In this post, “How Free Trade killed the Buffalo,” Olaf Storbeck links to a paper (forthcoming in the American Economic Review) by M. Scott Taylor on the late-19th-century slaughter of bison in America. Storbeck describes Taylor’s paper as showing that “the most important driver of the extinction of the American bison was technical innovation, globalisation and unfettered capitalism.”
Although I can pick several nits with Taylor’s paper, I read it not as a morality tale about what an unholy trinity “technical innovation, globalisation and unfettered capitalism” are, but, rather, as describing an historical instance in which capitalist institutions worked.
Yes, innovation that allowed for the successful tanning of bison hides prompted hunters to slaughter more bison in order to help meet the global demand for leather. And for a while this increased hunting did indeed reduce the size of bison herds to dangerously low levels. But only for a while – as Taylor himself notes when describing the
numerous private parties who found buffalo to be such a valuable resource that they established property rights on their own by capturing and then breeding live buffalo. Several entrepreneurial ranchers in the 1870s and 1880s established private herds that, until federal legislation arrived in the mid 1890s, probably saved the buffalo from extinction [p. 33].
Taylor needn’t have qualified his conclusion with the word “probably.” Such private property rights certainly saved bison from extinction. Private owners of bison are no more likely to let their herds be slaughtered to extinction than are Jim Perdue and other private owners of chickens to let their flocks be slaughtered to extinction.
Storbeck also errs when he asserts that, in the late-19th-century bison market, “the law of supply and demand was not working.” What Storbeck here refers to is the fact that dwindling supplies of bison put no upward pressure on the price of bison leather and, therefore, the dwindling supply of bison hides was not choking off the quantity of bison leather demanded by consumers. But all this fact means (assuming it to be a fact) is that bison leather and cattle leather were such good substitutes for each other that – because bison leather was only a tiny fraction of the world supply of leather – the global price of leather did not rise noticeably when the supply of bison leather became threatened by bison extinction.
To repeat, though: there was a perfectly predictable (see Harold Demsetz 1967) private market response on the supply side – namely, private entrepreneurial efforts to establish private property rights in a resource whose market value increased enough to justify the costs of establishing and enforcing such property rights.
UPDATE: My friend Dave Rose, at Univ. Missouri at St. Louis, upon reading this post, e-mailed to me a great line: “The only thing that trade ever destroyed is privilege.” Indeed so.