Economic Governance of Cannabis: The Implications of Polycentric Governance in Mendocino County

The 2016 passage of California's Proposition 64, legalizing recreational (adult-use) cannabis, was justified ex ante in part for its potential to encourage restorative justice and positive local and state economic outcomes. But are the local institutions administering Proposition 64 achieving these aims? We address this question via a two-year case study of Mendocino County's polycentric cannabis governance system using a mixed methods approach including archival analysis, cannabis industry and governance system interviews, and participant observation. Evidence from our case study suggests that Mendocino's ability to achieve these goals is hampered by three quasi-market failures: interjurisdictional conflict, coproduction deficits, and devolution without adequate fiscal decentralization. A major driver in these quasi-market failures is the substation regulatory and enforcement responsibility this governance system places on local government. We conclude by discussing some institutional structures that may address these failures.