South-Western College Publishing - Economics  
Here, Fishy, Fishy, Fishy….
Topic Environment and the Economy
Key Words wild fish, aquaculture, fish stock, demand, overfishing, game theory
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Reference ID: A150839454

News Story Over the last few years, fishermen have seen the size of wild fish catches level off as more and more areas have been depleted of their natural resources.. To assist in providing the world its seafood, fisher folk have turned to fish farming--or growing domesticated versions of the wild fish formerly plentiful in the seas. Total fish produced on farms is beginning to catch up with the amount of wild fish brought to market.

In 2004, 66 million tons of fish were caught worldwide, and 50 million tons of fish were raised on farms. But that total production is still not enough to keep up with demand. As populations, health consciousness and incomes continue to rise, demand for seafood will as well.

The increased demand raises two problems. First, stocks of wild fish will not likely increase significantly, unless major steps are taken to offset the external costs associated with the overfishing that has already occurred. Overfishing becomes a case of the "Tragedy of the Commons" here, because individuals would be better off collectively ensuring the survival of the fishery. However, the costs of overfishing are passed on to the group as a whole (lack of future fish when current fish are captured), so individuals bear only a share of the full marginal cost of their consumption. And, as a result, since individuals cannot afford to bear a disproportionately large share of the costs, one individual's incentive to overfish becomes everyone's incentive to overfish. Second, aquaculture, as fish farming is called, presents problems of its own. For example, while such enterprises hold important promise to help feed hungry nations, capital investment in aquaculture in many areas is poor, limiting the fish farms' ability to increase production. In addition, aquaculture creates environmental problems, from soil erosion in areas that are clear-cut from fields to make way for the watery pens to the environmental damage that concentrated fish feces creates.

What's the solution? That's uncertain, at least in the short term. To bring back wild fish stocks, and to have greater populations later, governments must significantly curtail the fishing that's done now, which, of course, doesn't help meet demand in the short term. Aquaculture, while showing promise in its ability to increase the supply of fish and other seafood, will not become a mainstream farming technique unless its attendant environmental damage gets addressed. Until then, prepare to pay more for your tuna, Atlantic salmon, and East Asian prawns.

Discussion Questions:
1. What are the external costs from overfishing? Can you think of another resource humans consume that would be subject to such external costs?
2. Draw a graph of the market for fish (i.e., Atlantic salmon), and be sure to identify the difference between private production costs and social production costs. What's the difference between the market quantity, and the socially optimal quantity?
3. In your economic opinion, which is more important: containing the overfishing of wild fish, or improving the ability of aquaculture to produce? Why?
Multiple Choice/True False Questions:
1. If overfishing stopped, what would happen to the market price and quantity of fish sold?

  1. Price would rise and quantity would rise.
  2. Price would rise and quantity would fall.
  3. Price would fall and quantity would rise.
  4. Price would fall and quantity would fall.
2. According to the article, what will likely happen to the price of fish in the near future?
  1. Price will continue to rise.
  2. Price will rise initially, then fall.
  3. Price will begin falling again.
  4. Price will fall, and then rise again.
3. By definition, why does demand for fish rise as income rises?
  1. Fish is a normal good.
  2. Fish is an inferior good.
  3. Fish is a luxury.
  4. Fish is a substitute.
Source Revkin, Andrew C. "Farms' Output Grows Closer to Matching Fishing Harvests." The New York Times. September 4, 2006.
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