Thursday, 19 November 2015

Evidence for banking on extinction of Sumatran rhinoceros

In a previous post, I argued that contrary to what Robert P. Murphy claims in Chapter 6 of his 2007 The Politically Incorrect Guide to Capitalism, speculators and holders of stockpiles of rhinoceros horn have a very strong incentive to wish for the extinction of these species to increase the value of the horn they presently hold.

The thesis was outlined five years after Murphy’s book in the Oxford Review of Economic Policy’s ‘Banking on Extinction: Endangered Species and Speculation’ by the team of Erwin H. Bulte, Richard D. Horan, and Charles F. Mason. ‘Banking on Extinction’ provided a valuable previous example with the Dutch destruction of nutmeg trees, and also discussed banking upon extinction of less critical species like the sloth bear (Melursus ursinus).

Now,  as the Sumatran rhinoceros is extinct outside Sumatra itself and numbers have fallen almost as low as the Javan Rhinoceros, it has become clear that poachers in the primary horn consuming nations of Vietnam and China are deliberately trying to hunt the species to extinction. Although older articles on rhinoceros population declines argued that the crisis facing the Sumatran Rhinoceros has little to do with poaching and was dictated by large-scale habitat destruction for agriculture, in fact there remains a lot of suitable habitat within the historic range of the Sumatran Rhinoceros that is entirely unoccupied by the species.

The fact that the Javan Rhinoceros was poached in Vietnam until the very last individual was dead implies that those who carry out poaching know their superiors’ demands to ensure that the limited remaining horn of these species will sell for the highest price possible – which even for low-level hunters means greater long-term income as the stockpiled horn sells for prices much higher than the  $75 per gram that Sumatran rhinoceros horn presently sells for. What Sumatran horn will sell for once the species is extinct nobody so far as I am aware has ever estimated, but it could be orders of magnitude higher than the present price which no doubt is depressed by stockpiling in the expectation of extinction. Given the rarity of the commodity even today, and the potency traditional East Asian pharmacists associate with the Asiatic rhinoceros species, it’s possible I feel that post-extinction Sumatran horn could sell for $750 or even $7500 a gram. At such prices, only a tiny amount of horn would make the speculators who hold Sumatran horn stockpiles very rich indeed, and the prestige of the commodity would no doubt rise once it becomes via extinction non-renewable.

‘The Operatives’’ study is a very revealing argument against Austrian School claims that free markets will actually protect endangered species in all situations – exploitation can, and not only on cheap farmland in Australia and Africa, be too efficient an alternative.

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