A rebuttal to Kirk Tousaw’s Facebook post on LPs

Kirk Tousaw is a lawyer and cannabis activist. Along with John Conroy, he was one of the lawyers for the Allard case which protected a patient’s right to grow his or her own cannabis or have a designated producer do it for them.

Although respected and adored by many in the cannabis community, he, like many Canadians, are left-leaning and don’t entirely trust free markets. But as this is a cannabis blog that favours a free market, I couldn’t let Kirk’s recent Facebook status go unchallenged.

Of course, I’m criticizing the ideas, not the man himself. So let’s discuss. Kirk’s Facebook comments are in bold.

People advocating for no rules/regulations on the production and sale of cannabis are, in my view, wrong.

I don’t know anyone advocating for no rules or regulations. It’s a matter of the proper role of the state. Here, I’ll quote French classical liberal Frédéric Bastiat:

“Socialism, like the ancient ideas from which it springs, confuses the distinction between government and society. As a result of this, every time we object to a thing being done by government, the socialists conclude that we object to its being done at all. We disapprove of state education. Then the socialists say that we are opposed to any education. We object to a state religion. Then the socialists say that we want no religion at all. We object to a state-enforced equality. Then they say that we are against equality. And so on, and so on. It is as if the socialists were to accuse us of not wanting persons to eat because we do not want the state to raise grain.”

It’s also as if the socialists (or statists, or “liberals” as they call themselves) accuse us of not wanting any rules or regulations on cannabis because we don’t want the state involved.

Deregulation of industry is a net negative for society (see, eg, the Reagan years and what people fear is coming in the Trump era).

Deregulation of the Reagan years? This chart prepared by the US Chamber of Commerce and based on records from the National Records and Archives Administration reveal that regulations have increased non-stop since the 1970s.

Simply, deregulation is a myth.

Today there are rules for everything. In fact, on Tuesday, January 3rd 2017, the US federal government published an astonishing 700 pages of new regulations.

And that’s just one day. They publish new regulations every single business day.
These rules make it more difficult to produce, to start a business, to sell a good or service to a willing consumer.

And these rules carry costs, whether it’s in paying a fee or filling out paperwork.

Can you imagine the effect that decades worth of rules and regulations has had on economic productivity?

How does putting up substantial obstacles to prevent entrepreneurs from selling (while protecting the firms with larger capital and the right political connections) constitute a net benefit for society?

Deregulation typically leads to market consolidation by the biggest players with the deepest pockets.

I recommend researching “regulatory capture.” The modern banking and corporate elite didn’t rise to the top in a free market system, they used state privileges thanks to the regulations they helped lobby for.

In a totally laissez-faire system, where accreditation and quality assurance are provided by private enterprise, in much the same way the insurance industry operates, the only way to profit is to provide goods and services people actually want to buy.

In other words, all of the reasons people rail against LPs now get worse in a totally free-market environment

In a totally free-market environment, there are no state licenses, price controls, or restrictions that impede consumer choice.

How exactly does a government program dependent on state licensing and obstructing competition with capital barriers get worse in an environment where anyone can grow and sell?

Kirk gives us examples of what might happen. None of them hold up under scrutiny.

Monopoly — Quoting economist Thomas J. DiLorenzo, “If competition is viewed as a dynamic, rivalrous process of entrepreneurship, then the fact that a single producer happens to have the lowest costs at any one point in time is of little or no consequence. The enduring forces of competition — including potential competition — will render free-market monopoly an impossibility.”

When everyone can grow and sell, without seeking permission from Justin Trudeau, the prospect of a monopoly is virtually nil.

Price gouging — If the price of cannabis was fixed, I might consider experimenting with my own extracts. But when allowed to rise, I will allocate my cannabis its most urgent uses, namely, smoking.
Market prices are signals, indicating supply and demand. If a natural cannabis monopoly does form and the monopolist uses this opportunity to raise prices, new potential suppliers would come out of the woodwork, coming from all over the world to get a share of the premiums.

Prices, then, would return to their market-clearing rate. Unless of course, government intervention (under the guise of consumer protection) hinders this process.

We need free market pricing far more than we need federal regulations preventing “price gouging.”

If the issue is the rising costs of all goods and services, then look no further than the Bank of Canada’s open market operations.

“skirting rules on pesticides,” incorrect potency labelling, advertising/marketing, signing celebrities — In some ways it’s funny that Kirk points to all the problems of a government regulated system and then says it will be worse without these government regulations. Something doesn’t add up. It’s as if Kirk was cooking food and found it too salty, and so, he decides adding more salt or different kinds of salt is the solution.

The federal government first said no one can produce or consume cannabis. Then they eased up a bit, but the various regulations they’ve implemented have failed. Meanwhile, the free market has given us the best strains, growers, and vendors without licenses (and lo and behold, nobody has died or gotten hurt, save for the victims of prohibition), but we’re told by “liberals” that only government can effectively deliver a rational cannabis model.

On what basis is this claim made?

“profiteering” — Profits represent arbitrage opportunities and in a competitive market that never lasts. What leftists have always misconstrued as exploitation of workers by capitalists is actually a reward for smoothing out discordance in the distribution of goods and services.

As classical liberal and economist Ludwig von Mises put it, “The capitalist system of production is an economic democracy in which every penny gives a right to vote. The consumers are the sovereign people. The capitalists, the entrepreneurs, and the farmers are the people’s mandatories. If they do not obey, if they fail to produce, at the lowest possible cost, what the consumers are asking for, they lose their office. Their task is service to the consumer. Profit and loss are the instruments by means of which the consumers keep a tight rein on all business activities.”

Crushing the “little guy” out of the market — Insomuch that this happens in a free market, it is by consumer choice. But often, this is the consequence of government regulations, whether intentional or not.
The big telecommunication companies influence the Canadian Radio-television and Telecommunications Commission (CRTC), and thus, Canadians pay some of the highest prices for phone and internet services in the western world.

The Ontario Liberal government has remodeled the energy sector to be more “green” and “sustainable” by awarding exclusive contracts to build wind turbines and solar panels to multinational corporations, thereby locking out “little guy” entrepreneurs without the political capital.

And now, with the help of law firms like Bennett Jones, the LPs are lobbying the federal government to crush the “illicit market” out of existence.

The free market has given us dispensaries and superior strains. Government regulation has given us the LPs and contaminated products. I’m not against rules and regulations, I’m against the government’s pretense of knowledge.

To again quote Ludwig von Mises,  “There is simply no other choice than this: either to abstain from interference in the free play of the market, or to delegate the entire management of production and distribution to the government. Either capitalism or socialism: there exists no middle way.”

And, “If one rejects laissez faire on account of man’s fallibility and moral weakness, one must for the same reason also reject every kind of government action.”