Traditionally, oceans did not find their place in economic analysis. They were considered to be a part of the natural resources that could be exploited. The factors of production included land, labor, and capital, with oceans being a fixed factor in production. Oceans were classified as public goods, which means they are non-excludable and non-rival. In recent years, the finite nature of the oceans and fish stock and the ecological degradation of oceans due to harmful effluents have been analyzed using economics. Economic theories have also been central to creating nations' policy frameworks and soft laws.
The issue of property rights applies to oceans as well. According to economists, for an efficient system to operate defining property rights is rudimentary, and the owner of the right has the incentive to protect it. On the other hand, legal practitioners, working on protecting these rights, think that this can never be fully achieved. Individuals seeking private benefits begin exploiting the resource recklessly, leading to a situation of the tragedy of commons. Scarcity causes rivalry. Overfishing is one such scenario. The depletion of aquatic species is dependent on factors such as demand, biological characteristics of the particular species, as well as large-scale production. Overfishing might not be the ultimate cause of the depletion of marine species due to the costs involved and the fact that not all fish can be caught. According to the Food and Agriculture Organization (FAO) of the UN, 70% of the world’s commercially important fish stocks are depleted and exploited. To counter overfishing, several nations have developed several command and control measures. ‘Exclusive economic zones’ were created by way of an agreement among nations in 1976, extending jurisdiction to 200 nautical miles offshore. The next concern would be the free rider problem. When an individual, concerned about the environment takes steps to save the endangered species, the free riders benefit from it without bearing any costs.
Economics measures value as a measurement of money flow in the form of goods, services, and money itself. It does not take into consideration the non-monetarized flow such as free goods like air or unpaid human capital. The mineralized flow does not fully add to wealth as it contains pollution that only destroys wealth.
Use of Oceans and Economics
In economics, traditionally, oceans were classified as homogenous products. However, they have several uses and inputs, which is vital for the current globalized world. Transport infrastructure is one of the uses of oceans. Man-made structures such as ports and navigational systems have replaced the natural transport infrastructure provided by oceans. There is a constant trade-off between maritime services and the ecological degradation it causes. The market for ocean transport infrastructure is a derived demand as it is dependent on the demand for the goods that are being shipped. As with any other form of terminals, ports also face excessive demand than what they can hold. The best way to handle congestion is to allocate the use of the ports to the people who would gain the most with immediate use. Optimal charges measure the social cost of the delayed users, and the cost-benefit analysis is used to arrive at it.
Tourism is increasingly rising in oceans as it is viewed as leisure spot. Beaches have become leisure resources, and with the rise in income and standard of living, the demand keeps increasing. However, with more hotels coming up and human contact in oceans, there is high scope of ecological degradation to corals and marine animals. The economic paradox of tourism is that, on the one hand, it improves the standard of living by providing leisure, and on the other hand, it causes environmental problems.
Oceans also play a significant role in food production and influence the direct production chain. The growth of frozen fish has drastically changed consumer demand over the past thirty years. Frozen fish has been imported by both developing and developed countries and has become a significant contributor to the food chain. Under the ecological approach, the complete protection of the environment is sought. However, in economics, only a trade-off between the exploitation of resources and the benefits derived therefrom is sought to attain an optimum level. As ecologists have become more concerned about intergenerational issues, the idea of opportunity cost has been analyzed.
Ocean acidification occurs due to human activities like waste emission, freshwater diversion, and extraction, along with increased emissions of CO2. This severely reduces the diversity, health of marine species, and their interaction in the ecosystem. It also affects the human community, creating problems in the food webs and reducing the other benefits derived from oceans.
Sustainability and the Environment
‘Our Common Future’, 1987 is the report of the World Commission on Environment and Development defined sustainability as the development of the present generations without compromising on the needs of the future generations. The Rio Declaration has made it amply clear that human beings have become the center of sustainable development. They are entitled to live in harmony with nature. The application of the precautionary principle for all concerns over fisheries has been accepted internationally. The meaning of the precautionary principle is that the lack of scientific solutions should not be a reason for postponing the undertaking of preventive measures where there is a serious environmental concern. This means that there is a need for careful assessment and proper management plans before undertaking a fishery activity. This principle applies at all levels of the fishery system: to development planning, management, research, technology development and transfer, legal and institutional frameworks, fish capture and processing, fisheries enhancement, and aquaculture.
Ocean accidents, oil spills, and marine traffic have all caused a threat to sustainable development. When thinking about sustainability, a prime consideration is a balance between human harvesting and the influence of climate change. This balance cannot be quite achieved due to the disturbances caused by human beings due to which there is a reduction in the natural regenerative capacities of aquatic food chains. The introduction of more commercially efficient systems, such as motor engines and gears, as well as efficient systems for the increasing catch of fish, have added up to the environmental concerns. The extension of EEZs after the Law of Seas (LOS) Convention in 1982 has not necessarily stopped the exploitation of the oceans, as the open access beyond 200 nautical miles led to uncontrolled competition and overexploitation. To counter this, incentives and subsidies were introduced.
Sustainability in fisheries can be achieved only through integrated efforts from nations, and more efficient methods of ensuring this must be adopted. Economic principles can be applied to develop more practical and legally sound systems. A holistic approach along with wider participation among nations through agreements and treaties can ensure sustainability, which is the need of the hour, in the long run.