"Should I Buy or Should I Grow?" How drug policy institutions and drug market transaction costs shape the decision to self-supply with cannabis in the Netherlands and the Czech Republic

Vendula Belackova, Nicole Maalsté, Tomas Zabransky, Jean Paul Grund
International Journal on Drug Policy 2015, 26 (3): 296-310

BACKGROUND: This paper uses the framework of institutional economics to assess the impact of formal and informal institutions that influence the transaction costs on the cannabis market, and users' decisions to self-supply in the Czech Republic and the Netherlands, two countries with seemingly identical policies towards cannabis cultivation.

METHODS: A comparative analysis was conducted using secondary qualitative and quantitative data in four areas that were identified as relevant to the decision to cultivate cannabis: (i) the rules of the game - cannabis cultivation policy; (ii) "playing the game" - implementation of cannabis cultivation policy, (iii) informal institutions - cannabis cultivation culture, and (iv) the transaction costs of the cannabis market - availability, quality, and relative cannabis prices adjusted by purchasing power parity.

RESULTS: Although the two policies are similar, their implementation differs substantially. In the Czech Republic, law enforcement has focused almost exclusively on large-scale cultivation. This has resulted in a competitive small-scale cultivation market, built upon a history of cannabis self-supply, which is pushing cannabis prices down. In the Netherlands, the costs of establishing one's own self-supply have historically outweighed the costs associated with buying in coffee shops. Additionally, law enforcement has recently pushed small-scale growers away from the market, and a large-scale cannabis supply, partly controlled by organised criminal groups, has been established that is driving prices up. The Czech cannabis prices have become relatively lower than the Dutch prices only recently, and the decision to buy on the market or to self-supply will be further shaped by the transactions costs on both markets, by policy implementation and by the local culture.

CONCLUSIONS: The ability to learn from the impacts of cannabis cultivation policies conducted within the framework of UN drug treaties is particularly important at a time when increasing numbers of countries are seeking more radical reforms of their cannabis policy.

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