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Even those of us with only the fuzziest memories of high school economics class probably can recall the basics of supply and demand: when there are more people who want to buy a thing than there are people willing to sell that thing, prices will go up. But when more people want to sell a thing than want to buy it, prices will fall.

Right now, that thing is marijuana. Growers rushed into the market as legalization looked set to expand and entrench through most of 2016. The result? A really huge ginormously insane amount of marijuana has now been legally produced. And with Forbes reporting that the average wholesale marijuana price of a pound fell from $2,500 to $1,000 over the course of 2016, it seems that the growth in weed buyers hasn’t quite kept pace with the growth of weed sellers.

The Forbes article highlights the fact that weed is beginning, in place where it is legal, to be sold like a commodity. That means that it’s increasingly sold by grade in high volumes at rates set by the market, rather than differentiated by the qualities of the individual producer or grow.

For an analogy, look to Starbucks. When the now-megachain only had a few stores in the Pacific Northwest, it represented a revolution in the way Americans consumed coffee; we were willing to pay a premium for it. Fast forward more than two decades and the latte that you pick up at the Kuala Lumpur airport Starbucks probably costs about the same as the latte at the McCafe down the concourse, which probably doesn’t cost much less than the same latte at a Portland Pete’s.

If you sell coffee, this is bad. And one way sellers and producers try to fight commoditization is by engaging in what economists call “price discrimination”. We use quotes around the term because it’s really just a fancy way of saying “charging different people different prices for the same thing”. So when you go to Blue Bottle and spend $7 on drip coffee that comes from an Ethiopian single estate and is served in a chemistry set, you’re pretty much just buying the same cup of coffee you get at the McCafe. Blue Bottle has just done a really good job of convincing you it’s worth more.

And that’s what’s happening to marijuana today. The Forbes piece highlights both Snoop Dogg and Willie Nelson’s forays into the branded marijuana arena. These celebrity brands become increasingly important in maintaining pricing as wholesale markets tumble. Likewise, the novelty of many nonsmokeable products – whether they are edibles, concentrates, or extracts – and the pace of innovation within the young field has kept pricing in the segment firm.
One thing is certain: capitalism is amazing at creating innovation, of both the substantial and the superficial varieties. We’ll continue to see new strains, new claims about production methods, a move towards marijuana that is labeled as being cleaner and greener (and may actually be), and new ways of consuming and packaging THC. And just wait until a full-fledged marketing team discovers terpenes. This is only the beginning.