Monday, November 9, 2009

Economics: Elephants

The New York Times reports on efforts by Zambia and Tanzania to reclassify elephants to allow the legal sale of government stockpiles of ivory. As you might expect, many conservation groups are not happy about this.

This made me think of a well-known economics paper by Michael Kremer and Charles Morcom entitled, simply, "Elephants." In this paper the authors argue:

Many open-access resources, such as elephants, are used to produce storable goods. Anticipated future scarcity of these resources will increase current prices and poaching. This implies that, for given initial conditions, there may be rational expectations equilibria leading to both extinction and survival. The cheapest way for governments to eliminate extinction equilibria may be to commit to tough antipoaching measures if the population falls below a threshold. For governments without credibility, the cheapest way to eliminate extinction equilibria may be to accumulate a sufficient stockpile of the storable good and threaten to sell it should the population fall. [Emphasis mine]

So, this proposal would allow these governments to sell off the stockpile, which in Kremer and Morcom's analysis is a good thing IF this is part of a government policy of doing so strategically and only as a way to depress world prices when elephant populations are becoming dangerously small.

Just food for thought on a rainy monday...

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