Nova workboard

a blog from young economists at Nova SBE

Tragedy of Overfishing

Even last month Brussels approved a plan for the monitoring of fisheries in Portugal. Apparently, the goal is sustainability and in this sense the issue of overfishing is again subject of interest.
Assuming that the perfect competition is verified, the general equilibrium theory stipulates that market forces eventually lead to an economic optimum. However in the industrial fishing sector there is an interdependence between agents that generates a market failure called externality.
In the absence of control and in the presence of competition, each fisherman tries to catch as many fish as possible in order to maximize his short-term profit. This would not be a problem if marine resources were not a finite and common good. The truth is that the fish once caught will not come back into the sea! The decline in stocks is therefore the heart of interdependence. When fishing companies increase their catches and / or use nets with tighter meshes, they reduce existing stocks and endanger future ones. Thus, they not only increase their unit cost, but also their competitor’s.
The interaction between agents can be illustrated by the iterated prisoner’s dilemma. Each fishing company has: the temptation to increase its catches in order to maximize profit; the reward for mutual cooperation, dealing fishing levels to ensure sustainability; the punishment when all succumb to temptation and threat stocks; plus the loss of meet the agreed catch level but see others cheat. This is a game with endless repetitions and the cooperation represents the most efficient solution. However the fact that there are many participants, rises the suspicion that someone will increase their catch. Ultimately no one meets the agreement and everyone increases their fishing levels.
Since free access encourages over-exploitation of marine resources, it is required the intervention of the governmental entities for the economic optimum to be reached.
Theoretically, the best measure would be to assign property rights through a competitive auction. Companies would continue to make offers as long as the value of these bids were lower than the revenue from existing stocks in the property. This means that taxpayers would receive almost all of the revenue from stocks and that the optimal fishing effort would be obtained. Although it seems a good alternative in the long run, this will present several difficulties in implementation and acceptance by society in a short term. The fishing sector is characterized by mostly low-skilled workers who do not have easiness to find or develop a new profession. Likewise there are also issues such as regions highly dependent on fishing that will obstruct this measure.
In Portugal, the imposed solution undergoes by rigid administrative regulations and several tax licenses. The first part has as examples the restriction of hours of fishing in certain places or periods of closure or restriction for the collection of certain fish species. It is noteworthy that if the time is the problem, companies would bet on ships with greater capacity for capturing, creating inefficiency of resources and higher production costs. The second approach can be based on capacity of the vessels. In this case, companies would increase working hours beyond the efficient level.
I believe that, it is clear that those responsible for fisheries control in Portugal try to eliminate these negative responses by imposing new rules. Furthermore, they have been focusing on an increasingly strong monitoring system. However, this method is very expensive and still insufficient, which encourages the failure or violation of rules in the fishing sector. The answer to overfishing is to change the agents’ way of thinking. While this is not done, the costs of monitoring increase, the dissatisfaction of fishing companies regarding new rules intensifies, and the infringement of imposed rules remains.

Helena Fernandes, nr 737

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Author: studentnovasbe

Master student in Nova Sbe

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