Tuesday, September 11, 2012

Incentives - Black Rhinos

Why does the market for Black Rhinos that create incentives different than other markets? How can these incentives be changed?

In Chapter 2 of Wheelan's Naked Economics titled "Incentives Matter," Wheelan address the incentives for people to kill Black Rhinos (which happen to be endangered). Wheelan suggests that when people kill rhinos, they can cut off the rhinos' horns and sell then for $30,000. The key to note here is that this species is valed higher dead than alive - making the black rhino market quite different from others. People have incentives to hunt down and kill rhinos - they get money for selling the horns. In order to save this endangered species, one, or a country for that matter, must give the black rhino killers greater incentives to keep the animal alive rather than dead. The example Wheelan makes addresses the tourism industry. Let's say, for example, since there are so few Black Rhinos alive - and they can only be found in Africa (I believe), people will visit Africa especially to see the black rhinos. Obviously, people come to see living - not dead animals. By keeping Black Rhinos alive, more tourists visit Africa. In turn, this will cause the former black rhino killers to keep the rhinos alive because by keeping them alive, they get more money (from the tourist industry) than they would have gotten for selling the 2 horns per Rhino.

1 comment:

  1. Josh,
    You addressed how scarcity can affect the market for rhinos and how these incentives can change based on the development of a tourism industry. You did not address in detail why the market is so different in that communal resources affect incentives and that the market cannot adjust to higher prices by producing more.
    4/5

    ReplyDelete

Note: Only a member of this blog may post a comment.