From the Alaskan tuna fish, the Norwegian salmon, the Omani pearls, the Ghanaian kobi, the Chinese carp, and the Canadian cod (and much more!), it is an understatement to say that marine resources are an important component of lives and economies around the world. Beyond the aesthetically alluring appearance of its pearls and the tantalizing taste of its fish, the oceans provide us with a seemingly infinite amount of precious resources. But yet it is not infinite. The vastness of the oceans may deceive us to believe that its contents are just as endless, but reality says otherwise. Fish populations and habitats are, for a variety of reasons, dwindling - causing both environmental and economic implications. In this blog, we will take a short voyage into the microeconomic aspects of overfishing and explore the complex relationship between supply and demand, market dynamics, and the long-term sustainability of fisheries.
“More Sushi, Please!”
The rising demand of marine resources is arguably the most apparent cause of the issue. As the demand of seafood rises due to rising wealth and changing dietary preference, which are brought by population increase, fish populations are under increasing strains. The growing demand encourages fishermen to overfish and further strain the finite oceanic resources. This is a typical illustration of ‘tragedy of the commons’, where a common pool resource is exhausted and overexploited for short term gains, at the expense of its long term sustainability.
Figure 1: Graph illustrating the market failure due to the tragedy of the commons (Ansari, 2023)
To understand the graph above, think of point QS as the starting point for the quantity of fish hauled. QS is socially ideal as MSC (marginal social cost) equals MSB (marginal social benefit). At this point, net societal gain is measured by the red area A. However, due to the increase in demand, QS increases to QP. Now, we are operating not at the MSB curve, but at the MPB (marginal private benefit), which favors firms, but is not sustainable - causing resource depletion and market failure.
The net social effect ends up being a net social loss of the B shaded area, leading to a vicious cycle of overexploitation, which makes the problem even worse.
Ripple Effects on Society
You may be wondering: So why does it matter if we overfish, who is really being hurt? Well, it turns out that pretty much everyone! From the small-scale fishermen, to the larger corporations, and even to us consumers.
As fish stocks decline, local fishermen may face lower catches and hence lower income, which is highly likely to cause Fishermen to use more cost-intensive and time-consuming fishing techniques. This causes uncertainty and economic hardship for coastal communities dependent on fisheries, leading to unemployment, poverty and social instability in many coastal cities.
As for bigger-scale fishing corporations, they may actually initially benefit from overfishing because they mostly take advantage of high demand, inflated prices, and less competitive waters (as the fishermen cannot compete with their technology or marginal costs). Additionally, bigger firms may benefit from informational asymmetry with regards to their lower-scale competitors. However, in the long run, the depletion of fish stocks will undermine the profitability of its business and endanger the sustainability of its economy - causing even more unemployment and societal damage.
To us consumers, we may be affected due to the market volatility, price surges, and inevitably a reduction in our food security (Srinivasan et al, 2010). This is due to the fact that the oceans literally and figuratively connect us together. To further understand this, consider taking a short 10 minute walk to the seafood aisle in the ASDA superstore just West of the university. Investigate the various origins of the products: The salmon may be from Scotland/Norway, the prawns from Malaysia/Thailand, the cod from Iceland/Canada…etc. Any shock to any of these markets will affect the price and/or availability of the product on our local supermarket shelves. A shock that we as consumers will inevitably have to bear in our receipts!
The Canadian Cod Conundrum
Even our friends across the Atlantic are not immune from the risk of overfishing. As the table below shows, the conundrum here is that after record highs of 46 million lbs of cod in 2017, the landed weight of cod decreased in 2018 and started fluctuating from 26 million to 32 million in 2019-2023; while the value per lb increases nearly yearly, and reach $0.799 per lb in 2023. This shows that the supply does not satisfy the rising demand, leading to the surge in price of cods.
Simultaneously, the fishing industry as a whole has been stagnating, as the fishing-related employment is also falling since 2018. The total number of employment in the industry, including harvesting and seafood product preparation, fell from 71,050 in 2018 to 69,173 in 2022. This is not necessarily a stark drop, but highlights lackluster growth in the industry, despite the growing demand for fish.
Figure 2: Table Annual Canadian Cod Weight Loaded, Value Per lbs, and Total Employment (Government of Canada, 2020-2024)
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