Saving the elephants, only for the hippos to be hunted

When two goods are substitutes, if the price of one of them increases or it becomes less available, consumers switch to the other. So, this report from The Telegraph (gated, ungated version from the New Zealand Herald here) last week should come as no surprise:

The elephant ivory ban is killing hippos, conservationists have said, as poachers and hunters take advantage of a loophole in the new law.

The Ivory Act, which will come into force later this year, was championed by Michael Gove, the British Environment Secretary, but conservationists argue that it puts hippos at grave risk as the import of their tusks will still be legal.

Hippo ivory, which resembles that of an elephant, is being increasingly traded globally with 12,847 hippo teeth and tusks, weighing 3,326kg, bought and sold in 2018. Trade increased from 273 items in 2007 to 6,113 in 2011...

Campaigners have called on the Government to close the loophole to ensure the ban applies to all ivory-bearing animals. They have also warned that it is nearly impossible to tell whether a tusk is from a hippopotamus that was slaughtered recently or many years ago, and whether it was poached or legally killed.

Will Travers, president of the Born Free foundation, said authorities were "shifting pressure" on to hippos by only banning ivory from elephants.

Banning elephant ivory doesn't completely shut off the supply of elephant ivory, but it does decrease it. This is because the costs of supplying ivory have increased (due to the penalties for supplying an illegal product). This decrease in supply shown in the diagram below, by the shift from S0 to S1. The equilibrium price of elephant ivory increases from P0 to P1.

Elephant ivory and hippo ivory are close substitutes (in the article, Will Travers says that "I sometimes can't tell the difference between different types of ivory and I've been in this for 35 years"). Elephant ivory has now become relatively more expensive, so more price-sensitive consumers switch to hippo ivory. This increases the demand for hippo ivory, as shown in the diagram below, from DA to DB. This increases the price of hippo ivory (from PA to PB) but importantly, it also increases the quantity of hippo ivory traded from QA to QB.

I have to admit, I hadn't realised the number of animals that produce ivory, including walrus, wart hogs, and narwhals (as well as elephants and hippos). But if you're going to ban ivory to save the elephants, it probably pays to ban all of it.

NZ ranks 18th in new ridiculous healthcare ranking

Last month, the New Zealand Herald reported:

New Zealand's healthcare system is ranked 18th place out of 24 countries - lagging behind a number of countries including Japan, Germany and even Australia.

UK healthcare recruiter Medical ID has ranked 24 OECD countries on their healthcare systems.

The ranking was based on the amount of GDP spent on healthcare, the number of doctors and nurses, how many hospital beds they have and the average life expectancy.

New Zealand was ranked 18th with a score of 60/100 and spending 9 per cent of its GDP on healthcare. It has 12,821 hospital beds and 62,843 doctors and nurses and the average life expectancy is 81.45.

It shared its 18th placed ranking with the UK which, despite having the 13th highest spending on healthcare, was brought down by being placed 22nd for the number of doctors and beds per capita.

This shouldn't even be news. Why? Because the ranking method is ridiculous, for a couple of reasons.

First, it is based on a mashup of both inputs (healthcare spending, doctors/nurses, and hospital beds) and outputs (life expectancy). This is basically double-counting, since inputs get turned into outputs. But also it double counts some inputs, since spending on doctors/nurses and hospital beds depends on the number of doctors/nurses and hospital beds.

When you want to know if a health system is good or not, it matters most to you what the output of the system is - does it keep people healthier, for longer? It doesn't matter so much how the health system achieves those outcomes. That is, it doesn't matter how much the health system spends, or what inputs it uses, if all you care about is whether it keeps people healthier. In that case, why not simply look at life expectancy, or even better healthy life expectancy, to work out which health system is better?

Alternatively, you might be interested in how much health outcome you get per unit of inputs (which might be per doctor/nurse hour, per dollar of spending, per hospital bed, etc.), or the amount of health inputs per unit of health outcome (for example, the cost per year of additional life expectancy). In the latter, you would be measuring the cost-effectiveness of the health system. In both cases, more output (using the same amount of inputs) is good, but more inputs (to get the same amount of output) is bad.

In contrast, in this ranking system, if two countries have the same number of doctors/nurses and hospital beds, and the same life expectancy, but one spends more than the other, the country that spends more is ranked higher. WTF? If Country A is spending more but only achieving the same outcome (the same life expectancy) as Country B, then Country A has got a worse health system. It is wasting healthcare resources, relative to Country B.

Second, and related to the previous point, higher health spending is not necessarily better. If that were true, a country could improve its ranking by simply contacting Big Pharma, and offering to pay them double for medicines.

So, it should be easy to see that this is a ranking system that is complete rubbish. I guess that's what happens when it is produced by "UK healthcare recruiter Medical ID", which has a vested interest in having a ranking system where the number of doctors and nurses, and healthcare spending, are indicators of a better healthcare system. In fact, they could instead be indicators that the healthcare system is simply wasteful.

Rational avocado thefts are on the rise

Last month the New Zealand Herald reported:

Tauranga growers Liz Pratt and Neville Cooper have caught the latest thieves on film after two separate night break-ins on June 8 and June 12.

Cooper said the sole thief caught on film on June 8 stole avocados worth about $1250...

The couple believes the thieves are selling the fruit on the black market to sushi shops, where the fruit is used immediately and can't be traced...

Police said provisional figures recorded 130 avocado thefts in the six months to last December, up from 110 on the same period of 2017.

There were 210 reported thefts in the full year to December, mainly in the Bay of Plenty, Northland and Eastern districts...

Police Senior Sergeant Alasdair Macmillan said police "have seen a rise in reporting these types of thefts in recent months".

"Avocados are a target for thieves due to availability and price," he said.

This relates to previous posts of mine on honey thefts and onion thefts. At the risk of repeating myself, Gary Becker (the 1992 Nobel Prize winner) identified that rational criminals would weigh up the benefits and costs of their actions, in his economic theory of crime (see the first chapter in this pdf).

A similar way of thinking about it is represented in the diagram below, where Q is the quantity of avocado thefts. Marginal benefit (MB) is the additional benefit of engaging in one more avocado theft. In the diagram, the marginal benefit of avocado thefts is downward sloping - the more avocado thefts a criminal engages in, the less they can sell their stolen avocado for (because it is harder to 'fence' greater quantities of stolen avocados - there are only so many sushi shops that will accept stolen avocados). Marginal cost (MC) is the additional cost of engaging in one more avocado theft. The marginal cost of avocado theft is upward sloping - the more avocado thefts a criminal engages in, the higher the opportunity costs (they have to give up more valuable alternative activities they could be engaging in, and as well, they are more likely to get caught and it becomes harder to 'fence' their stolen avocado). The 'optimal quantity' of avocado thefts (from the perspective of the thief!) occurs where MB meets MC, at Q* avocado thefts. If the criminal engages in more than Q* thefts (e.g. at Q2), then the extra benefit (MB) is less than the extra cost (MC), making them worse off. If the criminal engages in fewer than Q* thefts (e.g. at Q1), then the extra benefit (MB) is more than the extra cost (MC), so conducting one more theft would make them better off.

Now consider what happens in this model when the value of avocados increases. The benefits of avocado crime increase. As shown in the diagram below, this shifts the MB curve to the right (from MB0 to MB1), and increase the optimal quantity of avocado thefts by criminals from Q0 to Q1. Avocado thefts increase.

It is incentives that lead to an increase in avocado theft, and avocado theft can also be reduced by changing the incentives. The New Zealand Herald article gives some suggestions:

Pratt and Cooper had four thefts last year, prompting them to spend about $2500 on security cameras and $1700 on electric fences along all their road frontages.

"Up to then we hadn't had any trouble at all," Cooper said.

"Other growers have had similar experiences. I was just talking to one the other day, he's just bought 10 of them [cameras] to put around his orchard. He's had a lot of break-ins."

He said he had heard that at least one sushi shop owner had been prosecuted for receiving stolen avocados. But that didn't seem to have stopped the practice...

[Police recommended that] "Orchardists can help prevent thefts by taking action to secure their properties and crops. Measures include installing boundary fences, and CCTV and hidden cameras to catch offenders.

"Such measures can be highly effective, and the information captured through CCTV can be extremely helpful as the more information residents can pass on to police, the more likely it is that we can make an arrest."

Installing CCTV and security fences increase the marginal cost of engaging in avocado theft, shifting the MC curve up and to the left. The optimal quantity of avocado theft will reduce. Prosecuting sushi shop owners who receive stolen avocados will make shop owners less willing to receive stolen avocados, reducing the marginal benefit of avocado theft. This shifts the marginal benefit curve down and to the left, and decreases the optimal quantity of avocado theft.

Read more:

• Why honey thefts are on the rise
• When avocado demand outstrips supply
• Rational onion theft

For economists, talking with sociologists

Have you ever (as an economist or economics student) found yourself talking to sociologists, and wondering what on earth they are talking about? Sometimes they seem to be speaking a foreign language. Maybe they are. Or maybe, they can't understand you and you wish you could say things in a way that the sociologists could understand?

Fortunately, there is a solution. Back in 1990, Jeffrey Smith and Kermit Daniel (both PhD students at the University of Chicago) compiled the Economics/Sociology Phrase Book:

...to help economists adjust their way of speaking in a manner that will make it comprehensible to Sociologists.

Why sociologists? Smith and Daniel explain that:

We chose Sociologists rather than Political Scientists because the latter tend to be unpleasant, emaciated people with glazed eyes, while Sociologists are often entertaining and cute. Unlike Anthropologists, they can be invited to parties without much worry for the safety of the silverware, and their rhetoric, when treated like background music, has a pleasant, lyrical rhythm.

The phrase book contains very helpful translations, such as the sociologists' use of "is correlated with", "determines", and "is caused by", all of which translate to economists as "is correlated with". Harsh, but fair. Enjoy!