Tom Palmer has a paper on popular market myths (HT: Tyler Cowen) and towards the end sounds a little caution about eulogising over markets too much. I thought about that paper when I read Tim Worstall’s post on elephant poaching.
Tim suggests that decriminalising the ivory trade would lower ivory prices and thus reduce the incentives to poaching elephants. The analysis seems elegant. However there’s a flaw in the argument neatly illustrating that unintended consequences aren’t restricted to government interference in market outcomes.
Why wouldn’t the increased supply of ivory depress prices making poaching unattractive? Well the price would surely decrease but whether this acts as a significant disincentive depends on additional factors.
Firstly, if you’re a farmer facing a lost livelihood because of a marauding elephant, then you don’t really need much of an incentive to continue poaching, because you’re alternative income is pretty bleak. This probably applies whatever your next best alternative to poaching. In short, the price drop from the increased supply of ivory would have to be really big to stop poaching.
Secondly, poachers may be able to infiltrate the legal trade route and generally face lower costs. So even with falling prices, the return to poaching may stay constant.
Finally, legalizing trade in ivory may reduce the stigma attached to buying it and thus increase consumer demand which may offset the price falls from increased supply. That increased demand may be met by poachers, especially if buyers’ cannot discriminate between legal ivory and poached ivory, and supply from the legal market is restricted (because there aren’t any more animals to cull, for example).
I don’t know what the final result would be but it’s not so crystal as thinking poachers would be driven from the market and take up something else instead. A better option might be something like Zimbabwe’s Campfire scheme. This exploits the fact that many potential poachers only kill because the animals have no other value to them, only a cost (habitat, vegetation destroyed etc.). Campfire allows farmers to share in the revenues from legal hunts. This can be substantial and encourages farmers to care for the elephants and generally share in the wider conservation efforts. Apparently, the farmers involved have also taken steps to ward of poachers themselves, thus lowering the costs of direct enforcement.
The main point is that defenders or opponents of free market solutions frequently need to look beyond the simpler first order effects and perhaps even the neoclassical version of events.
Sure, agreed.
For example, in Campfire, people get to eat the elephant as well.
My poinst was rather that banning the market doesn’t ban the trade. More thoughful solutions, as you mention, are needed.