MA Dispensaries and Market Monopolies

A hotly contested Senate race is not the only question facing the citizens Massachusetts on November 6^th. Ballot Question 3 asks voters to approve a state law legalizing the medical use of marijuana: “A YES VOTE would enact the proposed law eliminating state criminal and civil penalties related to the medical use of marijuana, allowing patients meeting certain conditions to obtain marijuana produced and distributed by new state-regulated centers or, in specific hardship cases, to grow marijuana for their own use.” Setting aside the moral implications of medical marijuana use, if approved, Question 3 would create the first legal market for marijuana in modern Massachusetts history. The law “would allow for nonprofit medical marijuana treatment centers regulated by the state to grow and provide marijuana to patients or their caregivers. The number of treatment centers would be limited to 35 in the first year, but after that, more could be set up.”

The regulation of medical marijuana is most commonly discussed in moral, not economic terms, with political actors expressing concern over increased access and use and its potential to “corrupt the youth." This regulation scheme may appear at first glance to run counter to the interests of the firms. By limiting the number of authorized actors the state is significantly restraining the potential for market expansion and in turn potential profits. In reality, it is in the interests of licensed firms to limit the number of market actors and maintain their monopolistic price position. The proposed tight state control of this market serves as a significant barrier to entry for outside firms interested in opening dispensaries in MA. Stigler would attribute industry support for state regulation to this structure. In the current political climate state market intervention is often characterized as a burden on industry rather than a tool used by industry to limit competition. Firms have a vested interest in maintaining these protectionist regulations, while their limited impact to the average individual creates an incentive structure that dissuades individual political participation. The tight controls on medical marijuana being proposed in MA are defended on social grounds, but they designed to serve the interests of market actors not a concerned citizenry.