Rent-Seeking May Be What Pot Entrepreneurs Are (Really) Seeking

Let’s discuss rent-seeking, as it relates to local marijuana dispensaries. This will not be a discussion about skyrocketing rates for industrial and warehouse spaces, as marijuana growers and processors wave wads of cash at landlords.

Rent-seeking uses the word “rent” in the way Adam Smith used it in 1776. Any governmental favor that provides private economic benefit is considered a “rent.” Lobbying for such favors or protections is called “rent-seeking.”

We know too well how businesses hate, hate, hate government regulations. That’s only true part of the time. When businesses see a government regulation that might discourage or disallow competition, they are only too happy to support such limits. That’s rent-seeking.

Taxi medallions were the most popular example. Government limited how many taxi licenses would be issued, limiting competition between those who had a taxi license.

It’s most common form is more subtle. It concerns paperwork. If you’ve ever wondered why government loves to create paperwork, it’s often because the largest businesses support it.

Politicians can cite a few horrors that redundant and relentless oversight may have prevented. Meanwhile, with no limelight, large businesses see administrative burdens discouraging competition — especially from small operators who may be more attuned to customer needs and new ways of thinking.

Tesla sells its cars directly to consumers, bypassing the bulky and inefficient dealer networks set up by every other automobile manufacturer. The legacy companies have cried foul. They want “consumer protection” laws that prohibit automobile manufacturers from selling directly to customers. That’s rent-seeking.

What does any of this have to do with marijuana? Quite a bit — especially right now in Eugene and in Creswell.

When the state of Oregon legalized marijuana for recreational purposes, local jurisdictions were given a few tools. They could refuse to issue dispensary licenses within their boundaries. They could accept dispensaries. They could refer the matter to their voters. Or they could create “retail buffers” to limit licenses.

Following Oregon’s court-approved limits on strip clubs, cities must refuse licenses to any dispensary sited within 1,000 feet of a school. But they also can forbid any dispensary to be sited within 1,000 feet of another dispensary.

Eugene is one of only a handful of cities in Oregon that chose not to impose a 1000-foot retail buffer around each licensee. Now there’s concern that too many dispensaries are siting too close together, creating pockets of pot-related commerce that won’t work well for anyone. The Eugene City Council has scheduled a discussion this fall to revisit the city’s retail buffer policy for any new dispensary licenses.

Creswell will also be reconsidering its stance. They were among the 100 Oregon cities that chose to forbid dispensaries, but a group of local entrepreneurs has collected enough signatures to force another vote. If their initiative passes in November, they will have the only dispensary allowed within 1,000 feet of I-5 exit 182. That’s rent-seeking.

If government officials in Eugene or Creswell are uncomfortable giving commercial protections to private enterprises, here’s a way they can shape how commerce grows without such a heavy hand.

They could grant a 1,000-foot retail buffer for any new dispensaries, but only for 1,000 days. The protection would expire 33 months after the license was issued. That would give the first licensee in the area a head start, but not permanent protection. It reduces the rent-seeking advantage.

Every marijuana dispensary would then know that competition could be opening its doors across the street in less than three years. That will focus their attention on taking care of their customers, and relieve government of any long-term commercial oversight.

If Creswell’s City Council puts this more limited option on the ballot for voters, it will be interesting to see whether the entrepreneurs involved will discourage such a middle option. They have not been coy about their ambitions to make Creswell — and especially Exit 182 — the hub of what they themselves have called “an empire.”

Is it the dispensary license they really want? Or is it the permanent protection provided by rent-seeking?

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Don Kahle (fridays@dksez.com) writes a column each Friday for The Register-Guard and blogs at www.dksez.com.