OBJECTIVES

• To understand the ‘tragedy of the commons’ as a form of market failure, with specific reference to the fishing industry
• To analyze the Indian fishing industry with respect to ‘tragedy of the commons’
• To outline the pros and cons of methods by which the ‘tragedy of the commons’ can be solved to ensure sustainability of fisheries

Introduction

Our presentation is on a form of market failure known as “tragedy of the commons”. This refers to the problems inherent with resources that are treated as common property. Our focus is specifically on the fishing industry with India as a case study.

It is necessary to first define what we mean by common property resources. Common property resources share two characteristics: excludability and subtractability. Excludability refers to controlling access to a resource by potential users, i.e. it is open access. In the case of common property such as fishing waters, every citizen has access to this resource without any restrictions as is the current case in India. Subtractability means that each user of that resource is capable of subtracting from the welfare of other users. That means that if one person fishes in that water source, there will be less fish stocks available for the other fishers.

Since each fisherman is a rational being, he will take into consideration only his own marginal costs and revenues, ignoring the fact that increases in his own catch will deprive other fishermen of their catch, as well as affect the future of the sustainability of fish stocks. As fish stocks continue to get depleted, eventually that resource becomes so degraded that it collapses completely, for example the collapse of the Newfoundland cod fishery in North America in 1989. In this case, the market due to lack of regulation resulted in excess capacity and overexploitation of the resource. Since in the long term the good is not efficiently allocated, this form of market failure is called “tragedy of the commons”.