Port Authority
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Mud dumping from Port Authority

Market Failures:

1. Negative Production Externality:

     The Port Authority of New York and New Jersey is exploiting its access to the ocean by polluting it with waste products that it dredges from the bottom of the Port.  There is a lack of control over this pollution because the ocean is an open access resource and therefore there is a lack of defined property rights.  As a result, what is known as a "tragedy of the commons" occurs.  Since the Port is primarily interested in protecting their business interests, they cannot be trusted to properly determine the amount of waste to dump.  In other works, they will fail to choose a level of dumping at which the marginal costs to society equal the marginal benefits of the Port. 

[1884 NY Harbor Waste Barges]

Tug boats pulling waste barges in NY Harbor 1884

Picture source: http://www.nan.usace.army.mil/business/prjlinks/dmmp/benefic/hars.htm

2. Public Goods - the "free rider problem": 

In this situation, there is inefficiency because there is an incentive for people to rely heavily on the contributions of others.  Because the ocean is non-excludable and non-rival, many individuals will fail to pay their share of the abatement costs neccesary to conserve the resource.  These individuals are able to do so because there is no way to limit their personal use of the ocean even if they fail to pay. With the lack of funding for abatement efforts, the ocean will once again be subject to the pollution caused by the Port Authority.            

3. Asymmetric Information:

    This market failure occurs when one party has additonal information that the other party is unaware of or misinformed about.  In the case of the Port Authority, there have been recent efforts made to classify waste into one of three categories, the first being non-toxic and not harmful to the ocean.  However, misinformed members of society do not realize that this material is in no way harmful.  As a result, such individuals restrict theri use of the ocean for recreational uses.  This asymmetric information has also been detrimental to the local fishing industry, as people fearing pollutants refuse to purchase any fish caught or sold in this area.