Scot Wick Blog

Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed.

PART 4 The Economics of the Public Sector

Chapter 11 of 36 Public Goods and Common Resources

Section 13 of 13

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When Europeans first came to North America, more than 60 million bison roamed the continent.

Hunting the bison was very popular during the 1800s and by 1900 the bison population had fallen to only about 400.

Finally, government intervened to prevent species extinction.

The elephant in some African countries today are threatened with extinction, as poachers kill for ivory.

Not all animals with commercial value face this threat.

The cow is a valuable source of food.

There is no concern the cow will soon be extinct.

The great demand for beef ensures cows will continue to thrive.

…

Why does the commercial value of ivory threaten the elephant, while the commercial value of beef guards the cow?

This is because elephants are mostly a common resource, whereas cows are a private good.

Elephants roam freely without any owners.

Poachers have strong money-gain incentive to kill many elephants and take their tusks.

There are many poachers so each has slight incentive to preserve the elephant population.

Cattle are privately owned.

Each farmer makes great efforts to maintain his cattle population because he reaps the benefit of these efforts.

…

Governments have tried to solve the elephant problem in two ways, regulation and privatization.

Regulation

Most countries have made it illegal to kill elephants and sell their ivory, but

these laws have been hard to enforce.

Elephant populations have continued to decrease.

As usual, making a highly demanded product illegal results in short supply driving up its price and making the risk worth it for illegal traders.

Privatization

Some countries have made elephants a private good.

They allow people to kill elephants, but only those on their own property.

Landowners have an incentive to preserve elephants on their own land.

Elephant populations have started to rise in these countries.

With private ownership and the profit motive, the African elephant might become as safe from extinction as the cow.

(end of chapter 11)

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Congratulations! 11/36 = 31% of way to becoming a competent economist.