Thursday, March 14, 2013

Shark Fin Bans

Hawaii and California have both passed bills banning the sale (or ownership) of shark fins.  The primary reason is due to the impact that harvesting sharks fins is having on the population of sharks in the oceans.

In economic terms, on the one hand, a shark fin ban is a quota equal to zero, which eliminates the market (since supply is now zero), and reduces both consumer and producer surplus for shark fins reducing overall economic efficiency.  On the other hand, a shark fin ban reduces the negative externality of harvesting shark fins.  Thus from an economic perspective, the question is which is greater, the reduction in economic efficiency from banning shark fins or the increase in economic efficiency from lower external costs?

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