Monday, August 29, 2011

Communal Resources ... The Rhinoceros

Rhino Horns Put Europe's Museums on Thieves' Must-Visit List is a timely and informative story about the rhinoceros and its very valuable horn. {For those studying economics with us, this very subject is covered in Chapter 2 of "Naked Economics."}

The broader subject deals with the unique problems associated with preserving "communal resources," meaning those resources not owned by anybody. Specifically, depletable resources such as ocean fish, gorillas in the wild, and the rhinoceroses of southern Africa present very real problems for preservationists.

Our general society may wish the soon-to-be-extinct-species to be a part of our world forever, but we don't act that way. The "communal resources" issue is our discussion topic for today.

The rhinoceros story says something meaningful about human nature, incentives, crime and free riders.

Communal resources present any society with special problems, especially if the resources are valuable, scarce and depletable. In this case, the rhino horns of southern Africa are also illegal to sell.

With respect to the question of value, the rhino clearly is worth much more dead than alive to the impoverished people of the area. Thus, there is no reason for the nearby citizens of southern Africa to help its government stop the poaching.

To the contrary, local citizens may have some incentive to see the rhinoceros both hunted and extinguished. This could be due to the citizens' safety concerns (would you want a rhino in your back yard?), and/or because the hunter may be willing to pay the villager a substantial sum of money to help hunt down the rhinoceros and its valuable horn.

As a result, the villagers' incentives favor the poachers taking horns instead of preserving the endangered rhinoceros. Similar to the sale of of many illegal drugs in our country, the horn of a rhino sells for a high price since it is valuable, illegal and scarce.

Of course, as with any such illegal activity, that means there is an economic argument for legalization. Legalizing the activity would bring down the price per horn and maybe enable to government to provide monetary incentives to villagers to protect the neighborhood rhinos from poachers, but that's another story.

Now let's discuss briefly the "free rider" problem. Many people will sympathize with the plight of the rhino but will sit passively on the sidelines, while hoping that somebody somewhere will do something to save the rhinos from extinction. If such a good deed is done by someone, then all of us roadside sympathizers will have achieved what economists call "free rider" status.

Being a free rider simply means that while we won't actively intervene to save the endangered species, if somebody else intervenes, then all people will benefit from those actions. Free riders get the benefit of another person's actions while incurring none of the costs. The costs are borne entirely by the one who intervenes on behalf of the community.

In such cases, all innocent and passive bystanders get a "free ride." However, if no such free ride presents itself, the illegal poaching and selling will go on until there are no more horns to hunt. Then the rhino will be no more, and the species will become extinct, even though that's not the desired outcome sought by anybody. Not even the poacher.

Obviously government has a legitimate role to play in these situations. If government effectively regulated or otherwise incentivized the villagers to help preserve the rhinoceros, the poachers would have an opponent.

But since the government may be without funds or its officials may be susceptible to bribes by the poacher community, all human incentives now seem to go against the rhino's preservation. And if no such human incentives are on the side of preservation of the species, the rhino doesn't have a chance.

In the above referenced story of Rosie the rhinoceros, the thieves didn't bother to go to southern Africa to replenish their supply of stolen rhino horns. They simply went to an English museum instead. While there, they stole a rhinoceros horn that had been on continuous display since 1907.

Why did they do it? They did it for the money, of course, and perhaps also because they believed a trip to the museum to be less risky than going to southern Africa.

And the value of an ever more scarce rhino's horn? Currently it's $200,000.

Thanks. Bob.

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