Sunday 9 December 2007

Can cartels benefit the environment?

Can cartels benefit the environment? According to the Free Exchange blog maybe they can. They write,
"It seems that way from the experience of fisherman in Australia and New Zealand. Instead of their earnings' coming from their individual catches, they get a share of the revenue of the industry as a whole. This has lead to an increase in profits because it gives the individual less incentive to fish, increasing fish stocks. Now, when the fishermen venture out they do not have to go as far to find fish, lowering their costs. Higher prices for the fish, and lower operating expenses, translate into higher profits. More fish in the ocean and higher profits for fisherman — it seems to be a clear Pareto improvement."

But there are also problems, as with any cartel. However the article concludes,
Still, if these inherent problems can be overcome, an interesting policy question presents itself. If overproduction of the good in question has negative externalities, does imposing a cartel provide an alternative to credits or taxation?

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