Steve Lafleur: Chill out about the pot shops

Yes, it can be annoying to have one every 50 feet. Most will close eventually without any interference from bureaucrats.

By: Steve Lafleur

Lately there has been a moral panic brewing in Toronto about the number of marijuana stores in Toronto. Take this New York Times article, for example, which captures the mood with the quotes from various Torontonians. Or this BlogTO piece. And here is a link to a story about two city councilors (including my own) pushing for a moratorium on new pot shops. 

At least on its face, the panic hasn’t been about the availability of cannabis products or any kind of (unsupported) claims about pot shops attracting crime. Rather, the concern is that there is simply an unsustainable number of shops that may be cannibalizing other retail opportunities. So a scrappy band of politicians is coming together to save main street from the excesses of the free market.

What could possibly go wrong?

The boom in pot shops is real. Legal marijuana retailing is a new phenomenon, and there has been a gold rush in the sector. This was first evident in financial markets during the 2018-19 weed stock boom (which went bust) as investors sought to capitalize on the rollout of legal marijuana sales in Canada. There are now nearly 2,000 pot shops in Ontario, and it’s not hard to find two on the same block. People aren’t wrong to point out that there has been a rapid buildout of marijuana retailers. Hence the push by City Council and now the Ontario Liberal Party, to restrict clustering of pot shops.

To be sure, new trends can push out old trends. And this can be frustrating. For instance, one insidious trend recently replaced two of my two favourite hole-in-the-wall restaurants: poke bowls. The trendy Hawaiian rice bowls have taken cities by storm. Businesses, understandably, want to capitalize on the trend. If people want it, businesses will sell it.

Trends can create dislocations. No one knows in advance how many poke restaurants — or pot shops — the market will bear, where they should locate, or what their operating hours should be. But through a process of trial and error, retailers and consumers will figure this out. And if it is just a flash in the pan trend, many will fail.

But that’s okay. That’s just the creative destruction of the market at work. It’s not always pretty, but it’s how we get new products and services. It’s a process. Sometimes the market rewards annoying things. But trying any effort to plan these things in a way that avoids over-saturation of short-lived trendy businesses would be rife with unintended consequences.

If you want to see what top-down, mother-government-knows-best retail planning looks like, consider Ontario’s liquor retail system. For much of Toronto’s history, picking up a bottle of wine or a few beers was an ordeal. Often it meant walking 20 minutes out of your way even if you were in downtown Toronto — God help you if you lived somewhere less central. And if it was after 10 p.m., well, you were probably out of luck. Might as well go to bed and dream about living in a real city.

This absurd situation wasn’t driven by a collective desire for eight hours of uninterrupted sleep on Saturday nights. It was driven by decades-old public-policy decisions. Until recently, the Ontario government and a consortium of brewers enjoyed a virtual monopoly on alcohol retail stretching back to the end of prohibition. As a result, there were very few alcohol retail stores even in big cities like Toronto. Unlike New York or even Calgary, one had to plan to purchase alcohol in Ontario, rather than simply going to the corner store as one could in cities with more liberal approaches.

While there were surely some busybodies who preferred making people sweat to get a bottle of wine, it was a source of public discontent. So much so that Doug Ford rode into the premier’s office after running on a platform that included expanding beer sales to convenience stores (and Buck-a-Beer — remember that?). While Ford failed to bring beer to convenience stores, many pandemic-era policies such as allowing brewers to sell direct to consumers and letting restaurants sell alcohol to go have put a major dent in the old monopolistic system (one that the proliferation of microbreweries was already eroding).

Some wonder whether the boom in home deliveries and bottle shops will last beyond the pandemic. But that is beside the point. If there are genuine excesses, some of the services will be driven out and those resources will be reallocated to other uses. That is precisely how things should work.

The trouble with top-down decision-making is that it prevents markets from adjusting to consumer preferences. Sure, sometimes annoying trends come along. But even with our tendency towards mass delusions — like NFTs or poke bowls — there’s no system of economic organization that has ever done a better job at sorting these issues out in the long run than relatively free markets. I know, I know. Humans have only had a few thousand years to work on this. Maybe at some point some genius will devise a perfect system of allocating resources that will spare us from the annoyance of possibly having two of the same kind of store on the same block. Alas, that history changing genius hasn’t perfected their algorithm yet. The messy trial and error of markets is the best we can do for now.

It might be unfortunate when a pot shop or poke restaurant or some other new thing nudges out a beloved eatery or yoga studio, but micromanaging retail operations would probably lead to retails strips that feel more like the LCBO than the sort of vibrant and eclectic neighbourhoods that progressives romanticize. While some temporary excesses may exist, it’s better to allow the market to sort through these issues than to have politicians make judgement calls on the optimal location and number of marijuana stores. If there are more pot shops than demand can support, the market will take care of it eventually. And then the next fad will sweep in.

Steve Lafleur is a public policy analyst and columnist with a over a decade of experience working at Canadian think tanks. 

---

The Line is Canada’s last, best hope for irreverent commentary. We reject bullshit. We love lively writing. Please consider supporting us by subscribing. Follow us on Twitter, we guess,  @the_lineca. Fight with us on Facebook. Pitch us something: lineeditor@protonmail.com