Ontario’s pot shop lottery

The Ontario government (in Canada) has allotted the first 25 pot shop licenses by lottery.

Nearly 17,000 applicants participated in the lottery to win the right to apply for a licence to run one of Ontario’s first cannabis shops.

[…]

The province has temporarily limited the number of stores to 25 because of a shortage of pot. Politicians decided that a lottery was the fairest way to decide who could first apply for the licences.

The lottery was a blow to entrepreneurs who already had plans to open shops under way. Some had signed leases and completed branding and store designs.

At least half a dozen companies, including Ottawa’s National Access Cannabis, planned pot-shop chains or franchise operations.

Those big players found themselves at the mercy of chance, just like everyone else who paid $75 to enter the lottery. It didn’t appear that any of the big players won the lottery.

7 Responses

  1. Not the first! Arizona did the same in 2016

    http://www.conallboyle.com/lottery/176SellMedicalCannabisArizonaUSA.pdf

    But this is a crazy idea, giving away a commercial opportunity by lot. Still the authorities made $75 from each entrant, which made $1.3 mn for the public.

    I bet the winner will immediately sell on their licence to the highest bidder for more than this amount.

    A lottery is not the right strategy for Ontario. Because this is a commercial transaction an auction would be the right way to go. This will flush out the keenest business to run the pot-shop.

    This way Ontario should make a better return. (This has been the world-wide experience with 3G, 4G bandwidths).

    Should Ontario retain some control? If the auction winner is, say the local mafia, then pre-announced rules can prevent that? Maybe, but there could be problems with corrupt officials.

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  2. Conall:

    Interesting re Arizona.

    Giving out the licenses by auction is plutocratic, lottery is much more democratic.

    Auction means licenses go to rich people/corporations/businesses (not to the keenest, nor to those who will treat customers best). Lottery puts small businesses and individuals with modest means on a pretty level playing field with the rich.

    Presumably the local mafia would not be given a license, even if they won the lottery to apply for a license. Nor does having an auction shut out the mafia, as they may well have a lot of money.

    I don’t know how transferable the license is.

    Both lottery and auction are a firewall against corruption, cronyism and favouritism on the part of politicians and government officials.

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  3. The hefty application fee in the 2016 Arizona lottery is rather plutocratic (in contrast to the $75 fee in the Ontario one): “750 applications in total for 31 certificates, with applicants paying a non-refundable fee of $5000” (from Connal’s above link).

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  4. Sorry Simon, I am a economist, so find the plutocracy vs. democracy argument in the commercial sphere irrelevant. No so, of course if it is a ‘positional good’ based on societal support like places (seats) for students at Harvard.

    In an ideal dream world, lots of local boutique pot-shops run by hippies would be fine. In the real world of commerce a Macdonalds or Amazon-type operation would emerge providing low-cost, safe, standardised cannabis products. Of this the customers would approve.

    [Personally, the main reason I’ve never done any illicit drugs, is because of complete lack of quality control.]

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  5. ConalI, I think it a safe guess that some economists prefer the Ontario pot-shop lottery to an auction.

    I have not been to Macdonald’s in some years and have no plans to go, despite their “low-cost, safe, standardized … products.” For some reason I prefer interesting independent restaurants that do rather better than serving food-like substances.

    I still see no reason why a winner of an auction would be a better pot-shop owner than a winner of the pot-shop lottery, and no reason to favour large corporations and the very rich in the allocation of such licenses.

    Liked by 1 person

  6. The exchange between Simon and Conall is a good illustration of the different mind-sets of diehard sortinistas and those of us who feel that the market has an ongoing role to play in democratic politics. The economic approach to (liberal) democracy argues that competitive elections between political parties is essential for political representation. I agree and go further to claim a key role for a diverse and free commercial press (as opposed to “public” media) as an element of “representative isegoria”. Where (I think) I differ from Conall is that I claim that the invisible hand metaphor should not just be restricted to the market in goods and services as it can also be used to demonstrate aggregate informed political judgments directly (via large allotted juries). Conall (I believe) is only really interested in the Blind Break for the just (and efficient) allocation of positional goods and reserves the invisible hand for his own profession.

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