A huge legal sale of ivory in 2008 backfired. Instead of crashing the price of ivory and undermining poaching, poaching exploded in East Africa. It increased by 65%.
The international trade in ivory was banned in 1989. In 2008, China and Japan were allowed to pay $15m for 107 tonnes of ivory from elephants that died naturally in four African nations.
Hsiang and Sekar this week found that this legal sale of ivory was followed by “an abrupt, significant, permanent, robust and geographically widespread increase” in ivory poaching. They were right to conclude that the legal sale provided a cover for poached ivory.
The economic intuition was that if we allow the sale of some legal ivory in Japan and China, then there would be fewer people left to purchase it illegally. We found that that intuition was incorrect. The black market for ivory responded to the announcement of a legal sale as an opportunity to smuggle even more ivory.
The legal sale of ivory created new demand for ivory in China, where it no longer had the stigma of an illicit product. The presence of legal ivory provided cover for smugglers trying to peddle illegal ivory sourced from poachers.
As illegal ivory can now masquerade as legal ivory in China, transporting and selling illicit ivory has gotten easier and cheaper, which can boost illegal production even though prices are falling.
Ivory is a repugnant market. Many friends will be revolted by you having ivory products.
The presence of legal ivory made it possible for counterfeit legal ivory to be passed off as legal ivory and therefore your friends will not reject you. This is a real and striking example of a unintended consequence. The solution to poaching is property rights.