On October 16, 2018, Canada had a $5.3 billion marijuana black market. The next day, recreational pot became legal.
Their national statisticians reported 4.9 million Canadians were using cannabis last year–maybe 20 grams a person. But it was still tough to figure out the supply side. The government had to decide how much and how fast to license producers, processors, and retailers.
And they did not quite get it right.
Supply Shortages
In Quebec, the 12 government-run shops had to be shut down for three days just after they opened. Subsequently, they’ve been closed Mondays through Wednesdays. Meanwhile a private retailer in Toronto was open for just four hours during the first two weeks. Another shop was closed for ten days.
Why? Not enough to sell. The reason? Supply chain problems.
One Ontario grower had no one to harvest 13,642 plants. Firms complained about a glue shortage that prevented them from sticking mandatory tax labels on cannabis packages. Large scale production and distribution networks are still developing. And, they will need more greenhouses, fertilizer, specialty machinery, and the tracking software that regulators require.
The one common concern though is a slow licensing process.
Our Bottom Line: Government and the Market
I know it all sounds rather anecdotal and random. But the big idea is not. As economists we can ask if government can figure out supply and demand.
Until October 17, medical marijuana was legally sold and recreational marijuana came from the black market. According to one NY Times report, in Vancouver, there were 100 black market retailers–double the number of Starbucks cafes. And now, responding to the supply glitches, black market sellers are reputedly making home deliveries and lowering their prices.
So yes, many people prefer buying pot that is legal and quality controlled. However, government is fighting a black market in which supply and demand are pretty powerful weapons.
My sources and more: The NY Times, here and here and here tells about Canadian marijuana supply shortages.
This post was slightly edited after publication.
