Saving the Rhinos: an Addendum

Last week, we offered several different views on ideas to save the African rhino. Ray Fisman, one of the participants, has followed up with another take:

Pretty much any policy prescription that an economist will propose will have incentives at its core. In rhino conservation, economists’ mania for incentives would translate most directly into policy through programs that reward communities based on the rhino populations that survive in the areas under their control. So, effectively, we in the rich world would be paying rhino royalties to poor communities to encourage them to preserve the animal life that we value. This is analogous to proposals of the Coalition of Rainforest Nations that the global community compensate rainforest nations for abstaining from chopping down their forests. Not surprisingly, this is an organization with an advisory board largely composed of economists.

Another more subtle alternative has been proposed by the Harvard economist Michael Kremer. This approach to rhino conservation incorporates elements of both of the schemes you describe in your question.

Why do poachers kill rhinos? Because they get well-paid by middlemen. And why are middlemen able to offer handsome rewards to poachers? Because rhino horns sell for huge sums in the Far East, owing to the scarcity of available horns. So it is high prices that ultimately drive poaching activity.

Now, suppose the government were to announce the strict enforcement of anti-poaching laws and higher penalties rhino killers. Rhino middlemen would quickly realize that supply will grow even scarcer – and hence prices even higher – in the near future. So they’ll buy up as many rhino horns as they can in anticipation of this future of low supply and high prices. But this rush to poach before laws go into effect could itself drive rhinos into extinction.

Professor Kremer’s proposed solution is that the government put together its own stockpile of rhino horns, either from seized contraband or from, as you suggest, controlled harvesting. And at the same time that the government announces its anti-poaching efforts, it could make a parallel announcement that it would use its supply of stockpiled horns to flood the market if necessary to ensure that prices stay low. This gets us right back to incentives – in a future where the government has guaranteed low future prices, neither poachers nor their middlemen have an incentive to go on a rhino killing spree.


egretman

All of this assumes a functioning honest guvment. Any viable solution whether dreamed up by an economist or a one-eyed one-legged jackalope is going to be one that includes the realization that the guvment of the areas where rhino is most in danger is also the most corrupt.

lermit

There must be an explanation, right

.lermit

mcbrucker

Issues here seem similar to efforts to reduce supplies of illicit drugs. Doing so is very likely to increase the price and create a greater incentive to provide drugs. I wonder if anyone has calculated the elasticity of drug demand!

lermit

It has a positive slope

.lermit

Mainesails

I recall a brilliant Rhino preservation program in Africa:

They caught all the adult rhinos in the area, tranquilized them, and cut the horns off short with a chainsaw. I think the horns were destroyed.

The rhinos were unhurt - adult rhinos DON'T NEED their horns.

The poachers no longer wanted them. The documentary I saw said that they had a problem with TOO MANY rhinos in the area!

clsand99

egretman: You're beating a dead rhino with the corrupt "guvment" thing. We heard it all before on the previous entry. It sounds like you have an axe to grind against "guvments". But what you're failing to recognize is that incentives fix governments just like they fix poaching problems. I'm certain any solution would involve addressing the tendencies of the local governments. And if they are uncurably corrupt, then their greed could easily be used to help save the rhino's. The more greed they have, the better the incentives work.

chesapean

It's an interesting assumption that principles of economics might be applied in some effective way to "save the rhino."

The _assumption_ is interesting on many levels.

For one, it is illogical. Just because "economic forces" are evident in rhino poaching doesn't mean that economic forces are at work alone.

For another, it is grandiose. Just because "economic forces" are evident doesn't mean that economics itself is perfect and complete.

Finally, it may be irrelevant. Just because "economic forces" are evident doesn't mean that principles of economics offer an effective solution.

If you think economics is really about the allocation of scarce resources, then you may succumb to this assumption about the rhinos. Or about rainforest destruction, or about global warming. And so on.

But if you suppose that economics really is about the value of money (the mechanics of how monetary value changes over time in the hands of people who use it), then one thing becomes clear: rhinos have very little value in monetary terms. So little, in fact, that their extinction will never be reflected in the price of, say, eggs.

There's a worthy puzzle here for Freakonomicists to ponder. Why are rhinos, which are so unnecessary to human survival, so undervalued in comparison with an equally unnecessary asset like diamonds?

My guess is, a rhino necklace doesn't appeal as much to human vanity as diamond necklaces do.

Read more...

CDButler

Well I can't say I know the price of rhino horn, but human vanity? I suppose that could be a crude way to state that the marginal utility of a diamond is greater than that of a rhino horn. They are certainly different goods with different demand curves as diamonds are an integral part of western civilization. Also, the process of making a diamond market ready from the point when its taken out of the earth is capital and labor intensive. I would imagine that harvesting rhino horn is sufficiently less complex.

ECrampton

With Kremer's proposed system, the poachers will have to know that at some point, the price will rise considerably -- once the government stockpile has been exhausted. If horn is a durable good that can be transported out of the soon-to-be tough enforcement zone prior to enforcement, there'll be an incentive to poach now and build up a stockpile in a warehouse somewhere in Asia, then to sell horn again once the price has risen. No?

random_joe

There are already very substantial government stockpiles of horn in Zimbabwe, or at least there were in the mid-90's when I saw them. (Might be stolen and sold for all I know now). There are also some older papers with empirical analysis of this sort of thing; for example G Brown and D Layton gave a talk on this. Can't recall their bottom line results though.

Alsadius

Economically, the above suggestion is exactly on the mark. Politically, it's suicide - the only thing people will approve of as a use of seized products of endangered animals(be it elephant tusks, rhino horns, or anything else) is sitting in a locked shed somewhere gathering dust. Any solution built around using seized government stockpiles of *anything* is basically doomed to failure politically.

egretman

All of this assumes a functioning honest guvment. Any viable solution whether dreamed up by an economist or a one-eyed one-legged jackalope is going to be one that includes the realization that the guvment of the areas where rhino is most in danger is also the most corrupt.

lermit

There must be an explanation, right

.lermit

mcbrucker

Issues here seem similar to efforts to reduce supplies of illicit drugs. Doing so is very likely to increase the price and create a greater incentive to provide drugs. I wonder if anyone has calculated the elasticity of drug demand!

lermit

It has a positive slope

.lermit

Mainesails

I recall a brilliant Rhino preservation program in Africa:

They caught all the adult rhinos in the area, tranquilized them, and cut the horns off short with a chainsaw. I think the horns were destroyed.

The rhinos were unhurt - adult rhinos DON'T NEED their horns.

The poachers no longer wanted them. The documentary I saw said that they had a problem with TOO MANY rhinos in the area!

clsand99

egretman: You're beating a dead rhino with the corrupt "guvment" thing. We heard it all before on the previous entry. It sounds like you have an axe to grind against "guvments". But what you're failing to recognize is that incentives fix governments just like they fix poaching problems. I'm certain any solution would involve addressing the tendencies of the local governments. And if they are uncurably corrupt, then their greed could easily be used to help save the rhino's. The more greed they have, the better the incentives work.

chesapean

It's an interesting assumption that principles of economics might be applied in some effective way to "save the rhino."

The _assumption_ is interesting on many levels.

For one, it is illogical. Just because "economic forces" are evident in rhino poaching doesn't mean that economic forces are at work alone.

For another, it is grandiose. Just because "economic forces" are evident doesn't mean that economics itself is perfect and complete.

Finally, it may be irrelevant. Just because "economic forces" are evident doesn't mean that principles of economics offer an effective solution.

If you think economics is really about the allocation of scarce resources, then you may succumb to this assumption about the rhinos. Or about rainforest destruction, or about global warming. And so on.

But if you suppose that economics really is about the value of money (the mechanics of how monetary value changes over time in the hands of people who use it), then one thing becomes clear: rhinos have very little value in monetary terms. So little, in fact, that their extinction will never be reflected in the price of, say, eggs.

There's a worthy puzzle here for Freakonomicists to ponder. Why are rhinos, which are so unnecessary to human survival, so undervalued in comparison with an equally unnecessary asset like diamonds?

My guess is, a rhino necklace doesn't appeal as much to human vanity as diamond necklaces do.

Read more...

CDButler

Well I can't say I know the price of rhino horn, but human vanity? I suppose that could be a crude way to state that the marginal utility of a diamond is greater than that of a rhino horn. They are certainly different goods with different demand curves as diamonds are an integral part of western civilization. Also, the process of making a diamond market ready from the point when its taken out of the earth is capital and labor intensive. I would imagine that harvesting rhino horn is sufficiently less complex.

ECrampton

With Kremer's proposed system, the poachers will have to know that at some point, the price will rise considerably -- once the government stockpile has been exhausted. If horn is a durable good that can be transported out of the soon-to-be tough enforcement zone prior to enforcement, there'll be an incentive to poach now and build up a stockpile in a warehouse somewhere in Asia, then to sell horn again once the price has risen. No?