High-Powered Incentives

31 December 2008 at 2:42 pm 2 comments

| David Gerard |

As I pack my bags for the American Economic Association meetings this weekend in San Francisco, I am reminded of a recent New Yorker article on the impacts of medical marijuana legalization. This is probably a rather mundane topic for you left-coasters, but here in Pennsylvania where we can’t even buy beer in grocery stores, it is a pretty exotic concept.

The article highlights a number of ways in which legalization foments organizational change, and also gives some anecdotal evidence on sharecropping terms, suggesting different terms for indoor and outdoor operations.

The easiest way to make this kind of small indoor scene work is to live in someone else’s house and nurture the plants in exchange for a third or half the profits, and that is how the Kid would be spending her time for the next two months.

On the outdoor side, however, this description of the “Humboldt Slide” suggests that landlords appear more willing to change the contracting terms:

“You start at this really great percentage, and you’re buddy-buddy and everything’s great,” Emily said. As the harvest approaches, growers inevitably begin to run out of money and get greedy, and the sharecroppers lose whatever leverage they had earlier in the growing cycle, when their daily attention was necessary for the young plants to survive. Emily’s wage the previous year was initially set at a third of the value of the plants that she harvested. Later, her boss “slid” her percentage to a sixth, meaning that she owned only a dozen of the eighty plants that she grew that season.

The explanation is that the laborers have no legal recourse, so the landlord is free to rewrite contracts as he pleases, but then wouldn’t we expect a slide in the case of the indoor operations as well?

I welcome suggestions for more systematic treatments for effects of the California legalization. One effect that I don’t expect is for it to have much of an impact on the average sobriety level at this weekend’s conference.

Entry filed under: Former Guest Bloggers, Institutions, Recommended Reading, Teaching. Tags: .

Krugman’s Got the Disease Top Posts of 2008

2 Comments Add your own

  • 1. Tomas  |  31 December 2008 at 9:23 pm

    I haven’t read anything about the Humboldt slide anywhere else (Google’s first hit is this: http://adsabs.harvard.edu/abs/2003AGUFMOS22A1150S, which reads quite a bit like Bob Higgs’ video), but I’m kind of skeptical. Should we really believe that because “there are no signed contracts and recourse to the police or the courts is impossible,” that contract terms are changed unilaterally? Scott’s weapons of the weak? Milgrom and Roberts’ short term contracting? There are lots of reasons to believe that either the renegotiation was anticipated or that growers have enough power to stave off opportunistic behavior.

  • 2. John Kitzmiller  |  1 January 2009 at 1:03 pm

    It sounds complicated by a multitude of factors. Personally, the illegality of the trade resonates through the whole article. While statutory defined and allowed at a state level, the Federal Government regulations take precedent, and define the ability of Federal Organizations to not only put enormous pressure on the trade, but on local law enforcement, and although not stated, I suspect on the local judicial systems as well. For me, that peppers the whole industry, from the growers, to the pluckers, to the brokers, etc. The Humboldt area seems to be even at more risk given its well known, visible outdoor arena. The difference in indoor vs outdoor readjustments to understood contracts may be the result of added perceived risk, among other things.

    My suspicion is that the fellow quoted in the article who saw the lights from the helicopter was not as think as we stoned he was.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Trackback this post  |  Subscribe to the comments via RSS Feed


Authors

Nicolai J. Foss | home | posts
Peter G. Klein | home | posts
Richard Langlois | home | posts
Lasse B. Lien | home | posts

Guests

Former Guests | posts

Networking

Recent Posts

Categories

Feeds

Our Recent Books

Nicolai J. Foss and Peter G. Klein, Organizing Entrepreneurial Judgment: A New Approach to the Firm (Cambridge University Press, 2012).
Peter G. Klein and Micheal E. Sykuta, eds., The Elgar Companion to Transaction Cost Economics (Edward Elgar, 2010).
Peter G. Klein, The Capitalist and the Entrepreneur: Essays on Organizations and Markets (Mises Institute, 2010).
Richard N. Langlois, The Dynamics of Industrial Capitalism: Schumpeter, Chandler, and the New Economy (Routledge, 2007).
Nicolai J. Foss, Strategy, Economic Organization, and the Knowledge Economy: The Coordination of Firms and Resources (Oxford University Press, 2005).
Raghu Garud, Arun Kumaraswamy, and Richard N. Langlois, eds., Managing in the Modular Age: Architectures, Networks and Organizations (Blackwell, 2003).
Nicolai J. Foss and Peter G. Klein, eds., Entrepreneurship and the Firm: Austrian Perspectives on Economic Organization (Elgar, 2002).
Nicolai J. Foss and Volker Mahnke, eds., Competence, Governance, and Entrepreneurship: Advances in Economic Strategy Research (Oxford, 2000).
Nicolai J. Foss and Paul L. Robertson, eds., Resources, Technology, and Strategy: Explorations in the Resource-based Perspective (Routledge, 2000).

Follow

Get every new post delivered to your Inbox.

Join 263 other followers