Cannabis Commerce in the USA

Part 12: Miron Redux

A few paragraphs into David Segal’s recommended New York Times piece, “In Colorado, Pot Pioneers Try to Turn a Profit,” I came across the obligatory quote from Jeff Miron, first-call cannabis consultant for mild-mannered reporters at great metropolitan newspapers (Miron also stars in Part 2, “The Enigma”). I’ve read plenty of those. They’re all pretty much the same.

But this one was different. Way different.

Americans spend roughly $25 billion a year on marijuana, according to the Harvard economist Jeffrey Miron, which gives some idea of the popularity of this drug.

It’s a little peculiar that the all-the-pot-news-that’s-fit-to-print Times went with “drug,” as opposed to “herb,” although the term is technically correct. “Drug” sticks out, but that’s nothing compared to “$25 billion.” The same, reliable $10.5 billion annual cannatax figure Miron has recycled for a decade — despite criticism that it’s ultra-conservative — had finally changed. It had headed due north, up a whopping 250%.

Shocking!

Read between the lines

$25 billion. What’s so shocking about that?

Miron, undisputed world #1 poteconomist, has long contended that his potential cannatax figure, [if federal marijuana prohibition was repealed] for all the marijuana purchased and consumed within the USA annually, has held steady at give or take $10.5 billion since 1999.

It’s the same figure he gave Cannabis Commerce, a mere four months ago. In that hour-long interview, Miron was adamant that even with all the activity documented in this report in [in Parts 7–9], public demand for the pungent passion had not increased.

His figure was set in stone.

If Miron revised his forecast to more bullish numbers, there’s been a lot more cannabis commerce going on than he cared to admit. Amen to that! But I could scarcely believe he would do that, his tone had been so authoritative.

Anatomy of a number

First, I had to find out if $25 billion was real or a misprint. I asked David Segal where he got the Times’ figure.

I actually got my number from Jeffrey Miron, in an interview. Surprised to hear this isn’t the number he typically uses. I remember him describing this as his best estimate; one that he said was higher than the drug czar’s.

My next email went to Miron’s inbox in Cambridge, Massachusetts.

After you held the line at $10.5 billion for so long, including our April interview, I was surprised that you changed your tune for David Segal of The NY Times. $25 billion?

I guess, “I continue to read other people’s estimates, and think about whether or not I should change my view, and they maybe nudge me that I’m 20 or 50% too low . . . ” was reconsidered. Drastically.

Since I spent quite a bit of time analyzing your figures, and I haven’t posted the Conclusions chapter of Cannabis Commerce in the USA, I’ll offer you the last word.

I couldn’t resist adding: “Do you need an address for those Red Sox tickets? The ones I won from our bet about the source for “America’s number one crop?”

Miron got back to me quickly:

My statement to The New York Times was something like, “I can imagine that the true number might be something like $15-25 billion.” Which became $25 billion. So, I did not change my tune for Segal, just admitted to scientific uncertainty, which I think I did with you as well.

In any case, I have worked on this a lot more, and revised my actual number a bit, so I am now at $18 billion. That’s granting all the somewhat dubious assumptions made by my critics, but doing so correctly.

Does not seem so different from $11 billion.

I may still be way wrong, but in my judgment, there is nothing credible out there to convince me that I’m wrong.

So, I guess I don’t see any need to revise or amend anything I’ve said.

What was our bet?

Miron didn’t volunteer a basis for elevating his figure. That called for additional probing.

Here’s what he said:

I accepted that one main criticism put forward by Gettman was reasonable: that the ONDCP [Office of National Drug Control Policy] estimates do not account for undereporting. This raises the numbers about 25%.

Why it took him three years and countless readings to acknowledge Jon Gettman’s criticism in 2007’s Lost Taxes and Other Costs of Marijuana Laws, restated in Max Chaiken’s 2008 The Other Green Economy, Miron didn’t say.

I was hoping to learn more when the probe unexpectedly struck a tender spot. The man wanted to communicate something I could scarcely believe.

“I am done. I hate this activity.”

I’m both honored and flabbergasted that Jeff Miron graced Cannabis Commerce in the USA with the most sensational four-word sound bite of his distinguished career:

“I hate this activity.”

The hateful activity is forecasting cannatax. There it is. Eureka moment. Enigmatic nature demystified.

Here’s the statement in context:

$18 billion. Final offer. By final offer, I do not mean “I am right.” I mean I am done. I hate this activity. It is intellectually uninteresting, and I am confident it will contribute to worse rather than better drug policy, because the promised budgetary benefits will not materialize, and then all the prohibitionists will say, with some validity, ‘you legalizers are a bunch of liars who sold the public a bill of goods.’

Wow. What a loaded diatribe! There’s a lot of passion there.

Apparently, Miron’s historic resistance to his task (documented in Part 2) has passed a lack of genuine enthusiasm and graduated to “hatred.” It’s hard to excel at activities you hate.

Then why does he do it?

It didn’t take Mike Wallace to dream up the next questions, answered below:

“I do this because if I don’t somebody else will, and they will make up ridiculous numbers like Gettman’s.

No, I’m not doing it for the money. I have received small payments in the past from various groups; my hourly wage ends up being below minimum, so I’m not in it for the money.

He sounded a little blue. Has trying to appease both the drug czar and his critics left him trapped between a rock and a hard place? Find out, as a quartet of contentious quotes is analyzed below.

Legalizers are liars

“You legalizers are a bunch of liars … ”

It’s hard to imagine operating under a microscope, your every move scrutinized by the DEA, and its sister agency, the ONDCP.

It’s in these agencies’ best interests for Miron if forecasts low amounts of cannatax; beaucoup tax bucks provide ammunition for legalizing a substance they’ve classified as a Schedule One drug since Amelia Earhart was the first lady of the sky.

Conversely, anti-prohibition forces love finding higher cannatax amounts: potential monetary benefits promise to spread the wealth, thereby spurring legalization.

Guess who’s caught in the middle?

Welcome to Mironworld.

Living in pro-pot climes, it’s hard to picture places where “prohibitionist” forces kick sand in poteconomists’ faces, teasing them mercilessly for being “legalizers.”

Now imagine the singe of “legalizer,” with the incendiary “liar” thrown in to boot. If I heard that, I’d squirm, too. The desire to avoid further hazing is understandable.

Only … who are the lying legalizers trying to sell the public a “bill of goods?” Which bill of goods was that? I don’t recall running into either while I was forcefeeding myself a strict diet of poteconomics.

Perhaps the “bill of goods” and “the promised budgetary benefits” are the same thing?

Miron has never issued the equivalent of a Carfax report in his white papers, guaranteeing that his forecast was dead-on perfect. Other poteconomists are no more likely than weathermen to guarantee their forecasts.

Under pressure, has Miron begun “tilting at windmills?”

Intellectually uninteresting

“It is intellectually uninteresting.”

Did I really read that? Discovering how much cannatax is out there is “intellectually uninteresting?” That’s not reassuring, coming from the go-to guy.

If he’s really “done with” pot prognostication, Miron has three options:

• Retiring, with his place in the Poteconomics Hall of Fame assured.
• Declining comment when every reporter on earth calls for quotes.
• Taking a well-earned vacation. No one would blame him for taking some time off. I hear Martha’s Vineyard’s idyllic this time of year.

It appears Miron’s choosing “none of the above” and forging on. Why?

There is nothing credible out there

Miron’s rationale begins by noting that his is the only “credible” voice in poteconomics:

“ . . . there is nothing credible out there to convince me that I’m wrong.”

Regrettably, “not credible” gets escalated to “ridiculous,” as Miron lambasts friend and World #2 authority, Jon Gettman:

“I do this because if I don’t, somebody else will, and they will make up ridiculous numbers like Gettman’s … ”

Labeling Gettman’s numbers “ridiculous” ignores the fact that many cannatax projections, including ones from CNBC, Max Chaiken, RealNEO, and Cannabis Commerce have unearthed at least as much lost taxes as Gettman found.

Miron also infers he alone is capable of performing multivariate economic calculations “correctly.”

With due respect, I doubt those who find Gettman credible have read his papers as carefully as I have, checked his original sources, checked his arithmetic, etc.

So, the bottom line is this: since others are not credible, ridiculous, and incapable of performing calculations correctly, Miron is doing us all a favor by going through the motions. Even if he’d rather be doing anything else.

Consumed by duality, it’s no wonder he hates this activity.

Giving good weight, redux

Could the man considered the greatest pot authority on earth possibly be perplexed about the weight typical plants yield? Er, yes.

The giveaway’s below, contained in his justification for continuing to eschew supply-side data:

In a few cases, there are data, which are almost certainly way misinterpreted. These estimates assume one plant yields one pound of MJ, yet a really careful [white] paper and other evidence suggests the right yield ratio is one plant yields one to two ounces. That’s a huge difference.

Really? Indoors? Outdoors? Is Miron saying supply-side data mined by his peers is off by a factor of 8x to 16x [16 ounces to a pound]? Baffling.

Some of us, who’ve actually nurtured plants in the wild, urban jungles, and in sophisticated indoor grow situations don’t need a paper, “careful” or not, to tell us what a plant yields. We already know. We’ve seen freshly harvested buds weighed on calibrated scales before our very eyes.

Here’s how it breaks down. A novice “medical marijuana” grower will typically obtain yields of around 1–2 ounces from indoor plants. Once he  or she gets the hang of it, after tweaking several variables like selecting the right strains, settling on a growing medium [soil, “cocoa,” hydoponic,s et al] evaluating various nutrients, tweaking the lighting conditions, and dialing in the climate control, three to four ounce yields are commonplace indoors. Indoor plants raised in commercial grow facilities often yield 12 ounces or more.

Outdoor plants — virtually all commercial Mexican weed, or all weed grown clandestinely on national forest land in the US — can yield a pound or more of buds per plant, under fortuitous growing conditions.

While virtually 100% of MMJ [medical marijuana] is grown indoors, there’s no shortage of outdoor plants sold and consumed in America outside the purview of the MMJ scene — that’s according to Miron’s favorite source, government statistics — like the 2010 National Drug Threat Assessment, which cites about 15,000 metric tons of outdoor weed!

So, one “average” plant yields somewhere between one to two ounces and a pound, depending on how many indoor and outdoor plants there actually are, a figure known to neither man nor deity. Assuming each plant is 1–2 ounces is not constructive for our purposes.

Pricing misconceptions

In addition to misconceptions about weight, Miron’s emails suggest he struggles with market pricing, too. I pointed out that prices were dropping in dispensaries. Miron wasn’t buying it.

“I am skeptical that prices will decline a bunch. I visited a dispensary in CA in February [2010] and saw prices [for ounces] in the $700-900 range.”

Golly. Miron is apparently unaware of the myriad changes that have taken place in the short time period of February to September 2010. Finding one dispensary, in one place, selling some celebrity strain for $900 an ounce, is so much the exception — rather than the rule.

In Miron’s brainspace, prices in quasi-legal “test markets,” like Denver’s, have remained unchanged from the halcyon, pre-HB 1284 days of February. In reality, $400 ounces have become $250 ounces. $8 joints have become $5 joints. Higher priced product is still available, but the downward trend is clear

[I’m re-reading this November 11, 2011; $175 ounces are readily available.] [and again, in May, 2012 ; we’re started to see $140 ounces!]

A different take on credibility

As I’ve implied throughout this report, forecasts from a purely academic perspective are always going to be skewed, if not totally flawed — no matter how much their authors pound their chests or how much credibility they’re accorded by A-list publications.

I take a more logical approach to credibility. To become credible, poteconomist wannabes must follow one of two paths:

• If you’re experienced as a buyer, seller, or grower, you have to forcefeed yourself economics. This entails digesting at least The Miron Report[s], and/or Jon Gettman’s Lost Taxes, so you have some basis to speak intelligently about cannatax.
• If you’re an academic with no personal interest in “the dank,” it would behoove you to lose the oxford shirt, pack the green jeans, and learn something about buying, selling, and growing in the real world.

Jeff Miron told Cannabis Commerce he’s always maintained a safe distance between himself and all that gooey, gunky, stony, skunky stuff — and all the souls who buy it, sell it, grow it, and revel in it. Each to his own. I say it’s almost impossible for a non-buyer, non-smoker, who considers cannabis just another weed and hates writing about it, to keep current with market realities.

Great news for cannatax

There’s no doubt that Miron’s pain is cannatax’s gain. His change of heart is big news on the cannatax front. When the single authority hardest to persuade finally acknowledges there’s upward momentum in the marijuana marketplace, it’s cause for celebration.

“That’s granting all the somewhat dubious assumptions made by my critics, but doing so correctly.”

“Granting” is the operative word. The “somewhat dubious assumptions . . . made by my critics” is Mironese for acknowledging the aforementioned critics were right all along, that there’s always been a lot more cannatax than he’s ever uncovered performing a chore halfheartedly.

Miron’s influence on Cannabis Commerce in the USA

Jeff Miron is the leading man in this epic. He inspired me to write it. It would have been a lot poorer without all his help. Criticisms from me are directed at the behavior, not the being.

Whether the conversion was grudging or not, Miron suddenly finding religion suggests that all the factors buoying healthy cannatax pot-ential documented in this report are meaningful after all.

That’s a positive development for a report which didn’t want to end on an anticlimactic note.

During the course of writing Part 11, I realized that medical marijuana, subject to the vagaries of local control, acted like a ball and chain on cannabis commerce. Its ascendance — at the expense of repealing prohibition, the far worthier proposition — greatly diminishes potential cannatax. Ending CC in the USA on an optimistic note required some sort of spark, an infusion of fresh data.

Voilà! Thank you, Dr. Miron.

It should also be noted that Miron’s previous stance — that is, not budging on that $10.5 billion in total sales for all the Thai sticks in Bangkok — acted as a governor, forcing me to filter my natural enthusiasm. It dampened predictions made throughout this report.

Mironesque restraint reared its head especially during Part 6, “Obvious Tax Opportunities Oddly Unaccounted For.” There I assigned numerical values to each fresh discovery previously unaddressed in literature. I bottled up the excitement, and low-keyed it instead.

That said, I’m not going to change the projections put forth in Part 6 for the following reason: it has been demonstrated, beyond a reasonable doubt, that price “cratering” [collapsing] occurs in a quasi-legal, competitive environment, such as the MMJ “test market” here in Denver.

Cratering was accurately predicted by Jon Gettman in Part 3. It’s real, whether Miron acknowledges it or not.

Cratering negates the higher numbers that would have emerged if I hadn’t displayed commendable restraint.

So, I’ll hold the official Cannabis Commerce cannatax forecast at $67 billion, for openers — that is, in a legal, regulated landscape, without lugging a ball and chain.

Most-quoted man offers to pay up

An implausible event occurred on our imperfect planet. A gentleman’s wager went to the mister, not the doctor.

“What was our bet again?” the most-quoted one asked.

I emailed him his own words, to wit:

We’re being, from a tax revenue perspective, a bit hopeful that somehow this is a miracle commodity, that’s going to overtake everything else. For example, you hear this statement all the time, that marijuana is the largest cash crop in California. I challenge anybody to discover the source of that statement. I’ve been hearing that statement for decades, and I bet whoever made that statement had zero data to back it up.

This anybody took the challenge.

“OK. Then what is the exact source of marijuana being “California’s #1 cash crop?”

Here’s my answer, as offered in Part 2 of Cannabis Commerce in the USA:

The Department of Agriculture rated pot as California’s largest crop, “larger than grapes, vegetables, and hay combined,” in Agricultural Statistics 2005 (National Agricultural Statistics Service>Statistics by Subject>Crops and Plants.) NASS isn’t really known for fabricating herb lore. Dr. Miron, you can pay the bet in Red Sox tix.

Miron manned up:

I’ll concede on the bet. I dispute the accuracy of the statistics used to make the assertions about the largest cash crop, but they did have some data. Give me an address, and I’ll send you some Red Sox tickets.

Me: [canary eating grin]

Nix sending the tix, take me to a game when I’m in Boston. Then we can debate pot tax between innings, and when relievers are warming up. Now that would make a good video!

A request — how about some “at-ease” pictures of you? Fishing, playing with the kids, at the ballpark, whatever. C’mon, I’ve mentioned you 6.2 billion times . . . you have to admit I’m more interested in what you say than anyone else, even if I don’t agree with a lot of it.

Never got the pix. But here’s his “last licks:”

It is true you are more interested than anyone! I’d be delighted to take you to a game. Give me a heads up the next time you’ll be around.

Jeff

That one sentence, “It is true you are more interested than anyone!” made all the ups and downs I’ve experienced writing this report worthwhile. Why did the president of the Miron Critics Club find his comment so moving?

I dunno — maybe I’ve become the enigma now.

Conclusion

It’s sad the exercise is utterly joyless for Professor Miron. No one else is as fascinating or fun to debate. However, when you’re the bell cow for poteconomics, you lead the herd or someone else gets the honor.

I’m not in any hurry to see the last of him. I enjoy our duels discussions, although I feel it’s “high time” reporters for large metropolitan dailies expand their Rolodexes and give someone else a shot, too.

Why is it I can spot Miron’s lapses of logic with crystal clear acuity? Honestly, I don’t know. If I were capable of analyzing life’s other mysteries with the same acuity, I’d own my own island.

I haven’t argued Miron’s $18 billion v. Gettman’s $40 billion v. my own $67 billion v. Max Chaiken’s $212 billion to the nth degree, because it should be glaringly obvious by now everyone’s guessing. If you write a lot about poteconomics, others can and will crucify you no matter how careful you are. Numbers for illegal purchases are never real. It’s easy for economists to dismiss non-economists just as it’s easy for “laymen” working in the trenches of cannabis commerce to diss economists.

The only way to really find out how much cannatax is possible is legalizing it and counting the beans. But for now, we can leave Cannabis Commerce in the USA feeling more bullish than before.