Fishing is a great example of how market failure can occur. Ever since the start of industrial age the world’s fish stocks have come under pressure. Overfishing is a huge problem that we are faced with today. Overfishing is when we catch fish faster than they can reproduce. Overfishing also puts many marine species in danger, as they they become victims when such unsustainable practices as longlining and bottom trawling (see below) are used to produce fish.
As a result “53% of the world’s fisheries are fully exploited, and 32% are overexploited, depleted, or recovering from depletion.” (FAO (2010) State of World Fisheries and Aquaculture (SOFIA) – SOFIA 2010. FAO Fisheries Department). Most recently, stocks of Bluefin Tuna and Chilean Sea Bass have been pushed to the brink. Experts claim that our level of consumption is not sustainable unless actions are taken around the world.
Why are our fish stocks so depleted? What are the consequences? How is it that we are endangering our entire ecosystem like this? Infographics do a really nice job in helping to explain the issue, and how we can tackle it (no pun intended.)
Many of these answers revolve around our economic system we live in. Here are a few reasons as to why things are the way they are:
1- Property ownership is lacking when it comes to the sea, and therefore people neglect it. This is called tragedy of the commons.
2- There are negative externalities (of production) that are connected to fishing. Fisherman do no consider the impact of over-fishing on society especially the impact it may have on fisherman in the future. (Watch the video below to get a sense of the damage it does to our ecosystem.) If these additional costs to society were factored in, we would not have such a situation.
3- Fisherman have imperfect information in regards to the size of available fish stocks.
4- Fishermen are often times subsidized by governments. Why.
5- Pollution of our oceans has led to the further depletion of ocean wildlife. Pollution of our oceans is again due to the lack of property rights and therefore, is considered a Tragedy of our Commons. Consider the BP Oil Spill in the Gulf of Mexico as an example.
6- The Prisoner Dilemma- this game theory example helps demonstrates why fishermen take part in over-fishing. Fishermen have incentive to catch as much fish as possible, as they assume other fishermen are trying to do the same thing. The dilemma arises when an individual’s behavior is influenced by the predictions that they make about how others will react in response to their behavior. In the case of fishermen, they are more than likely to predict that other fishermen are catching as much fish as they possibly can before our fish stocks are depleted therefore, they too will fish for as much as possible. This dilemma creates more of an issue as fishing stocks fall, as fishermen are influenced to fish more rather than less. Although policies can be put in place, fishermen are likely to cheat, as they expect other fishermen to be doing the same. Check out this Khan Academy Video to learn more about how the Prisoners Dilemma Works. (What does the Prisoner Dilemma have to do with prisoners? Watch this to find out.)
7- Owning a fishing boat is expensive and therefore, fishermen feel obligated to catch enough to pay for the expenses (fixed costs) and hopefully, earn a profit.
8- Destructive (unsustainable) fishing practices such as dynamite fishing and cyanide fishing, destroying ecosystems and the fish populations that live in them.
Draw an economic diagram to demonstrate the negative externalities associated with overfishing.
What policies could government use to help solve the problem? Make a list of at least 5 policies to help tackle the overfishing problem.
Here are examples of how countries/ trade blocs are dealing with overfishing.
- EU fish quotas rise in line with sustainable reforms
- How about providing information for the sushi eaters through the use of a documentary? Show how consumers are contributing to the problem, which may help sway consumers into consuming less! Check out Sushi, The Global Catch. Or check out End of the Line which focuses more on providing people information about the problems with the production methods of fishing. (Here is a short clip) Who will this type of documentary impact?
Finally, create an infographic (in groups of two) that puts the spotlight on a negative or positive externality of either consumption or production.
- How do I create an infographic? Use this document to support you in creating one.
- Use economic terminology to explain that the situation, especially language related to market failure.
- Use solid and up to date facts to support your claims.
- In your infographic offer solutions to the market failure issue you are working with.
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