Download When Profits Endanger Species Economics Name: E. Napp Date

When Profits Endanger Species
Economics
E. Napp
Name: __________________
Date: __________________
Economic Concepts Needed for This Lesson:
~ Adapted from Britannica
The Power of Price (the amount of money that has to be paid to acquire a given product):
1- Prices perform an economic function of major significance.
a) Prices provide an economic mechanism by which goods and services are distributed
among the large number of people desiring them.
b) They also act as indicators of the strength of demand for different products and
enable producers to respond accordingly.
c) This system is known as the price mechanism and is based on the principle that only
by allowing prices to move freely will the supply of any given commodity match
demand.
d) If supply is excessive, prices will be low and production will be reduced; this will
cause prices to rise until there is a balance of demand and supply.
e) In the same way, if supply is inadequate, prices will be high, leading to an increase
in production that in turn will lead to a reduction in prices until both supply and
demand are in equilibrium.
2- And yet demand can be created. How can demand be created?
Questions:
1- Define price.
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2- What do prices determine?
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3- What do prices act as indicators of?
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4- What principle is the price mechanism based on?
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5- What happens to price when supply is excessive?
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6- What does this happen to price when supply is excessive?
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7- What happens to price when supply is inadequate?
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8- Why does this happen to price when supply is inadequate?
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The Article: Horn of Scarcity (It is the profit motive, not Asian tradition, that endangers
rhinos, elephants, tigers and sharks), The Economist Magazine, April 20, 2013
WRITING in 1917, R.B. Smart, deputy commissioner and settlement officer in Akyab
district of British-ruled Burma (now Rakhine state in Myanmar), was worried about local
rhinoceroses. His volume of the “Burma Gazetteer” notes that their blood and horns were
much prized as medicines and aphrodisiacs. As a result “these animals are ruthlessly
hunted down and shot.” The state was already one of the few parts of Burma where rhinos
were still fairly plentiful, but “they will become extinct in the near future if not preserved.”
Smart’s concern seemed more for the loss of big game for the “European sportsman” to
kill than for biodiversity. But he was right. It is a long time since a rhino was seen in the
wild in Myanmar. Now Dicerorhinus sumatrensis, once scattered across South-East Asia up
to the foothills of the Himalayas, is confined to a few isolated pockets of Indonesia and
Malaysia. A 2011 estimate put the global population as low as 216.
They are still threatened by poachers, as are other rhino species in India and Africa. In
the Kaziranga reserve in India’s north-eastern state of Assam, 16 rhinos have been shot so
far this year, and the authorities have started using drones – unmanned aircraft – in an
effort to curb poaching. A rhino’s being dead or in a cage affords little protection to its
precious horn. In the past two years there have been at least 20 thefts in Britain alone from
zoos, museums and private collections.
In traditional Chinese medicine, powdered rhino horn was – wrongly – believed to be
effective against fevers, rheumatism, gout and much else. It was also used in pre-modern
medicine in India, Korea, Malaysia and elsewhere. Asia’s population and wealth have both
grown spectacularly. Tens of millions of people have become able to afford expensive cures.
Small wonder the rhino and other endangered species are feeling the pressure.
The same, after all, is true of many other species whose products are much sought-after in
Asia for their culinary, curative or decorative properties. Just this week it emerged that a
Chinese vessel that ran aground in a protected coral atoll in the Philippines on April 8th
was carrying 400 boxes – ten tons – of meat from the pangolin, the endangered scaly
anteater. Better-known prey is the tiger, a living pharmacopoeia: nearly every part of it has
medicinal value, or some other lucrative commercial use, such as in a rug. That is why
tigers may disappear from the wild. Elephant populations are also in crisis. On March 14th
and 15th, just as a ten-day meeting of the parties to the Convention on International Trade
in Endangered Species (CITES) was winding up in Bangkok, at least 86 elephants,
including 33 pregnant females, were killed by poachers in south-western Chad for the ivory
from their tusks.
The CITES meeting also had to respond to the crises facing creatures endangered by
Chinese fine-dining habits, such as abalone, sea cucumbers and sharks. Shark’s-fin soup is
an important part of the Chinese banquet served at weddings and other celebrations. So
every year between 100m and 275m sharks are killed for their fins. The CITES meeting
added five shark species to the convention’s Appendix II, meaning trade in them will be
regulated. The manta ray, threatened by the popularity of its feathery gill-rakers as an
ingredient in a health tonic, was also added.
The economics of extinction are ruthless. The fewer specimens of a creature there are, the
greater the value of its products. Those holding stocks thus have a big financial interest in
the creature’s disappearance. The CITES regime – controlling cross-border trade – seems
not to be working. So some argue that what is needed is an expansion of trade, using
existing stockpiles, farmed animals and the by-products of “trophy hunts”, to bring down
the price and cut incentives for poaching.
This approach has two big problems. The wild product is always likely to have a certain
cachet (European foodies can be known to turn up their noses at farmed salmon). Banyan
still remembers the indignation of a vendor in Ho Chi Minh City when he asked in 1997
whether the piece of tiger bone given pride of place in his shop, on plush red velvet, was
from a farmed tiger. Second, the bigger the legal market, the easier it is to launder poached
goods. So conservation groups are appalled at recent agreements South Africa reached
with China and Vietnam, though they are supposed to curb poaching. The groups fear they
herald an expansion of the ivory and rhino-horn trade.
The conventional view is almost despairing: as the inexorable rise of demand, rooted in
centuries-old tradition, meets a dwindling number of wild animals, the future for these
species is bleak. But in fact much of the demand is manufactured. Take rhinos. Demand for
rhino horn – and poaching to meet it – fell sharply after China banned its use (along with
tiger bone) in 1993. The poaching boom had arisen first from a craze for rhino-horn
dagger-handles in Yemen, then from China’s high-end market for ivory and rhino-horn
carvings. The final blow to the rhino has been soaring demand from Vietnam in recent
years. This stems from nothing more substantial than a rumor that rhino horn had cured
an (unidentified) former government minister from (unspecified) cancer.
Consumer demand is not immutable. Mainstream practitioners of traditional Chinese
medicine have long abandoned the banned derivatives of endangered species. In Chinesemajority Singapore a number of big supermarkets and restaurants have stopped stocking
sharks’ fins. In Smart’s day, rhino blood was as prized as the horn and “worth its weight in
silver”. It is rarely prescribed these days, even in Vietnam. Criminals, and the officials they
buy, make a fortune out of the market in endangered species. They are creating the
“traditional demand”, not the other way round.
Questions:
1- What was the deputy commissioner and settlement officer in Akyab district of
British-ruled Burma (now Rakhine state in Myanmar) worried about in 1917?
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2- Why were “these animals are ruthlessly hunted down and shot”?
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3- What was the global population of Dicerorhinus sumatrensisin 2011?
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4- What have authorities in the Kaziranga reserve in India’s north-eastern state of
Assam started using in an attempt to stop poachers?
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5- What beliefs have Asians held about these endangered species and why has demand
for these species increased?
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6- Identify several endangered species in Asia and the properties these species are
believed to possess.
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7- What is CITES?
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8- Discuss an action CITES has taken to address the issue of species extinction.
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9- Explain the economics of extinction.
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10- Why would an expansion of this trade possibly bring down the price and cut
incentives for poaching?
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11- What two problems would arise if the trade was expanded?
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12- How is demand for the products of endangered species manufactured?
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13- What can government officials do to reduce demand for products from endangered
species?
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14- Discuss reasons for optimism regarding stopping this trade and reasons for
pessimism for reducing this trade.
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Analyze the following images:
Multiple Choice Questions:
1- Excess supply
a) Is when quantity supplied is
more quantity demanded.
b) Is when quantity demanded is
more quantity supplied.
c) Describes any price or
quantity not at equilibrium.
d) Is the point at which quantity
demanded is equal to quantity
supplied.
2- In the Wealth of Nations, Adam
Smith argues that the baker and
butcher provide people with food
primarily to
a) Provide a service.
b) Earn a profit.
c) Offer a charity.
d) Connect with their
community.
3- Which of the following correctly
illustrates how prices serve as
signals to consumers?
a) A high price signals to
consumers that they should
buy a good.
b) A low price signals to
consumers that the good is not
well-made.
c) A low price signals to
consumers that they should
buy a good.
d) A high price signals to
consumers that the good is
well-made.
4- A market in which goods are sold
illegally is
a) A supply shock.
b) Rationing.
c) A black market.
d) Spillover costs.
5- Which of the following is NOT an
advantage of a price-based
system?
a) Prices act as an incentive for
buyers and sellers
b) Prices are flexible
c) Prices act as signals for
buyers and sellers
d) Prices can easily be set by the
government
6- How are goods and resources
distributed in a free market
economy?
a) Through rationing
b) Through prices
c) Through government action
d) Through disequilibrium
7- Which of the following does NOT
apply to a market system?
a) It ensures that government
intervention is always present.
b) It ensures the availability of
products that consumers want.
c) It ensures that sellers decide to
stay in business based on their
profits.
d) It ensures that sellers respond
to changing needs and tastes of
customers.
8- In any market, quantities
supplied and quantities
demanded will
a) Never be equal.
b) Be equal at only one price and
quantity.
c) Always be equal.
d) Be equal at several different
prices and quantities.