More worthless elephants? Positive and normative effects of an ivory trade ban with smuggling and costly anti-poaching enforcement

Trade in African elephant products has been officially banned in CITES countries since 1990. A decade later, preliminary assessments of the effectiveness of the trade ban are ambiguous. Elephant populations continued to decline in some countries but rose in others. Some elephant range states still oppose the ban, arguing that it reduces the incentive to protect elephants against poaching. Supporters of the ban contend that even restricted trade encourages poaching since there is no affordably reliable means of distinguishing legal from illegal ivory. Thus, the best way to control poaching is to close off the market for ivory. Existing economic studies of the ivory ban do not account for smuggling—as distinct from poaching. Nor do they clearly demonstrate that trade, by enabling higher ivory prices, leads to greater protection and larger elephant populations. Furthermore, these studies failed to address whether the ban is a welfare-improving policy. Although trade restrictions are generally considered undesirable, market imperfections arising in the case of ivory may forestall the gains from trade. The decision by a majority of elephant range states to ban the trade in ivory suggests they felt trade was detrimental.; This study illustrates the positive and normative consequences of imposing a complete export ban on the products of a renewable natural resource subject to poaching and smuggling. Enforcement against illegal hunting is chosen to maximize social net benefits from the resource. We show how criminalizing an activity can be equivalent to the optimal tax policy, thereby providing a theoretical justification for a ban on exports from the private sector. A complete ban, while reducing the private incentive to hunt and sell ivory, also reduces the public incentive to pursue poachers. The net effect on elephant populations and social welfare is analytically ambiguous since the second effect counteracts the first. Numerical simulations reveal that a ban is likely to lead to more elephants in the steady state, but lower social welfare. Welfare may be higher if enforcement costs are high, the initial elephant population is small or that population is subject to complete open access, ivory dealers are foreigners, there are non-use benefits to be derived from elephants or prices after the implementation of the ban. Thus, an ivory trade ban can be beneficial for those countries that find anti-poaching enforcement difficult and costly, but it will be detrimental for others.