Question

Watch the video on Icelandic fishing and answer the following questions:

1. Explain the public good identified in the video? Explain the two characteristics of this good that make it "public".
2. Explain the externality that results from over-fishing? Who is impacted? How are they impacted from overfishing?
3. How did they solve this problem? Use the information from the video to answer this question.
4. Why is this considered better than taxing/subsidizing (which is the solution discussed in your text)?

https://www.youtube.com/watch?v=sCLd8T1HNN8&feature=emb_title

Answer 1

Fisheries is the public good identified in the video. As a result of market competition, over fishing is imminent in the process of establishing fisheries to an extent some of the fish species have completely gone out of stock.

They are treated as a public good because they are a common property resource at the end of the day and non-rivalrous. Although the problem of over fishing is something which makes us question why fisheries are public goods.

The negative externalities include decrease in bio mass (extinction of species, etc), disturbing coastal environments and intra industry friction just to name a few. The natural habitat including the people living, the fishes and related industries are affected due to ovefishing.

The problem was solved by offering property rights to the fisheries which provides an incentive to conserve the fishes. This motivates the owners of these fisheries to positively reduce the externalities caused due to overfishing. Apart from this, a regulation was imposed on the number of fleets and vessels which can be carried so that overfishing can be curbed, and in case needed the Fishers can trade the permits.

A market system for permits allows the most efficient fishers to be in the market and paves an exit way for the least efficient fishers. In this way, the problem of overfishing is controlled and why is it better than taxing/subsidizing anyways? In the case of taxing and subsidizing, government is directly involved meaning that the efficiency could be compromised somewhere and the market powers could influence the government to turn favourable decision. On the other hand, a market system similar to Ireland ensures that the problem is solved naturally.

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