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D. Whitmarsh and M.G. Palmieri
externalities – the side effect of actions by individuals and firms that impact on the
well-being of others. The DPSIR (Driving forces – Pressure – State – Impact –
Response) paradigm, which has been applied to a range of issues concerning the
sustainability of coastal resources (Ledoux and Turner 2002), is used here to
explore the externalities problem and to suggest policy solutions. In formulating
policy it needs to be understood that marine aquaculture not only creates externalities but is also the ‘victim’ of external costs generated elsewhere by other activities
in the coastal zone. Indeed, the fact that externalities associated with the exploitation of marine and coastal resources typically arise from multiple activities,
amongst which aquaculture is but one, provides a strong rationale for integrated
approaches to coastal zone management. We therefore start by outlining the concept of externalities, specifically the use of monetary valuation, and this is followed
by a review of the empirical evidence as it relates to aquaculture.
8.2 Externalities Caused by Marine Environmental
Disturbance: An Overview
The marine environment provides goods and services, which support economic
activities and the welfare of individuals directly. These resources include commodities
such as fish and raw materials, and services ranging from nutrient cycling, disturbance
regulation, and biological control, to recreational and cultural services. Many of
these resources are unmarketed, which means that no property rights are assigned
over their use and that there are no markets reflecting their scarcity. This implies
that users can make resources scarce for others but this is not reflected in any
change in their cost of access to the resources. The price mechanism has therefore
failed in one of its basic functions, which is to signal to society the real value of
resources and the services they supply. Externalities are the symptom of this market failure. In economic theory a negative externality is said to occur when the
production or consumption decisions of an economic agent have an unintended
adverse impact on the utility or profit of a third party, and the generator of the
impact offers no compensation to the affected party (Perman et al. 2003). What
happens is that some of the costs of private production or consumption decisions
are ‘external’ to the economic agents making those decisions and, consequently,
are not taken into account in their decision process. Externalities may affect a
production activity by modifying the efficiency of the production process and
consequently its profitability, or affect the satisfaction (utility) of a consumer. In
the case of the marine environment, for example, an oil spill may reduce the yield
for fishermen and fish farmers and the enjoyment of the marine landscape by visitors. Negative externalities imply that the social cost of an economic activity will
be greater than the private cost, a fact which provides the rationale for environmental
control measures such as taxes and charges that attempt to ‘internalise’ such
externalities.
D. Whitmarsh and M.G. Palmieri
externalities – the side effect of actions by individuals and firms that impact on the
well-being of others. The DPSIR (Driving forces – Pressure – State – Impact –
Response) paradigm, which has been applied to a range of issues concerning the
sustainability of coastal resources (Ledoux and Turner 2002), is used here to
explore the externalities problem and to suggest policy solutions. In formulating
policy it needs to be understood that marine aquaculture not only creates externalities but is also the ‘victim’ of external costs generated elsewhere by other activities
in the coastal zone. Indeed, the fact that externalities associated with the exploitation of marine and coastal resources typically arise from multiple activities,
amongst which aquaculture is but one, provides a strong rationale for integrated
approaches to coastal zone management. We therefore start by outlining the concept of externalities, specifically the use of monetary valuation, and this is followed
by a review of the empirical evidence as it relates to aquaculture.
8.2 Externalities Caused by Marine Environmental
Disturbance: An Overview
The marine environment provides goods and services, which support economic
activities and the welfare of individuals directly. These resources include commodities
such as fish and raw materials, and services ranging from nutrient cycling, disturbance
regulation, and biological control, to recreational and cultural services. Many of
these resources are unmarketed, which means that no property rights are assigned
over their use and that there are no markets reflecting their scarcity. This implies
that users can make resources scarce for others but this is not reflected in any
change in their cost of access to the resources. The price mechanism has therefore
failed in one of its basic functions, which is to signal to society the real value of
resources and the services they supply. Externalities are the symptom of this market failure. In economic theory a negative externality is said to occur when the
production or consumption decisions of an economic agent have an unintended
adverse impact on the utility or profit of a third party, and the generator of the
impact offers no compensation to the affected party (Perman et al. 2003). What
happens is that some of the costs of private production or consumption decisions
are ‘external’ to the economic agents making those decisions and, consequently,
are not taken into account in their decision process. Externalities may affect a
production activity by modifying the efficiency of the production process and
consequently its profitability, or affect the satisfaction (utility) of a consumer. In
the case of the marine environment, for example, an oil spill may reduce the yield
for fishermen and fish farmers and the enjoyment of the marine landscape by visitors. Negative externalities imply that the social cost of an economic activity will
be greater than the private cost, a fact which provides the rationale for environmental
control measures such as taxes and charges that attempt to ‘internalise’ such
externalities.