You can read Chapter Ten from John McMillan's super book on markets, Reinventing the Bazaar, here. The chapter deals with externalities and considers three examples of externalities
- Driving and Congestion
- Overfishing and Decling Fish Stocks
- Wages in Sport and Competitive Balance
An excellent artice was on conservation methods in fisheries was published in The New York Times Magazine a few years ago. A Tale of Two Fisheries looks at formal and informal conservation methods. Some quotes from it are used by John McMillan. For example:
"Right now, my only incentive is to go out and kill as many fish as I can," Sorlien said. "I have no incentive to conserve the fishery, because any fish I leave is just going to be picked by the next guy."The author of the article, John Tierney provides updates, here, here, and here.
Sometimes it can happen that a strategy to correct an externality backfires. In this example a South Sea Island tries to reduce fishing by ends up making the problem worse. We know that people respond to incentives because of The Theory of Unintended Consequences we have to be careful of how they respond.
Finally, find out what happened traditional cod fish fingers and learn that we may have wild ocean fish for only another 50 years.