Useless and discredited economics underpins rhino trade policies
- Ian Michler
- 03 Mar 2014 10:58 (South Africa)
And a peek at the list of conference presenters may just shed further light on this. Drawn from a broad cross-section of government and civil society, and representing the worlds of conservation and science, amongst them were only two from the field of economics. One was an avid pro-trader well-known to almost everyone associated with the rhino poaching crisis in South Africa, and the other, Professor Alejandro Nadal, is a neutral hailing from the El Colegio de Mexico in Mexico.
His presence was significant in that he presented a strong critique of the current economic modelling underpinning the pro-trade lobbies for various species. According to Nadal, “all of the models being used are quite useless and have been discredited theoretically long ago. They are deeply flawed.”
Could the South Africans have had an inkling of what was coming?
Armed with a degree in law and a PhD in economics from the University of Paris, Professor Nadal is affiliated with the Centre of Economic Studies at El Colegio de Mexico, which is regarded as one of the most prestigious institutes of higher education in Latin America. Here he teaches Comparative Economic Theory to Masters and PhD students. He is also the author or co-author of eleven books covering various aspects of economics, Co-editor of Economic Thought, a journal of the World Economics Association, and he sits on numerous local and international boards as a senior advisor.
Professor Nadal agrees with most that the London Conference was a “major accomplishment”, as it put the role wildlife trafficking plays as a primary driver of biodiversity loss on the front page of global political agendas. But he also believes it was crucial in that it provided a credible platform to provide another key message: legalising markets as a solution to wildlife poaching “with the aid of pseudo-economic analysis should not happen without a serious debate.” Although his college has a neoliberal reputation, Nadal believes these issues need to be approached without any agenda: “I am not anti-trade, I am just anti-nonsense,” he says.
As is the case with so many complex disciplines, the headlines are good for selling the story, but to understand the real substance and consequences, one has to delve into the detail. Nadal outlines a number of areas where the current pro-trade modelling falls short. “Firstly, those models are totally incapable of determining the direction of relative price movements. This is a pretty serious problem for anyone advocating the use of legal markets as a policy option,” he explains by way of warning.
“Secondly, they are ineffectual when it comes to analysing market dynamics because they are based on comparative statics. What this means is that those models are very crude tools in the analysis of price formation processes, which are essentially dynamic.”
His third principal area of concern endorses the warnings so many have made against making simple assumptions on the demand side. “Pro-trade modelling uses a completely discredited notion of normal downward sloping market demand curves. This impedes understanding final demand dynamics,” he says. For Nadal, this component is one of the most critical when deciding on policy options. “It is indeed surprising to observe that nobody that proposes legal markets for rhino horn, for example, has ever produced reliable data on price elasticity of demand. So, in essence, these folks are empty handed when it comes to the crucial question of how demand may react to price reductions. Clearly, under those circumstances advocating a legal market becomes a dangerous proposition.”
And his last point is that “pro-trade models have not integrated a more realistic set of assumptions on the nature of the agents involved in illegal wildlife trade.” In other words, they have simply left out a chunk of vital information.
Given these glaring weaknesses, it’s hard to believe the South African government would not have called for a range of opinion during their decision-making process. Well, it seems they did, but have chosen not to release or even acknowledge the conclusions of papers they didn’t like. A number of years back, Nadal was tasked to review a study commissioned by the South African government on the feasibility of legalising rhino horn trade; why has that study never been released into the public domain?
Nadal’s final word on the pro-trade literature that underpins South Africa’s policy is extremely telling. “The modelling is plagued by simple textbook economics. We have not seen anything resembling a rigorous discussion that would have the same standard of papers in, say, debates on macroeconomics or free trade agreements or industrial regulation. Most of the literature is full of dogmatic perspectives that are probably driven by ideology more than serious theory.”
Earlier this year Economists at Large released Horn of Contention, a review of literature on the economics of trade in rhino horn. This report was also critical of the pro-trade economic modelling being used to underpin the legalisation of trade as a policy option. But in the senseless frenzy to discredit the paper by focusing on the funder, the message and detail seemed to be conveniently ignored.
Given his professional credentials and impartiality, it’s hard to see how Professor Nadal’s independent input can be given the same treatment. It is becoming apparent that there is absolutely no credible way the South African government and SANParks can continue advocating a policy that seeks to legalise markets trading in rhino horn and elephant ivory. DM
Ian Michler has spent the last 24 years living and working across 15 African countries as a safari operator, specialist guide, consultant and environmental journalist. He works with the Conservation Action Trust.
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- Useless and discredited economics underpins rhino trade policies
- Truth can be stranger than fiction: the horn and ivory trade paradigm
- Horn of contention: pro-trade thinking comes in for criticism