monica presents
a global common under threat
THE OCEAN
In 1982, the United Nations declared the world's oceans to be the common property of all humanity.
WHY IS THE OCEAN A GLOBAL COMMON? The open ocean is considered to be a global common because it is not under the control of any single nation nor is it owned by a corporation, institution or individual.
TRAGEDY OF THE COMMONS HOW DOES IT HAPPEN? The ocean belongs to no one and so fishermen must share the ocean. Let’s say, for the sake of this example, that the ocean can support 100 fishing boats. One hundred fishermen each bring a boat and all is well. But then, each farmer thinks, “If I bring one extra boat, it doubles my whole income and only puts a 1% drain on the commons.” All 100 fishermen think this so all bring one extra boat, and 200 boats quickly overexploit the fish that live in the commons. The fish become extinct, the predator that eats the fish is also threatened, the prey of the fish overpopulates, our entire underwater ecosystem becomes messed up. Eventually, the commons will not be able to sustain itself. Although the loss of the commons and its resources are the truly tragic consequences of overexploitation, the real tragedy is that each individual fisherman do not understand the significance their action has on the ocean and so they do not take responsibility for the damage.
WHY IS THE OCEAN BECOMING A TRAGEDY OF THE COMMONS? Like any other common, the ocean is often seen to some as belonging to no one and therefore is exploitable by anyone. Common resources are overexploited because there are no persons or institutions that has the motivation and/or responsibility to allocate them in a sustainable way. The key reason why people take resources from the ocean in the first place is to make money. The commons, being unowned, is therefore available to use at no cost, thus making the fishing industry more profitable. With more and more of the ocean’s resources becoming depleted every day, the natural balance of life is endangered as the disruption of the food chain can cause serious damage.
WHAT IS A MARKET? A market is made up of buyers and sellers. Buyers are there to acquire goods and services at the lowest possible price and sellers are there to offer goods and services at the highest possible price. Together, buyers and sellers form a market.
THERE ARE MARKETS FOR...
WHALE MEAT
SHARK FIN SOUP
TUNA
... AND THE OCEAN PROVIDES ALL THESE RESOURCES FOR FREE
price
THE MARKET WANTS: SHARK FIN One of the most lucrative fishing industries is the shark fin industry. Shark finning is a profitable but cruel practice that refers to the removal and retention of shark fins, accompanied by the disposal of the rest of the shark’s body (often while still alive) into the ocean. Depending on the shark and size of the fin, shark fin soup can be priced anywhere from $70 onwards. If the price of shark fins increases, there will be a decrease in quantity demanded. This is because the law of demand states that the consumer would rather buy more goods and services at a lower price rather than a higher price. This is better for the ocean because it means less threat of extinction to the sharks who play a crucial role in the ocean’s ecosystem. In contrast to the statement above, if the price of shark fins decreases, there will be an increase in quantity demanded as consumers are now more willing to pay for more at a low price.
LAW OF DEMAND
(BUYER’S SIDE OF THE MARKET)
higher price = decrease in qd
p1
lower price = increase in qd
p
quantity q1
q
SHIFTING THE DEMAND CURVE There are many factors that can change the underlying demand. Anything that affects the buying decision other than the price of product will shift demand e.g. weather, mortgage rates, gender, etc. The diagrams below show the change in demand of shark fin due to change in people’s incomes.
Market for Shark Fin P
P
d
se
c De
ea cr
In a re es
om inc
es
d se
om inc Qd
Qd
If the demand curve shifts to the right, it indicates a greater willingness to purchase, even without a price change
If the demand curve shifts to the left, it indicates less willingness to purchase, even at the same price
An increase in demand is not good for the ocean because it will require more sharks to be killed
A decrease in demand is good for the ocean because it will require less sharks to be killed
LAW OF SUPPLY
The law of supply states that (all other things unchanged) an increase in price results in an increase in quantity supplied. (SELLER’S SIDE OF THE MARKET) This means that producers are willing to offer more products for sale on the There are also variables that affect the market at higher prices by increasing ability to produce like natural disasters and production as a way of increasing profits. worker strikes.
P p2 = $50
p1 = $2
high price = more product
Simply put, at low prices, the supplier is either unable to unwilling to provide a lot of their product but at higher prices, the suppliers make more profit and so they are much more willing to provide more of the product to the market.
low price = less product
Qs q1
q2
The suppliers decision to sell are affected by other things too like cost of production which are land, labor, capital and enterprise.
If we are to save the global commons, we need to reduce the supplier’s production ability and decision to sell. Strikes and protests will affect their ability to make profit out of shark fins. More expensive production costs will reduce the number of businesses who want to sell shark fins. Also if the price is higher, there will be less quantity demanded so there is less profitability.
NEGATIVE EXTERNALITIES Negative externalities are the third-party effects arising from the production and consumption of a good or service They affect economic agents indirectly and if a firm must pay for all these social costs, it will cause their market to fail.
Price
MSC
MPC
p1
Negative externality in production of shark fin
p
MPB = MSB (D) q1
q
Quantity
}
The fisherman will only look at their Marginal Private Costs (MPC) of fishing for shark fin which will be the cost of the resources used in producing each additional (marginal) unit of shark fins and their profit. These would include labor, fuel costs, cost of the boat, the worker salaries, etc. Thus the supply curve for the shark fin market will only include the MPC of production at different prices and will not consider the actual Marginal Social Costs (MSC) or the external costs to society from the production of shark fin such as over exploitation, loss of biodiversity and damage to ecosystems and to the global commons as a result of over fishing. If the fisherman are forced to pay for the negative externalities their product created, they would need to sell their product for a very high price or not at all. This is because the cost of paying the social as well as their private costs would be extremely expensive. No one wants to pay for the environmental damage their product has. If fishermans were responsible for cutting the sharks humanely with painkillers and then attaching synthetic fins (which would have taken years of research), it would be a waste of time and resources. The price of the product would have to increase and they wouldn’t be able to supply as much because less consumers would be willing to pay the high price tag.
EQUILIBRIUM P
Market for Shark Fin
If the price is too high, the quantity demanded will be less and there will be a surplus. To get rid of the surplus, firms must reduce the price so that consumers will buy it. If the price drops too low and there is less of the product, consumers will compete. Eventually, the price and quantity demanded will have to reach the equilibrium which is the point in which the product will be optimally allocated with no shortage or surplus.
Surplus
The equilibrium means there will be no shortage or surplus but does it change anything for the commons?
P
Even if all the shark fins are optimally allocated, that just benefits the buyers and sellers. There are negative externalities that arise from the production, distribution and consumption of the product. It may not affect the people inside the market but it sure does affect those outside of it. The fumes from the trucks that transport the fins contribute greenhouse gases. The electricity used to make the shark fin soup isn’t helping Global Warming either.
Pe
Shortage Q Qe
Q
If the market for shark fin continues to be popular, not only will shark populations will deplete causing major damage to the ocean ecosystem but we will also be destroying our earth without realizing it.
To help the global commons, we must make people rethink about what the ethical choice is. Telling your friends and family to not eat shark fin soup and refusing it yourself will make an impact. Putting up posters and flyers can help to.o. You can volunteer at a local NGO to save the ocean, do beach clean-ups, fundraise for the sharks, join or make your own CAS group, donate and more! But, although handing out flyers and sticking up posters do help to spread awareness, it is usually money that sparks people’s interests and opinions. In an economics perspective, in order to decrease the threat to the global commons, we should increase the price of shark fin soup, thus decreasing the quantity demanded. We should also get businesses to pay for any damage their product creates. By including the negative externalities, businesses won’t be able to just go off and slice off the fins of sharks and because the price is higher, consumers will think twice before paying for their meal. Decreasing demand through protests and strikes would also help to reduce the threat to the commons as it would shift the demand curve to the left. As for the equilibrium, although it does allocate resources optimally, at the same time it causes environmental and health deterioration. The equilibrium may be the point of stability but to find equilibrium the company must know exactly how much consumers are willing to pay and how much of their product they are willing to supply. It is unlikely that a business will know exactly what the equilibrium is at first glance as the market is always in flux and depends on many determinants. A company will almost always begin with either a shortage or a surplus which isn’t really very optimal. To allocate resources without negative externalities depends on the choices we make and how we intend to promote environmental stewardship. The commons are tricky to debate because they have no owner. There is no one to regulate the rules or reinforce environmental stewardship so people will just take as they will and to those who try to stop them that they don’t have the right to tell them what to do because they don’t own the commons. Those who take from the common don’t realize the impact they are making on the common and so they are blind to the damage they have made. Thus, the tragedy of the commons exists. It is the duty of the current generation to prevent the destruction of not only the global common of the ocean but other commons such as the atmosphere and ozone layer. The commons after all, are what all humans share alike and to continue to harm the commons would be a big mistake.
SOLUTIONS Sharks play a crucial role in our ocean’s ecosystem. They are considered by scientists to be “keystone” species, meaning that removing them would cause the entire food chain to collapse. For this reason, the prospect of a food chain minus its apex predators may mean the end of the line for many more species. Some solutions we can begin thinking about are: - Don’t eat shark fin soup By refusing to eat shark fin soup, you would be lowering the demand for shark fins. - Sign a petition/pledge to not eat shark fin By doing this, you are showing your support to saving the global commons. - Persuade a restaurant to remove shark fin from their menu If you are really passionate, you could try to persuade a restaurant to remove shark fin from their menu and use another alternative - Donate/volunteer to a “Save the Sharks” NGO Some organizations rely on volunteer help and donations. - Create a club that stands up against shark finning Gather a bunch of people with the same interests to try and save the sharks. - Tell people about the issue! Educate people. Awareness is just as important as taking action.
“When the buying stops, the killing can too.”