The Economics of Poaching

A century ago, more than ten million wild elephants roamed the forests and savannahs of Africa. Now there are fewer than 500,000 left. The exorbitant price of ivory, at $1,800 per kilo, makes the grisly economics of poaching extremely valuable, condemning 35,000 elephants each year to an ugly death. Despite its trade being banned since 1989 and a global struggle to enforce an ‘ivory crush’, strong demand from East Asia has seen the market expand by 66% since 2003 and has continued the bloody exploitation of the world’s grandest megafauna. 

The estimated $25 million annual loss of tourism revenue is just one of the external costs associated with poaching, but limited data makes it hard to quantify its many other damages such as that to the ecosystem. As more elephants are poached, they become rarer, tourists are less likely to visit, and parks suffer from a reduced income. This creates a negative feedback loop as it becomes harder for reserves to fund the protection of wildlife through park tours, encouraging poachers and continuing the cycle. Whilst it can be difficult for these parks to raise the large capital necessary to safeguard animals, one study has found that an anti-poaching investment of $3.29 million in East Africa would provide a 78% return due to higher tourist numbers, demonstrating the financial argument to protect this wildlife.

The assumption has always been that people are driven to poaching by severe poverty and desperation, but the reality is far more nuanced. The vast majority of poachers poach to supplement their low wages, increasing their financial stability. If they were to cease poaching, they would not starve to death: however, their children may not go to school and they may not be able to afford their desired standard of living. In order to better their lives, poachers risks a $200,000 fine or life imprisonment for a tiny fraction of the (illegal) market value of ivory. The death of one elephant in Kenya can net the poacher $3,750, more than one and a half times the local average salary. The illegal gangs, who have profited since the prohibition of the ivory trade, may earn up to one hundred times this figure.

These gangs oversaw huge smuggling operations where volume increased by 71% in the following years, but on the whole the ban did succeed in suppressing demand since many consumers were reluctant to buy an illegal product, and poaching was reduced in the 1990s. However, rather than continuing to enforce a blockade on ivory, many African nations decided to sell off their own legal stockpiles taken from elephants who died naturally, to Asian buyers, raising funds for conservation. Whilst these one-off sales were intended to reduce illegal poaching by displacing the black market for ivory, critics argued that they instead made it harder to distinguish between legal and illegal ivory, and, therefore, easier and cheaper for smugglers to avoid detection, thus increasing supply at a given price. An alternative policy pursued by the USA and Kenya was to burn the stockpiles instead, and raise public awareness. By highlighting the despicable nature of the trade, this tactic aims to shame buyers of ivory, thereby reducing demand, lowering prices, and cutting poaching.

A significant problem in the reduction of poaching lies in the market for ivory. Most governments try to enforce an “ivory crush” by attempting to stop as much supply from reaching markets as possible. This has the effect of raising ivory prices which gives the poachers the perverse incentive to slaughter more elephants as they will make more profit.Contrary to the intentions of these nations, effective restriction of illegal ivory exports can lead to more poaching since the elephants are already dead when the ivory is seized, and more killing is incentivised by higher prices. Any effective policy to reduce supply must act by preventing poaching at source, either by better protecting the animals or by deterring would-be poachers. 

In the long term, rising income in Asian countries may pose significant threats to elephant populations due to ivory’s perception as a luxury good. Typically a symbol of wealth, ivory has an income elasticity of 0.75 meaning that as incomes rise, so will demand and likely poaching. Furthermore, 57% of Vietnamese express a desire to buy ivory but cannot yet afford it, creating huge latent demand which, with expanding incomes, could rapidly translate into an elephant bloodbath. Whilst education may change attitudes towards ivory, this often doesn’t translate into a reduction in poaching levels due to the price elasticity of the supply curve being 0.4. This means any shifts in demand will primarily affect the price of ivory rather than the quantity and, therefore, have a limited effect in reducing poaching.

A radical alternative method to lower poaching is to legalise the ivory trade and flood the market with faux-ivory which can now be 3D printed from keratin and is indistinguishable from real tusks or horns. Produced at an eighth of the current price of ivory, it could be sold as the real commodity in markets, either crowding out poached tusks or lowering trust in what is genuine, similar to the decline in shark fin consumption caused by the preponderance of fake shark fins on the market. 

The status quo isn’t working, and the ban on ‘white gold’ is simply leading to the continued butchery of elephants across the continent. Its reputation as an exotic status symbol is unlikely to change rapidly but disrupting the market through education and synthetic ivory remains preferable to legalisation which studies have found stimulates illegal production. Elephant populations are resilient however, and hope does remain. Policies which tackle the problem at the source, such as Namibia’s scheme to give communities a share of local tourist revenue, incentivise the protection of wildlife and have resulted in national elephant populations doubling since the turn of the century.

Photo by Oleg Magni on Pexels.com

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