CNBC:Is this a market that is big enough that Big Tobacco is saying, 'Hey, we are ready when the time comes?

Miron: Oh that’s a big enough market to attract some pretty aggressive entrepreneurs and whether its Phillip Morris or Anheuser-Busch or just a brand new entrepreneur, whether like the Cali Cartel can go legal, its quite likely it would end up if it were allowed to be a cartel like market, where you have a relatively small number of producers of a relatively moderate price, highly advertised, product differentiated brand like Coke and Pepsi, and then lots of small players making boutique marijuana just like we have micro-breweries.

CNBC: Clearly there are a lot of questions. There’s the assumption that it’s a cash crop, it’s a commodity, that if marijuana were legalized it would be as a plant and it would be consumed largely as it is maybe with some tech enhancements that would address the health issues. Why wouldn’t Big Pharma put it in a pill?

Miron: Well they could put it in a pill.

CNBC: Have you thought about that in terms of any of your models?

Miron: I thought about that. You could put nicotine in a pill, you could put caffeine in a pill and yet that is not the dominant method of consumption. So I suspect that we would see this consumption be similar to currently, so certainly there is a scope for filtered marijuana cigarettes, and there is substantial scope for consuming it by heating systems that don’t actually burn it. The THC actually becomes volatile, becomes inhale-able, at a temperature that is not that high, you don’t have to burn you just have to sort of warm it. So that allows people who are concerned about taking in the smoke and it damaging their lungs to basically inhale the THC vapors without actually taking the risk. So that’s all entirely possible, you would think that a legal market would offer that possibility to people, just like it would offer other means of consuming like marijuana brownies, marijuana beer.

CNBC: It's not like the powers that be would be fighting over it.

Miron: No, I don’t think so. I think it’s partly a cultural thing, I think it’s partly just a ritual thing, just like with lots of other substances, like coffee. You don’t want to just pop a pill, you like the whole idea of walking across the street and going to the Starbucks and ordering an espresso and going through the whole ritual…so I think most of the market would be that way, but you would certainly see these other things, as we do with existing legal products.

CNBC: Is it an agribusiness? Is it a grassroots things? Would you say it’s probably both?

Miron: [laughs] I think you have all that, but I think you have the equivalent of Anheuser-Busch or Phillip Morris that’s marketing the consumer product after buying it from some agribusiness that’s growing the crop.

CNBC: It does sort of cater to the entrepreneurial type.

Miron: Oh absolutely, I think there is room for large and small entrepreneur. There is certainly plenty of room for product differentiation in the same way that you see for, say beer, because it can have different scents, it can have different THC content, allegedly different buzzes, different varieties. There is plenty of room for the entrepreneur try to market one as being in some way superior and capture a good market share.



It can be grown in a huge range of states. I would say as with most agricultural products the high rate of return stuff is not the agricultural part—the raw material part—it's selling the somewhat processed, highly advertised, marked up brand-differentiated version of it. Think about Coke and Pepsi—it’s just colored water. The marginal Pepsi—you’re paying for all that advertising and that’s what I think you would expect with legalized marijuana. And that’s a reason to allow legal advertising—because then the price is going to end up being higher, and if you worry that use is a bad thing, and you want to discourage use, then high price is better than a low price.

CNBC: Presumably there would be a fairly popular advertising element like anything else, like in the heyday of booze and pot? Or not? In the heyday of booze and cigarettes it was on TV. Now it’s been restricted.

Miron: Well, it probably would, but in all of the cases, the legal ones and the currently illegal ones, there is a very good argument that restrictions on advertising are counter-productive that they allow firms with a large initial market share to basically hold on to a lot of that market share, to not worry that that market share is going to get competed away, because some new guy comes in with a slightly better or slightly differentiated product, that he can makes some inroads with through advertising, both because you want to let the price be higher if that’s what advertising does, you also want people who develop a better version of the product, say people can develop marijuana that delivers the THC with less smoke, there’s only a good return to that if you can advertise that and get it out there. So, the advertising is a good thing, and the same would be true of beer and tobacco, and that was a policy mistake that we limited it.

CNBC: Clearly an argument people would make against legalizing this stuff – that it would be appealing to minors, etc.

Miron: Yeah, they would be making that argument for whatever, thirty forty fifty years, if it were really so fast growing it would have already been 100 percent long, long ago. So they continue to talk as though the stuff is so incredibly appealing that nobody can resist it, but the evidence doesn’t suggest that.

The second thing to note teenagers largely seem to think they have access to it already. If you look at the results of a “Monitoring the Future Survey”, which is an annual survey of high- school seniors done by the University of Michigan research center, what they find is that a very high fraction of students say its easy or very easy to get marijuana. Indeed, about as many or more say that than say the same thing about alcohol. So, prohibition is doing a very bad job of making it inaccessible to teens. So legalizing it, yes, does in some sense mean it is somewhat more available, although in some ways the ability to control would go up once its legal. An underground seller, who’s already risking a felony conviction, just for selling it at all, just for possessing a significant amount at all, is not going to worry too much about whether he’s selling to a minor or not.

CNBC: The Drug Enforcement Agency says marijuana is a carcinogen, and it’s a health issue. Are we going to need more research on the health issue to make a wise decision on this, or is all the research out there and the DEA just sort of propagandizing?

Miron: I think the DEA is propagandizing. There is no question that there is potential for some health issues, but again since huge fractions of teenagers are already getting access to it, we’re not eliminating the health issue by prohibiting it, we’re just getting all the costs associated with prohibiting it. By legalizing, again, we have the at least the opportunity to try and say certain forms of it, pay a higher sin tax, or certain forms of it are not allowed because they are relatively unhealthy—to allow teenagers to get better information on which ways of consuming it are relatively unhealthy and which ways are relatively benign. Our ability to nudge people in a reasonable direction is much greater for a legal product than it is for an underground product.