Economic activity and our environment have been closely linked since man first discovered the concept of trade. In the language of economics, the environment has itself, become an increasingly “scarce resource1”. Since economics is about managing these scarce resources, it will be a useful tool when considering some of the environmental issues facing our planet. One of the major concerns confronting the environment today is the overfishing of the world’s oceans, depleting some species to near extinction. With continued advances in technological and industrial proficiency, fishing vessels are able to fish across the globe, further exacerbating the effects of overfishing. Because the oceans are considered a shared or common resource, they inherently lack specific property rights protection and are therefore vulnerable to resource over-exploitation. As a result, fishing on much of the world’s oceans is not subject to regulation and therefore monetization of this dwindling common resource is further incentivized to the detriment of general societal welfare.
Global demand for Bluefin Tuna has pushed populations of this species to “decline over 70% in the last 30 years2”. The participants, fisheries and fishermen, acting in their own self-interest for the greatest short-term gain, will eventually deplete this common resource until it is exhausted. In this sense, the plight of the Bluefin Tuna can be described in economic vernacular as a “tragedy of the commons1”. The expression tragedy of the commons describes how free and open access to common resources, traditionally environmental, are typically overused and will eventually be depleted or destroyed. This negative environmental externality, the unintended and uncompensated costs that sustained, unregulated fishing directs on the welfare of society, is an example of a market failure. This market failure exists because the market price for Bluefin Tuna undervalues the full social cost of unrestricted consumption of this once plentiful fish. When negative environmental externalities exist, the private equilibrium price and quantity, as determined by free market supply and demand, is not the same as the social equilibrium. Since social costs are not priced into the individual or organization decision making, when accounting for the intrinsic costs to society (see graph 1), the socially efficient quantity while decline and the socially efficient price will increase. Because overfishing is so widespread and pervasive, coordinated global intervention is necessary through a combination of market-based corrective policies in order to adequately address this market failure.
One of the distinct features of any common resource is that it is a “non-excludable good1”, meaning no one can be prevented from using what is available. As discussed, the consequence of this scenario is that it will produce a socially inefficient outcome. There are differing...