Market Failures

There are several different problems which currently affect Buzzard’s Bay. The main pollution problems that exist in the New Bedford Harbor are the result of manufacturing that occurred along the Acushnet and Slocum Rivers from 1940 to the late 1970’s. This manufacturing led to the contamination of the Bay with polychlorinated biphenyls (PCBs) and heavy metals. The area also has a problem with excess nitrogen levels which are due to sewage treatment plants, storm-water runoff, septic systems and waste discharge from boats. These problems are the result of different market failures.

The factories in the surrounding area discharged industrial waste directly into the Bay and indirectly through the city's sewer system. This action can be considered a negative externality because the dumping of the waste posed an external cost to the other users of the Bay which was not recognized by the companies. The cost of dumping PCB-contaminated waste into the Bay was not realized by the producers and led to an inefficiently high amount of pollution being released. The problem originated due to the lack of defined property rights in terms of waste dumping in the Bay and the rivers which run into it. Although the dumping of this type of waste into the Bay has ceased due to the strict definition of property rights for the Bay, people in the surrounding area are still dealing with the costs of the pollution. The continued effects of this pollution include contamination of fish, shellfish, and lobsters by toxic substances.

Buzzard’s Bay also suffers from the problem of increased levels of nitrogen. This problem is caused by sewage treatment plants, stormwater runoff, septic systems, and waste water discharged from boats. This problem is also a negative externality, which is due to a lack of both defined and enforceable property rights. The transaction costs of trying to regulate so many different possible polluters would be extremely high, preventing the regulation of pollution.

The introduction of human disease into Buzzard’s Bay and its animal population also represents a negative externality. This occurs as a result of the increased development of the watershed area, and it is not reflected in the cost considerations of developers.

The Buzzard’s Bay area can be classified as a public good. This means that it is both non-excludable and non-rival. One person’s consumption or use of the Bay does not preclude others from its benefits, and a person cannot be excluded from using the Bay if they do not pay for it. The Bay currently suffers from overuse, both by fisherman and recreational users. The problem of free-riders is also a relevant issue. Since many people are affected by problems in the Bay it becomes difficult to organize clean-up efforts. There are many private organizations dedicated to the protection of Buzzard’s Bay and its watershed area. They are supported by the residents of the area who choose to support those organizations and their efforts. But, since everyone receives the benefits of those people’s contributions, not everyone who is affected by the problem is motivated to help.