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-Market Failures-

        The Monterey Bay National Marine Sanctuary is a leading tourist area on the California coast, attracting many visitors every year.  They enjoy the area's beauty by swimming, boating, kayaking etc...  However, despite its popularity, the Sanctuary is faced with many market failures that arise due to its status as a public good.  For example, the proximity of the Sanctuary to the California coast makes it vulnerable to pollution problems in the eleven watersheds which drain into it.  The quality of the water in the Sanctuary is directly liked to the quality of the rainwater runoff and irrigation water from mountains, valleys, rivers, streams, and wetlands on the adjacent coastline.  As a consequence of open access to beaches surrounding the Sanctuary, as well as its close proximity to agricultural, residential and vessel route areas, negative externalities exist.  Key problems identified in the Sanctuary and its watersheds include sedimentation, toxic pollutants in sediments, fish and shellfish, high fecal coliform levels, fish population declines, low flows in rivers and streams, wetlands alteration, noise pollution and habitat degradation.  These problems exist because of the uneven balance of tourism, agriculture, and industry with wildlife preservation... such are the issues that this case study intends to examine more closely.

The Sanctuary can be described as a public good, being both nonrival and nonexcludable, but there are some differences.  The Sanctuary is nonrival because one person's use of the park does not exclude others from its use.  However, another's enjoyment of the area can possibly become reduced by an increase in water and beach traffic or by an increase in water and noise pollution.  The Sanctuary is nonexcludable because it provides open access to its visitors without an entrance fee to the waters.  However, access to certain roads that lead to beaches requires a small entrance fee in some areas.  Also, institutions, such as the Monterey Bay Aquarium, have entrance fees which require visitors to pay a certain amount for the pleasure they derive in seeing the Sanctuary's organisms up close and learning more about it's waters.  In general, there is little control over the increasing amount of visitors and surrounding residents.  On one hand, this is a negative aspect because increased human activity leads to negative impacts on the area.  On the other, however, the more people who visit and learn about the area, the more educated they can become on preserving the habitat.   

Urban runoff or 'storm drain pollution' is one of the leading causes of water pollution in this country.  Urban areas contain up to 90% hard surfaces such as rooftops and pavement where water collects and quickly runs off.  Urban runoff is difficult to prevent because it is a form of nonpoint pollution.  That is, instead of originating from a single point source, such as a factory or sewage treatment plant, the sources are spread throughout an urban area.  (eg: yards, sidewalks, streets, construction sites and parking lots)  Agriculture is also a nonpoint source pollutant, contributing to the urban runoff problem with soil erosion and sedimentation, as well as damage from fertilizer use.  Any deposits of oil, grease, pesticides, herbicides, soil, pet droppings, etc. in these areas are flushed by rainwater and other means down the storm drains and directly into rivers and bays. 

Vessel traffic also poses another negative externality to the Sanctuary.  Each year approximately 4000 large vessels pass through the Sanctuary, including product carriers, container ships, barges and oil tankers.  Each of these vessels is a threat to the Sanctuary because of the pollutants they expell and the possibility they carry of an oil spill.  Efforts to move vessel routes offshore, to remove the externality due to the shipping and oil industry in the area, are being implemented by the MBNMS and the Coast Guard, as well as other government groups. (see policy page)

Water quality is further affected by pollution generated directly through harbor, boating and other recreational activities listed below.   Most of boater generated impacts fall under 4 general categories: toxic metals primarily from anti-fouling paints; oil and gasoline from motor operation and maintenance; solid waste and debris; and, bacteria and nutrients from boat sewage.  On September 18th, 1999, divers recovered more than 5,800 pounds of debris from the ocean floor in the Monterey Harbor, an example of the damage of negative externalities.

Positive externalities do exist for the Monterey Bay National Marine Sanctuary because the tourism produces spillover effects that benefit society.  Visitors bring revenue to the area, thus increasing the economic prosperity.  They will become aware of the importance of preserving our country's natural beauty and ultimately become better citizens from the visit.  Also, spending time there, especially at educational environmental facilities such as the Monterey Bay Aquarium, creates a heightened environmental awareness and appreciation.  These facilities also conduct modern ecological scientific research in efforts to further preserve the habitat.  Also, if the Sanctuary is preserved, people will be better off simply by knowing that it exists, even if they never intend to visit.

Much is being done to preserve the Sanctuary's environmental importance while making use of its economic possibilities, but we must keep in mind that the actions of humans can and do have detrimental effects on nature.  The increase in tourism and in population in the counties surrounding the MBNMS has put a strain on the coastal and Sanctuary resources (see graph below).  The inhabitants of areas surrounding the Sanctuary and within its watersheds, as well as the recreational visitors, are in danger of losing their quality of life and health due to overpopulation.  And, as the population in the surrounding area continues to grow (see below), market failures will undoubtedly continue to take their toll on the area... 

Market failures, such as those mentioned above, are justification for government provision of the protected areas of the Monterey Bay National Marine Sanctuary.

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This table below shows some interesting levels of

human interactions in the Sanctuary: