Less Output or Cartel Output: That is the Issue
By David Henderson
Or, at least, it’s one of the most important issues.
As soon as I arrived in the United States in September 1972, I started paying close attention to California politics. I was fascinated by the number of initiatives on the ballot. Of course, I couldn’t vote for or against any of them because I was not a U.S. citizen. But that didn’t stop me from having my opinions.
One that I remember, that I think was on the ballot in November 1972, was an initiative to allow betting on dog races. The person who had pushed to get it on the ballot was the owner of a firm that, if the initiative passed, would be the only one allowed to take bets on dog races. In short, he would have a legal monopoly.
In the advertising I heard about the initiative, the opponents made a big deal about that. But, because I was learning so much every week from Armen Alchian, Chuck Baird, and other professors, l had a different thought: isn’t positive output better than zero output? Think about our main objection to monopoly: it causes there to be less output and higher prices than if the industry were competitive. But no one was proposing a competitive industry: that wasn’t on the ballot. The issue was whether the government allowed a monopoly and high prices or didn’t allow a legal industry, which meant even higher prices.
I raise that issue because there’s a similar initiative on the ballot in Ohio. It’s called Issue 3. Jacob Sullum of Reason writes:
Although Kampia has a point, my main problem with Issue 3 is the cannabis cultivation cartel it would create: Commercial production would be limited to 10 pre-selected sites owned by the initiative’s financial backers, who are investing in the gains to be made from the economic privileges they are trying to award themselves. This approach has the advantage of quickly raising a lot of money–money that can be used to pay marijuana mascots and produce ads featuring sympathetic beneficiaries of legalization (such as the mother who moved from Ohio to Colorado so she could treat her daughter’s epilepsy with cannabis oil). The downside is that the crony capitalism embodied in Issue 3 disgusts a lot of people who otherwise support legalization.
But of course, if Issue 3 goes down to defeat, those 10 sites won’t likely be selling. There will be some output, but it will be illegal. On the other hand, a cartel with 10 sites would be producing more output.