20 Sep 2016

Demand for elephants can save elephants

Back in 2008, there was a big kuffaw over a paper that said "Lake Mead has a 50 percent chance of going [technically] dry by 2020." (Lake Mead Reservior is close to Las Vegas and an important reservoir in the western US distribution system. It exists due to Hoover Dam.)

I contacted the authors of that paper -- both scientists at Scripps in San Diego -- and asked them how they calculated the progression from current to predicted supply and demand for water from Lake Mead. On the supply side, they considered how climate change might change precipitation, runoff and evaporation. Good science that. On the demand side, they multiplied current demand by future population (perhaps with some trend adjustments) to find total consumption. Bad economics that.

The reason why good turns to bad is that demand (and supply, to an extent) will adjust to changes in policies, behaviors and prices.

I just wrote this for an article that's soon to be published:
In conditions of scarcity, economists think of reducing demand by shifting in or sliding up the demand curve. The demand curve of an individual or group shows how the value of each unit of water falls as more water is consumed. These values show priorities, i.e., for drinking over irrigation. Taking these values as given, actual consumption --- or quantity demanded --- only occurs for units whose values are greater than the price of water. The demand curve can shift in with a change in tastes or technology that assigns lower values to water. One might, for example, decide not to have a lawn or use drip irrigation to produce the same greenery with less water. An increase in price, in contrast, reduces demand by choking off lower-valued uses, e.g., the tenth minute in the shower.
Now what you should take from this is that there are lots of ways of reducing demand, such that shortage never results in the face of lower supplies. In other words...

Demand is not a fixed constant.

The good news is that the authors of the Mead study did somewhat integrate that thought fact* into their revised study.

So, why this post, 6 years later? Because this problem --- of scientists (and just normal folks) taking demand as a fixed constraint --- constantly produces misleading conclusions.

In this case, it's an article entitled "Can We Sustainably Harvest Ivory?" [open access]. In the paper, "a harvest model is developed to estimate sustainable ivory yield from elephants" and the authors conclude that "even in the best-case scenario, the sustainable yield is well below the current demand... Our study shows that lifting the ivory ban will not address the current poaching challenge. We should instead focus on reducing consumer demand."

So they are sticking with the ban on ivory trading (and thus the continuation of the black market in poached ivory) while hoping to shift demand in by telling people ivory is unsustainable, etc., and that they should not buy it.

This is bad advice because it misses the obvious problem of people who still like ivory. I'm pretty sure that their "campaign of hope and virtue" (my label) will fail --- just as the War on Drugs has failed due to users' continued insistence on buying illegal (but very enjoyable) substances.

I emailed the author of the article and asked why they didn't look into markets and prices as a means of converting a common pool resource (elephants that roam without any owner who could make money from them) to a private good that would be sold for as a trophy but that would also provide a living to its owners as well as a huge incentive to get as many elephants as possible.**

He replied that property rights were not clear everywhere and that quantity demanded was far too high to be brought down by prices.

On the former, I replied that it's not hard (indeed it's done all the time) to isolate and protect -- thereby privatize -- elephants. On the latter, I gave this example: "Say you offer a van Gogh painting for $20. You'd have 10,000 people lined up to buy it. The reason it's auctioned is to find the ONE person who will pay $23 million for it. The same dynamic explains how to choke demand by raising prices."

He wasn't interested in changing his mind, so that was that.

But it wasn't, because it's likely that anti-hunting, anti-market people will use this "peer review study"*** in their fight to keep ivory trade illegal. Yes, they will win a moral victory, but they will lose the war: the black market and its customers don't care about your morals. They will pay for tusks from elephants slaughtered in dead of night, by people trying to make a living.

Bottom Line The only thing worse than killing elephants is leaving elephants vulnerable to murder. We can save them just as we save dogs and cats -- by giving them owners who value them, sometimes as dead trophies but more often as a thriving, growing herd.

* It's ain't called the Law of Demand for nothing!

** Read this paper about a successful program that "farmed" wild animals for community income in Africa. If you're into pandas, remember that they are no longer "endangered" in China because the Chinese government [irony!] spent heavily on breeding pairs that can be rented for $1 million/year.

*** It would never have passed peer review by any economist.

Addendum: Here are a bunch of comments (and my replies) to this post on Reddit.

Addendum: These authors are MUCH better at saying what I am