Saturday, October 8, 2016

Bobcat hunting permits and Basic Economics. Not sure which gets killed more cruelly.


Here is an interesting article that shows conflict between basic economic principles and a social policy that makes for a terrific lesson.  The following is an excerpt from a media source in the State of Illinois (any highlights are mine):
6,000-plus apply for 500 bobcat permits; some aren’t hunters
"""More than 6,000 people applied for the 500 permits available to hunt for bobcats this fall in Illinois, which is having its first legal bobcat hunting season in more than 40 years. 
The Illinois Department of Natural Resources received 6,416 applications, which it accepted throughout the month of September, for 500 available permits, according to the Carbondale Southern Illinoisan. 
A lottery will be held to determine who gets the 500 available permits. 
Some of the applicants apparently are opposed to bobcat hunting, and would not be using any permits they receive. Rockford resident Jennifer Kuroda started a Facebook group called Illinois Bobcat Conservation, on which she encouraged opponents of bobcat hunting to apply for permits, according to Chicago radio station WBEZ. 
“I don’t feel that badly about doing it because I feel strongly that these animals need to be conserved at some level,” Kuroda told the radio station. 
Kuroda said 11 of her friends have applied for permits. 
The fee to apply for a bobcat permit is $5. Hunters who harvest one are required to purchase a possession permit for another $5. 
The bobcat was once listed as a threatened species in Illinois, but the designation was removed in 1999.""""
Read more here: http://www.bnd.com/news/local/article105844877.html#storylink=cpy

The number of permits issued is fixed at 500. No more will be issued. We can assume the Supply of Permits is Perfectly INELASTIC---regardless of the price, only 500 will be available.

The State has set a price of $5.00 for each permit. We can assume there will be a demand for these permits at that price. This is how the "equilibrium" sets up---but not for long:


We know from the response there are at least 6,000 people who would like a permit at $5.00. Quantity Demanded is greater than Quantity Supplied.

There is a shortage in this market of 5,500 permits at $5.00.

 Ceteris Paribus, what is true at $5.00 and Point "B" is going to be true at every other point on along "D*"---at some price the Quantity Demanded is going to be greater than it was before. The market Demand Curve shifts to the RIGHT.
In this case the "true" market price would rise to some price higher than "Pe = $5.00"  to "P 1= ???" at Point "C".

However, Illinois does not seem predisposed to do this. They also do not allow the permit to be transferred from one person to another.

This, in effect, puts a "Price Ceiling" on the permits---the price is not allowed to rise above $5.00.

What are the costs of this policy?
 1. Lot's of people can't get a permit. Consumer Surplus is diminished.
 2. Right now the State gets a total of $2,500 for issuing the permits ($5 each X 500).  That CAN'T possibly cover the costs of permit issuing and enforcement, can it?
 3.  LOTS of foregone fee  revenue! Would 500 of that vast surplus of consumers/hunters be willing and able to pay $1,000 for a permit? $2,000? More?

Why only $5.00?  The only reason I can think of is the issue of "equity"---a low permit price allows low income people the opportunity to participate in the hunt.  That seems like a weak argument to me given what is at stake.

What are the benefits of this policy?

Any ideas?

POSTSCRIPT: I did not include in the calculation (but should have) in the total revenue the fact that anyone just APPLYING had to pay $5.00.  So the actual total revenue generated is greater than I posited.  However, my question still stands---why is the permit so cheap?
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