The Fishing Market is a Unique and an Interesting
The fishing market is a unique and an interesting market to study. Similar to cattle and farming, in which a rich and specific land is best to raise cows and grow crops, fish also have their specifications. On one hand, when growing crops such as kale, lettuce, or carrots, they are best if grown during winter season. Likewise, different fish live in different areas and thus have an optimal season in which to fish them. Some are found in lakes, ponds, rivers or the ocean, meaning that seasons and location affect the availability of fish. As a consequence of these factors, fishermen and fishing companies are forced to use marginal analysis in order to determine what benefits them the most. Moreover, the government also plays a key role within this market considering that throughout time, governments around the world have implemented regulations to protect fish and waters. Still, fishery managers also have their own restrictions through a system known as catch shares. Overall, there are numerous factors that impact the fishing market, sometimes resulting in a change in supply and demand for fish.
In the first place, overfishing is a significant problem. Even in “the early 1800s when humans, seeking blubber for lamp oil, decimated the whale population”. With the misconception that oceans are massive and rich, humans have brought about pollution as well as habitat destruction for fish. Needless to say, this has developed into a larger problem of scarcity, which can be defined as the state of lacking supplies or resources. Despite the fact that many fishing companies have applied regulations, illegal fishing further intensifies this issue. As a consequence, less fish in waters means less quantity available to fish. For that reason, “fishermen are hunting farther from home”. Therefore, since the process for acquiring fish has turned into an even more complicated and expensive routine, the price for fish rises. Inevitably, this also affects the market when taking into consideration foreign food. These fish are cheaper which means that more people rely on it to satisfy their need for fish. Likewise, the increase in prices for fresh fish, increase the demand of substitute goods such as chicken.
Scarcity eventually leads fishermen and fishing companies to examine their options in order to decide what benefits them most when comparing those benefits to costs. Firstly, due to the lack of fish, fishermen are instantly forced to depend on limitations as a means to continue fishing. For instance, taking into consideration that overfishing also prevents fish from growing and reproducing, fishermen have to wait around during seasons in which fish do so. This means that they are weighting the benefits of fishing when there would be more fish available at a cost of the time they must wait. Still, as mentioned before, scarcity also leads fishermen and fishing companies to look for different locations in which they can continue to work. Therefore, they travel to places abroad. However, this voyages which can sometimes consist of long distances, are at a bigger cost. They are outweighing the cost of traveling at the benefit of being able to fish the quantities they need to carry out their businesses. In some cases, the benefit might be greater than the cost, whilst sometimes the cost of having to travel: Gas, food, and more people to bring along, might not be worth the benefit, or quantity of fish fished abroad. For instance, the price of fuel might sometimes rise, which could determine that a fishing trip would not sustain the price of fuel. On the other hand, marginal analysis also takes place when thinking of specific fish such as tuna. As countries like as Indonesia, Japan and the United States continue to fish tuna, they are also putting dolphins at risk. With a high catch of 270 metric tons in 2019 for the United States, at the same time, this is hurting dolphins. The nets used to catch tuna, “enclose prey like a drawstring bag, often trapping dolphins with the tuna”. Moreover, many fisheries use “fish aggregation devices” that “unintentionally kills all sorts of marine life–sharks, rays, marlins, sea turtles–that get scooped up along with tuna”. Accordingly, not only dolphins but other animals are dying at the benefit of fishing tuna, which is why fishermen are faced with marginal analysis. This is done to examine whether catching more tuna is truly more profitable when taking into consideration the number of dolphins that they could possibly hurt by increasing the number of tuna caught. Essentially, overfishing, problems regarding marine life and pollution, lead to an inefficient equilibrium within the market.
Moreover, due to the fact that all firms, which in this case are small and big fleets, suffer from the repercussions of overfishing, there are little incentives for conservation. This is due to the “tragedy of the commons” in which individual firms are more concerned of their own benefits rather than the common good. As a consequence, they overuse the product without realizing the negative repercussions it will have on all firms involved. At the same time, in terms of overfishing, since everyone is experiencing the scarcity of fish, firms embrace the problem instead of finding a solution before it is too late. For that reason, scarcity has reached its concerning levels of today, as fishermen ignored the problem.
These market failures can be represented through Figure 1, which was extracted from Hubbard’s book but edited to represent the fishing market. Since fish is a common good, QEficcient represents the efficient equilibrium which is the intersection of the demand curve or marginal social benefit and S2 or marginal social cost of fishing. On the contrary, QActual represents the actual equilibrium at which fisheries are catching and supplying fish. This happens because fishermen and large corporate fish companies do not take into consideration externalities, such as the loss of other marine life or water pollution. Due to these externalities or market failures, the marginal benefit is set at a higher cost, which in Figure 1 is indicated as the “True Social Cost” at the efficient equilibrium. Moreover, the deadweight loss area shaded in yellow represents overfishing. This quantity is leading to the lack of fish, instead, fishing at the QEfficient would allow fishermen to catch enough fish to sustain their business as well as preserve the environment without catching an unnecessary number of fish or putting at risk other species.
As a result of these failures within the fishing market, the government has had to intervene in order to improve the overall market and preserve marine life as well. They have implemented a system called catch shares, consisting of setting a limit on the amount of fish with the purpose of catching them in a sustainable manner. The amount that fisheries are allowed to fish should leave an amount in the water that would allow for healthy growth and reproduction amongst all sea creatures. Later, “the scientifically determined catch limit is then divided among fishermen”. This division not only helps individual firms, or fisheries, to catch the fish needed for their business, but it also ensures that the appropriate annual catch of fish is not exceeded and that competition amongst fisheries is somewhat controlled. Furthermore, catch shares also help reduce bycatch, a term used to refer to species that are unintentionally caught. With this, dolphin, shark, and ray populations are also benefited and thus solving the market failures that fishing companies ignored. Additionally, it is important to mention that having legal restrictions also creates an incentive for people to follow the rules. Before, despite the fact that fisheries were aware of the problems within the market, there was no real incentive that would encourage them to restrict themselves, also taking into account the tragedy of commons.
Similar to catch shares, the government has had to take an even more specific action towards preserving dolphins. As mentioned before, they are the main animals being caught along with tuna. Consequently, since people began to express their concern towards dolphins, “tuna companies began buying tuna from fisherman who didn’t kill dolphins, and labeled their cans dolphin-safe”. Eventually, the United States government enacted the Dolphin Protection Consumer Information Act in 1990, to ensure that no companies would unethically label their cans “dolphin safe.” The result of this solution is that consumers have a new incentive to demand more tuna as they have been rightfully fished.
On the other hand, despite the fact that catch shares and overall government intervention has solved some problems to a certain degree, the implementation of catch shares has become a controversy amongst the fishing industry due to the negative consequences it has brought about. In the first place, before actually implementing catch shares, fishermen’s main concern was regarding how difficult it is to calculate the number of fish in the ocean. Due to the fact that the ocean is vast, and fish are constantly moving, fishermen questioned the estimate that scientists eventually reached. Furthermore, it is hard to set a limit that both preserves the environment and sustains the fishing industry, leading to the negative consequences of catch shares.
Fishermen with small operating businesses are the ones that are being affected the most. The majority use to live off what they caught on a daily basis, but catch shares prevented them from doing so. The limited amount of fish they were allowed to catch was not enough to keep them going with their business, leading them to sell their quota to bigger companies. For instance, in New Bedford the fleet went from about 1500 boats to less than 350 in a couple of years. As mentioned before, these small operating fishermen believe that scientist in charge of determining catch shares were underestimating the amount of fish in the ocean, thus leaving them with a low limit to catch. The perfect example of these consequences is represented through Carlo Rafael’s fishing quota. Due to the fact that his business was already big before catch shares, once these implementations came in, he was able to take advantage. He bought the fishing permits from small business to increase his quota. Throughout 30 years, he was able to take control over the market. This led to his market power over small fishing businesses which eventually turned into a monopoly, allowing him to manipulate the fishing industry in New Bedford. With the lack of competition, he was able to set prices higher than if there were many more fish companies available, which leaves consumers with few choices. Correspondingly, with market power, it also means that an organization has the ability to reduce the level of output or supply. Therefore, with higher prices and less supply of fresh fish, the demand for fish will increase, thus allowing Carlos Rafael to earn more profit. At the same time, his market power paved the way for him to be able to break certain laws in order to make more money. “Carlos Rafael lied about how much fish he caught, falsified his government reports, and smuggled the cash to Portugal”. On the other hand, the common fishermen suffer the negative repercussions of catch shares. Some are scared to go places in where they might catch more fish than they are allowed according to their quota. In other cases, these small businesses catch more fish and have to buy quota from another fisherman. Unfortunately, some do not even have the money to buy quota and are limited to their own. They believe it is ironic that they go out to catch fish that they have to buy. For that reason, these critics claim that catch shares have only “privatized a public resource”. Nevertheless, the Environmental Defense Fund and other catch share supporters claim that despite some failures, catch shares have been able to solve problems in places such as Iceland, since they saw a rebound in certain types of fish. Additionally, they support the fact that “catch shares allow for a more capitalistic industry in which there is a higher income and more competitiveness within the marketplace for the nation” stated Ragnar Arnason. Essentially, the government and the Environmental Defense Fund assumed that by imposing these regulations which brought less fish to the market, there was going to be an increase in demand for fresh American fish. However, this is what happened in terms of Carlos Rafael’s business. The decrease in supply from other competitors, only allowed him to be able to manipulate his own supply as mentioned before. However, the large amount of foreign fish that also comes into the country which tend to be cheaper and less sanitary, also plays an important role. People prefer to buy these products because they are cheaper, causing fresh fish to “lose its shelf space”. This cycle further continues to benefit organizations with market power such as Carlos Rafael’s due to the fact that as fresh fish becomes more of a commodity, people that demand it will be willing to pay a higher price for it to its single supplier.
Without a doubt, in spite of catch shares having some positive impacts on the industry, small fishing businesses think otherwise. These fishermen constantly struggle to sustain their business with catch shares, whereas before, they were able to produce much more. Consequently, one solution that would ultimately prevent monopolies from forming within the fishing industry is limiting the amount of fish that one single business can catch, that is limiting the quota they are able to have. Essentially, this would prevent people like Carlos Rafael from buying fishing permits from other fishermen because they would have a limit on how much quota they can own. Furthermore, with the limit on quota, determining a certain period of time in which big corporate fleets are not allowed to fish is a possible solution as well. Through this, smaller businesses that are still in the market will be able to catch more fish and thrive whilst new firms will have an opportunity to enter the market again. At the same time, the government must calculate which companies are big enough to sustain some time without fishing. Another possible solution is allocating fleets to consumers that would purchase according to the amount of fish they catch. For instance, small fleets can distribute to small local markets whilst bigger corporate fleets can distribute their more industrial quantities to larger markets or even export them.
Nonetheless, the fishing market is a complicated market to analyze. It is challenging to create laws that satisfy all firms involved, improve the economy and preserve the environment at the same time.
