Formalin vs. hilsa fish preservation

The problem of the use of formalin in foods and the problem of preserving hilsa fish is almost same in one respect: both problems are created by the manipulation of people who deal with in two cases. But both are quite dissimilar in another respect: while the preservation problem of hilsa fish can be solved by some quantitative and qualitative restrictions imposed in markets, the problem of the use of formalin in foods can hardly be handled in this way. This is the basic difference between these two problems. That means while a person can claim somewhat convincingly that destruction of hilsa fishes can be attributed to dishonest behaviour and evil motive of greedy fishers and businessmen, the same can hardly be applied to the case of formalin.  Formalin problem is mostly caused by the market structure and consumption preferences of consumers not by dishonesty of businessmen or sellers of the product. That's why we can't solve the problem of formalin by simply imposing some restrictions on market whereas the problem of hilsa fish preservation problem can easily be done in this way. In this short discussion, we will try to develop such a point of view.

FORMALIN PROBLEM AND IRRELEVANCE OF LAW AND DISHONESTY: The usual and mistaken belief is that formalin problem is created by dishonest behaviour of sellers who mix formalin in foods. In fact, this problem has nothing to do with dishonesty of sellers, and also the solution of this problem should not be approached by making law and imposing unnecessary punishment and harassment on sellers. Most people think that if we make a law that will create a fear of punishment in the mind of the sellers, the law would prevent the indiscriminate use of formalin in foods. This belief is exactly like catching a duck letting the duck swim in the ocean where a hunter dives day after day but never catches the duck and finally quits being exhausted. Then we can't blame that the duck is too clever and wicked to catch. Likewise, blaming sellers' dishonest behaviour is equally meaningless. Formalin problem, though very bizarre and peculiar problem, is created by some economic forces that are mostly out of human control. Take this example. What should we do faced with some market-related problems, say, big difference in pricing between rural and urban areas caused by higher degree of concentration of people in some selected geographic areas? First, we can make a law that would prevent people from crowding the places discouraging entry to these places. Second, we can let the market adjust to this change so that price difference problem is solved by the adjustment of market forces not by the artificial intervention of the government. If one is interested in solving the price difference problem so that such solution becomes a permanent solution, then there is no alternative to choosing the second one. As for the first alternative, it will bring a very fleeting and short-run solution with a lot of permanent miseries.

Just to sum up, we mention some forces causing the formalin problem: (1) gradual concentration of people in urban areas, (2)

consumption preferences of consumers, (3) shopping habits and preferences of consumers, (4) incompatibility of atomistically competitive market structure with the economic transition such as moving of people from rural sides to cities, and (5) influence of factory and industrial work in our life. Now can anyone tell us which our government should target to solve by a law? We think that if the government ever chooses any among the five and targets to solve it by a law, this action would be a shame to the problem itself.  Rather than trying in vain, the government should perform auxiliary role letting market forces correct the problem. One auxiliary role would be the assurance of continuous and uninterrupted supply of electricity. This is the domain in which the government should focus, and the government should keep it away from unnecessary tussle with market forces by making and enforcing irrelevant laws. If the government has a whole-hearted wish to ensure safe foods for the nation, the only and the ultimate task of the government must be ensuring the interrupted supply of electricity. The solution is simple for the government.  It will not only ensure the nation a promise of safe foods but also save government from a lot complications that are bound to arise from law enforcement.

HILSA FISH CONSERVATION AND RELEVANE OF LAW AND DISHONESTY: While the problem of formalin has nothing to do with dishonest behaviour of sellers, the problem of hilsa fish conservation has a lot to do with dishonesty of sellers. This is what we have claimed at the start. Let's say there are two feasible ways to solve the hilsa fish preservation problem, and we can choose one from the two. First solution is qualitative restrictions imposed by the government in market, and the second one is quantitative restriction. The qualitative restriction works through ordinary market but the government just does a simple trick. The quantitative restriction works through direct law enforcement. Let's say the government adopts the qualitative restriction employing the following trick. The trick is that government fixes the price of hilsa fishes below some standard size in such a way that catching of such fishes causes negative profit for fishers. For example, the government can declare that any hilsa fish below 12 inches long must be sold in market for 50 Tk. irrespective of the costs of fishing of fishers. That means catching of hilsa fish of size below 12 inches long is a waste of time because selling of such fishes no longer pays off. Rather fishers have to pay from pocket after catching such fishes. This is the trick of price setting with negative profit or return. This is illustrated in the following figure:

In the above figure, price is measured on the vertical axis and supply of hilsa fish on the horizontal axis. The usual market price is shown as P0 which gives, we assume, the normal rate of return. Now the government steps in and fixes the price at Pg which is fixed in such way that it yields the negative return. When price is reduced from P0 to Pg, we expect that supply will reduce from QI1 to QI0. Unfortunately, this can happen if and only if the government tightens its strict enforcement, oversees the market very closely and punishes who don't comply. However, the opposite will happen in reality. Consequence of price setting by government will be dire, and the price setting will be unable to tame dishonest fishers and sellers, of course including dishonest buyers who will often tip sellers to sell above the minimum set price. The consequence of setting minimum price is illustrated in the following figure:

The figure two above shows how fishers will hoax the government if it lacks the strict enforcement of the minimum set price in market. Since the government set the price at Pg , the sellers would reduce the quantity of fishes to play a trick to raise the price not only above Pg  but also above P0 ,the usual market price. Sellers would reduce the supply and make the supply curve shift to the left side which is shown as S1in the graph. The result is rise of the price above P0 or to P2 and they grab a manipulated advantage capturing abnormal return on the sales of hilsa fishes. The abnormal or manipulated profit is shown by the blacken region in the figure. But the story will not end here. Now buyers will enter into the story. Since market equilibrium quantity is QI0, sellers can raise price once again. But why? The demand seems to be QI1 at price. This is the peculiarity of the demand curve of hilsa fishes. The market demand curve is hard to obtain by observing price responses when taste dominates the price influence. This is exactly what happens in case of hilsa fishes. Taste dominates the price of hilsa fishes, and, therefore, the drawn demand curve (DD) is quite a fake demand curve and play an imaginative role here. In fact, the behaviour of the demand curve of hilsa fishes is unknown here but what we know, at least, is that price will rise in this case because equilibrium demand will force it rise. So,  the price finally reaches to P1 which is almost half times greater than P0.This illustration gives one message and that is qualitative restriction will work if and only if strict enforcement happens in reality. But this is foolish to expect in our country given the condition of law enforcement.

The second solution is the quantitative restriction. The government can use quantitative restriction by making a law that prohibits catching of hilsa fishes below some standardised size. For example, the government can ban totally, as it is doing now, fishing in the spawning season of hilsa fishes or it can declare ban on catching fishes below 12 inches long. Whatever different kinds of quantitative restrictions are taken by the government, problems and miseries associated with such quantitative measures will always be fewer and less than associated with the qualitative restriction as mentioned above. The reasons are: (1) quantitative measures are a bit easier to observe and enforce. Compare this scenario. In case of qualitative restriction above, government has not only to oversee price setting of sellers but also observe the behaviour of buyers who will cajole sellers to sell above the minimum price since taste factor dominates the price factor. So, it is quite easy to tame dishonest sellers but it is often an unrealistic attempt by policy makers to tame the behaviour, motives, and preferences of consumers or buyers. (2) In case of qualitative restriction, the same quantity will be sold at higher price, almost 1.5 times as much as the usual market price. But, in case quantitative restriction, the same quantity will be sold at market price even if restriction doesn't work out or fail to be implemented. Therefore, a law that imposes quantitative restriction on fishing of hilsa fishes will work out better in our country than the law that imposes qualitative restriction. The essence is that to solve the hilsa fish preservation problem, we need laws since this problem is mostly caused by dishonest behaviour and greedy motive of fishers.

SUMMARY VIEW: We capture the main message of the above analysis in the following remarks. First, the government should recognise what is within the scope of law and legislation and what is not in solving some problems. Second, while the problem of hilsa fish preservation is caused by dishonest behaviour and greedy motive of fishers, the formalin problem is rarely caused by such factors. Dishonesty and law have nothing to do with the formalin problem. The solution of this problem lies with market itself not with the government. Finally, any law that imposes any kind of restriction, whether qualitative or quantitative, is bound to create more formalin-related problem than solving it.

Md Jamal Hossain writes from                                                 the University of Denver, USA.                        [email protected]