Following up on an article in Monday’s Wall Street Journal (subscription required), I’ve been reading up on Irbis Enterprises. Irbis, which means “snow leopard” in Mongolian, is an organization attempting to align the incentives of nomadic herders in Mongolia with not killing snow leopards to sell their coats. As the WSJ article says,

Irbis … marries two causes — wildlife conservation and poverty reduction — that are often at odds … [T]he snow leopard … shares its home with people who have no option but to rely on the land for survival.

Here’s how it works: Irbis trains nomadic herders in crafts using local materials. Herders sign a contract with Irbis stating that they will not kill snow leopards, and they keep the proceeds from the international sales of the items they make. Irbis pays each family a 20 percent bonus if no snow leopards are killed in their area, and if a snow leopard is killed, then all families in the area lose that bonus. This summary of Irbis’ methods lays out the conservation contract and the bonus arrangement. Also, almost all of the individuals working with Irbis (and by association with the International Snow Leopard Trust) are indigenous Mongolians.

OK, how do the economics of this setup align incentives for human well-being with snow leopard conservation? First, Irbis is focusing on creating trust and relationships through developing local institutions, using local people and local knowledge. These informal institutions are the foundation of successful, ongoing commercial relations and trade. Second, the concept of a contract as a binding agreement between Irbis and the herders to trade skill acquisition and profits from crafts for profits from killing snow leopards creates an institution of visible commitment. Third, the payment of a bonus contingent on the actions of a larger group of families, and the potential loss of future profits from the cheating of any one family, decentralizes enforcement of this contract and creates a strong social norm within groups of herders to avoid killing snow leopards. Thus enforcement is cheaper and more effective because it relies on local personal relationships coupled with a potential real economic loss if any one of them cheats.

This set of institutions illustrates many, many of the lessons we learn from game theory. First, repeat the interactions to increase the possibility of cooperation to achieve mutually beneficial outcomes. Furthermore, exploit the already-existing repeated interactions among herding families that travel in groups together to increase the possibility of cooperation at lower enforcement costs. Second, find some way to make commitment credible, as Irbis is doing with their conservation contract and their trust-building activities. Third, use diffuse local knowledge to customize the institution to fit local culture and norms.

There are about 1,000 snow leopards in Mongolia, and none have been killed in the areas where Irbis has signed contracts with herders. Herder consumption of flour and rice has increased. Irbis is planning on expanding the program, which is quite young, into more of the snow leopard’s range. This is very, very cool. Now if we could achieve this kind of institutional success with tiger (my favorite charismatic megafauna!) conservation and human well-being! This PERC policy analysis by Michael ‘t Sas-Rolfes illustrates only too painfully the incentive problems in wild tiger conservation, and how international treaties to end tiger poaching have little actual effect. The Hornocker Wildlife Institute sponsors and performs extensive conservation and habitat research on Siberian tigers, and you can sponsor individual wild tigers, but their program does not address the core incentive problems in tiger poaching in the way that the Irbis approach addresses the incentive problems in snow leopard killing.