oregon lead the way in terms of current key stakeholders, but every state and local municipality that permits medical and adult use cannabis are institutions that will continue to increase their stake as well.
Government institutions will both need the output and have significant input. They want to know the economic impact of things like prison populations over time, unemployment and welfare, which may or may not rise. How should they allocate the tax proceeds and administer all of the oversight. With legalization comes regulation and states have had to create or assign their oversight and enforcement to an existing agency or create a new one. Colorado has the MED; Oregon assigned it to the OLCC; Washington expanded to the WSLCB; and California currently does not have a seed-to-sale tracking system so the BOE collects the taxes but that is it.
Municipalities are scrambling to understand how to regulate and tax the industry because with no federal oversight it falls to the states and within most states the municipalities can similarly implement their own regulations and more importantly, taxes. These government institutions need to understand how to prepare. There are 45 nations who have decriminalized or legalized marijuana and are looking to understand impact and implementation strategies.
There has been a lot done to minimize the economic impact but the point is not “benefit,” it is IMPACT. Refusing to look at it is irresponsible and short sighted. From that impact, policy can be discussed and recommended and responsibly managed.
Academic institutions have less of a beneficial interest, or use of the output, but I believe that qualifies them to be the gatekeepers of the information and oversee the research and reporting. Ensuring anonymous data so that contributors have proper assurances. There have only been a couple of qualified academic institutions that have done any research on the economics of cannabis. More are starting to do research on the medical efficacy of the product but not economic research.
Jeff Miron, who is the director of undergraduate studies at Harvard University, has published a number of research papers on the economic and budgetary implications of drug prohibition in general and a specific report on marijuana budgetary implications, but it has not been updated since 2005. The Marijuana Policy Group is a partnership between the University of Colorado Boulder Business Research Division and BBC Research & Consulting. In October of 2016, MPG published The Economic Impact of Marijuana Legalization in Colorado and it is extremely well done. The Tax Foundation wrote a good article in May of 2016 but it is not a research study.
We need a few more academic institutions to step up and help to facilitate this process. Some of the tax dollars can go into building and maintaining the data and responsible use of it.
Right now the information available results in marginally accurate reporting. Stories consistently repeat the same statistics that are more a result of great marketing but we are still largely qualitative—just research and anecdotes that are not quantitative in any way peer-reviewed or academic validation.
If you simply search “marijuana statistics 2016” in Google images you will find nice charts from New Frontier, Arcview Market Research, partially in partnership with New Frontier, and Marijuana Business Daily. Most of these are survey-based or use public information from the government without any institutional or academic data validation or review. More recently Headset and BDS Analytics have entered the arena and are attempting to focus on retail and consumption data through POS systems.
In the past year we have seen Merrill Lynch, Cowen & Company, Convergex, Deloitte and a couple of others put out reports or coverage. Most of them are the same stuff, boilerplate industry growth statistics using citations from those named above and not going any deeper into the industry, but they are institutions that bring the investment side of cannabis to a new level. Senior level executives from Wall Street, hedge funds and even the stock exchanges are entering the discussion.
Scott’s Miracle Grow (NYSE:SMG) has put $300 million of a $500 million commitment into the hydroponics side of the industry simply based on their calculated market share for current core products. GW Pharma (NASDAQ:GWPH) is a legit public company and likely acquisition target and Constellation Brands spoke out about wanting to look at the industry in a recent Bloomberg article. The fact that these companies are talking about it is a huge leading indicator.