Sharp reductions in costs of producing cannabis, fentanyl likely to spur widespread changes in use, dependence
Carnegie Mellon University
A large part of these changes relates to the ability to produce large quantities of the drugs at low costs, which has slashed wholesale prices for both drugs and retail prices for cannabis.
A new analysis explores the effects of these changes on use.
The
analysis concludes that sharp declines in production costs for cannabis and
opioids could dramatically reduce the price per dose for consumers in ways that
alter patterns of use and dependence.
The
analysis, by a researcher at Carnegie Mellon University (CMU), is published in
the International Journal of Drug Policy.
"Historical analogies suggest that very large declines in price can have effects on use that go beyond just expanding traditional patterns of consumption," explains Jonathan Caulkins, professor of operations research and public policy at CMU's Heinz College, who wrote the analysis. "The overall situation with cannabis and fentanyl may look more different in 2040 compared to today -- just as today looks different compared to 2000."
Caulkins
focused on the motivations for use of these drugs, factors that appear ready to
change. He also considered market factors, noting that basic relationships
among production costs, prices, and consumption have held up in markets over
centuries. And he looked at wild cards -- cultural, sociological, and political
changes that could be equally influential.
Caulkins
started with two key economic ideas: First, prices in competitive markets fall
to match the marginal cost of production. For example, North American cannabis
production costs have decreased as much as 95 percent. Second, when prices
fall, consumption rises. This has occurred with cannabis, although as yet,
there is no indication that fentanyl production has reduced retail opioid
prices -- but monitoring retail opioid prices is difficult.
Therefore,
falling prices affect consumption, but the effects of precipitous declines may
not be simply a larger version of the effects of modest price declines. Among
other factors to consider is elasticity of demand, including how the degree of
responsiveness to price changes varies from one setting to the next and from
one outcome to the next. In short, for many products used widely by society
(e.g., lighting and electricity, computers, cigarettes), Caulkins explains,
their meaning changed when production costs fell radically.
"Liberalization
of cannabis policy and reduced production costs may fundamentally change the
place of cannabis in society," Caulkins notes. Consider, for example, that
cannabis operations are listed on the NASDAQ and Toronto stock exchanges,
legalization has led to a wide range of products such as edibles and vaping,
and advertising for the product has soared. More changes are likely, he
suggests.
Significant
declines in wholesale opioid prices could also have far-reaching and unexpected
effects, Caulkins predicts. Among them: reducing the value of criminal
organizations' cross-border smuggling, making distribution less violent.
"We
don't know what the future holds," he adds, "but I predict that if
someone in 2040 lists the major changes in drug markets, use, and dependence
that occurred since 2020, there will be items on that list that pertain to the
declines in production costs brought about by cannabis legalization and the
spread of synthetic opioids."
Based
on this prediction, Caulkins concludes: "It's not too soon to invest more
in monitoring markets to stay abreast of the diverse ramifications that may
flow from these radical reductions in production costs."
