Download Rhinonomics - Save the Rhino

Rhinonomics
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The view of an economist using economic fundamentals to argue against the legalisation of sale of existing
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stock of rhinoceros horn, or the law of unintended consequences and perverse economic outcomes .
Scanning the savannah (or of rhinoceros and men)
Rhinoceros, often called rhinos in spoken language, comprise of a group of five extant species. Two of these species
are native to Africa and the other three are native to southern and southeastern Asia.
In nature, the rhinoceros has few natural enemies. Unfortunately, the irrationality of mankind threatens the very
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existence of these beautiful herbivorous mammals. At the beginning of the 20 century there were around 500.000
rhinos in the world, today there are fewer than 30.000 rhinos left. The main reason why rhino numbers have
dwindled is the high demand for rhino horn. One widespread use for rhino horn is for pseudo-scientific medicinal
purposes. A common misconception is that the horn is used as an aphrodisiac; it is actually prescribed for pretty
much everything but impotence and sexual inability.
Basic Rhinonomics (or what economics students learn during their first term at university)
Economics can often seem as mystifying and puzzling as the fact that someone can believe that swallowing a
solution of ground rhino horn will cure their fever or rheumatism. Fair enough, at times economics can be
perplexing and confusing. However, economics is in many cases just concerned with the simple demand and supply
characteristics of different types of goods. Elasticity of demand is a key concept used when studying basic demandsupply fundamentals. A good with an inelastic demand curve experiences little or no change in demand as price
changes. Conversely, a good with an elastic demand curve will face a relatively large change in demand as price
changes. Examples of inelastic goods would be highly addictive drugs, lifesaving medicines, etc. On the other hand,
an elastic good could be something that is easily substituted (if your local supermarket suddenly quintuples the
price of pasta, you would be more likely to have rice with your meatballs). A perfectly inelastic good would have a
vertical demand curve (zero price sensitivity) while a perfectly elastic good would have a horizontal demand curve
(perfect price sensitivity).
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This is a paper about economics and how different goods (such as rhino horn) will behave in different supply-demand situations. For
information of rhinoceros the Author suggests a visit to www.savetherhino.org
So what type of a good could rhino horn possibly be? Studying the properties of rhino horn might provide some
insight. The rhino horns are predominantly made up of keratin, the same protein that makes up hair and
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fingernails . One could argue that nail-biting is a habit difficult to kick. This author, while sometimes struggling with
this habit himself, would suggest that (despite all) it cannot be compared even on the same scale as desperately
requiring a lifesaving cancer drug. Furthermore, suggesting that rhino horn is as addictive as some very nasty drug
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is also a bit of a stretch. Oppositely, the lack of decent substitutes makes it slightly more complicated to swap your
rhino horn habit in a similar manner as switching from pasta to rice when the store increases the price. Evidence
suggests that rhino horn is in fact displaying characteristics of what economists call a ‘normal good’ and that it
faces a downward sloping demand curve.
Move along the curve (or the increased cost of intended consequences)
The above chart shows the simple behaviour of supply-demand fundamentals of a normal good. The initial quantity
demanded is at Free trade (F), where no restrictions are put on the trade of rhino horn. Price is at P and output is at
Q. When policy-makers impose restrictions to the trade and start prosecuting traders who are poaching horn and
supplying it to the black market, the cost of production, distribution and sale of rhino horn will increase. This will
drive up the price from P to P1 and subsequently reduce the quantity of rhino horn from Q to Q1, leaving us at R
(trade restricted). Conversely, if we were to move from restricted to free trade, we would see decreased prices and
subsequently an increase in demand of this ‘normal’ good. This example is commonly used to support restriction of
goods such as tobacco and alcohol (where it is in society’s interest to limit consumption by adding taxes or other
tariffs).
The rule of law (or demand)
One of the most basic concepts in economics is the law of demand. This law simply states that consumers will buy a
good more frequently and in larger quantities as its price decreases. Moving from an environment where
policymakers are administering punishment for the poaching and sale of rhino horn to an environment where the
transport and transaction cost of existing stock of rhino horn is allowed will (as in the above example) reduce the
cost of rhino horn and, therefore, increase the demand for this good (by a movement along the demand curve).
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However, the chemical composition of the keratin may differ between rhino horn and human nails.
Although saiga antelope and water buffalo horn have been promoted with varying degrees of success.
The supply of good intentions (or the perverseness of the invisible hand)
A parallel shift of the demand curve is said to take place due to non-price changes such as changes in consumer
preferences or size and composition of the consuming population. A good being illegal is a relatively effective
deterrent for most people. One of the most obvious examples of this is the consumption of alcohol during the
American Prohibition. Studies have shown that alcohol consumption fell significantly when alcohol was made illegal
(causing a change in the consuming population and, subsequently, a parallel shift of the demand curve). As most
people are generally trying to abide by the law, they will not consider the purchase of an illegal good (however, as a
good becomes legal and accepted by society more people would consider buying it).
Moving from a black market to a free, open market will send signals that the consumption of rhino horn is
tolerable, and subsequently change the size and also the preferences of the consuming population. This will lead to
a parallel shift of the demand curve from D to D1. At this point the quantity demanded is higher for any given price
than it was in the restricted black market.
Contrariwise to the law of demand, the law of supply states that supply moves in the same direction as prices. As
we have concluded, allowing trade in existing stock of rhino horn is likely to change the consumer preferences and
increase the size of the consuming population. This will cause a parallel shift of the demand curve from D to D1,
shifting the equilibrium output from 1 to 2 and increasing supply from Q to Q1 and price from P to P1 (causing
pressure on suppliers to deliver as much of the existing stock as possible).
According to the law of supply, producers will increase their output as prices increase, so what are the implications
here? As the existing stock is limited (and also decreasing), the only rational move for producers (as soon as the
demand is right) would, unfortunately, be to ‘restart production’ of this precious and costly commodity. Restarting
production (through poaching, rather than searching for hidden/forgotten existing stock) of rhino horn would likely
shift the supply curve from S to S1, and drive price back from P1 to P, settling at the new equilibrium 3 with an even
higher output at Q2.
Rhinotopia (or the return of the Leviathan)
Economics can be used in perverse ways to support views that have little or no connection to the real world.
However, by examining a normal good with a limited supply we can demonstrate that allowing trade in rhino horn
will initially cause movements along the demand curve and ultimately cause a parallel shift in the demand curve as
consumer preferences shift and the size of the consuming population increases.
In a utopia, it would, perhaps, be possible to save rhinos from ‘extinction through horn-poaching’ by allowing the
sale of existing rhino horn stock under controlled conditions. However, in a real world driven by supply and
demand, fuelled by greed and changing through unintended consequences, allowing the trade of existing stock of
rhino horn would soon reveal the true perverseness of economics, the invisible hand as well as of human nature.
For anyone still craving some legal rhino horn to cure that fever or backache, this author would politely suggest
that they take up nail-biting instead.
Written by:
Albert Küller. MSc. Economics, BSc. Economics, BSc. Political Sciences.
Editing:
Maria Nazarova-Doyle MSc. Strategic Planning and Investment, BSc. Global Economy, BA. Interpreting and
Translation Studies.