What Do Fishermen and Investment Bankers Have in Common?

Icelanders love taking insane risks. In 1973, when a volcanic eruption threatened to wipe out a town on the island of Heimaey, they bet they could stop the lava flow by shooting it with millions of gallons of frigid Icelandic sea water. Unbelievably, they won. Nobody in human history had beaten a volcano before, and nobody’s done it since.

That’s the same fearless, impassioned spirit in which Icelanders go fishing. It served them well–for many years, fishing was Iceland’s primary industry.

Then they discovered investment banking.

Michael Lewis’s absolutely must-read article takes the story from there, riffing on–among many other things–a classic paper on the economics of fishing to tell the tale of Iceland’s rise and fall in global finance, and how it fits into the bigger picture:

Fishermen, in other words, are a lot like American investment bankers. Their overconfidence leads them to impoverish not just themselves but also their fishing grounds. Simply limiting the number of fish caught won’t solve the problem; it will just heighten the competition for the fish and drive down profits. The goal isn’t to get fishermen to overspend on more nets or bigger boats. The goal is to catch the maximum number of fish with minimum effort. To attain it, you need government intervention.

Government intervention saved Icelandic fishing, but not its banks. Maybe we can set up an exchange: We’ll teach Iceland what we know about banking regulations, and they can teach us about volcano monitoring.


Ben D

I don't think we have much to teach regarding banking regulation.

Eric

What the hell do we (The United States) know about banking regulations?

abhtiw

dead on eric !!!

Pele V.

That Heimaey story is excellent! I have added it to the Facebook Volcano Monitoring group:
http://www.facebook.com/home.php#/group.php?gid=59952445247

Sohail

Maybe he is Canadian.

Justin Harper

Looks like I've been beaten to it already, so I'll just say, "agreed."

Proudhon

We can teach them that regulation and the presence of a central bank to artifically inflate the value of money doesn't work. They can infer from us that money is itself a commodity and should be treated as such; not pegged at a price by a central bank's monkeying around with interest rates and the printing of (inherently worthless) paper money representing NOTHING.

bill hingst

John McPhee wrote an excellent book on the lava story. I think it was "In Control of Nature".

stacy Click

fisherman and banks

jonathan

What do fishermen and I bankers have in common? Right now they both smell like very old fish.

Jackie

If we followed our actual regulations, I would agree.

lark

My ancentors are from the Lofoten islands, a chain north of the Artic circle several hours into the Atlantic from the coast of Norway. Probably the same stock as Icelanders. Anyway, one of their original sports was catching eagles with the bare hands. ha ha.

johnny

fish at least has protien

Jrm

they have something else in common :
both fish and market have no memory :)

anonymous

both try to avoid getting caught. Are suckers for food.

Jason B

20th century Icelandic history also witnessed the prolonged "Cod Wars" (Þorskastríðin), where they turfed the British out of their fishing territory. It's another neat story of these people's risk-taking and perseverence over seemingly unwinnable odds.

However it is they recover from their banking and monetary crisis, I would suggest the rest of the world pay close attention.

np

Could you explain why "[limiting the number of fish caught] will just heighten the competition for the fish and drive down profits"?

Also, what does this mean: "The goal isn't to get fishermen to overspend on more nets or bigger boats. The goal is to catch the maximum number of fish with minimum effort. To attain it, you need government intervention"?

Kudos to anyone who could explain this to the ignorant me.

David Chowes, New York City

Icelanders could learn a great deal from us about economics: the GREED of the Bush-Cheney years; a country who lived on credit (mainly, from China); and a population living on credit cards; and not comprehending that housing could not continue to increase in value every year.

Not to mention the bankers who were rewarded for giving morgages to people who couldn't pay them back. But, the bankers were made money for every sale.

Matthew R.

What I can't figure out is how George W. Bush managed to sabotage the Icelandic economy. After all, he is the singluar reason for every problem that has ever happened anywhere in the world since the beginning of time, right?

Andrew Scribner-MacLean

Too bad we didn't try putting Icelandic water on the 'red-hot ' housing market a year or two ago.
- Andrew