In 1975, Steven Spielberg released the iconic movie Jaws … and since then, none of us at 1st Class Economics have ever gone on a boat again!! You may think the story of a big Great White shark eating people is simply a horror film, but it’s more than that, it’s an economics story.
In the movie, a shark terrorises the small island of Amity; an island that heavily depends on tourism. At first, the shark kills a couple of swimmers but the Mayor proclaims these are accidents. Of course, the Mayor’s job is to keep the tourists coming to Amity and since there is asymmetric information (the Mayor has more information than the tourists) the Mayor leads a campaign of misinformation by insisting that the deaths were only boating accidents and it is still safe to visit the beach on the island.
The beach is kept open and, inevitably, tragedy strikes; the shark kills a young boy and frightens everyone at Amity’s beach. Subsequently, the island’s inhabitants are afraid that tourists will now be too scared to visit, putting the islanders’ livelihoods at risk. With no tourists there will be no point of hotels or restaurants, shops will lose customers and profits and tour-guides will lose their jobs in a heartbeat. Amity’s economy will shrink, unemployment will rise and the Islanders will be forced to desert the island in search of new jobs.
Amity’s citizens hire a local fisherman, who served in the Navy during World War 2, to go to sea with the island’s Sheriff Brody to hunt and kill the animal.Only a good old bit of economics saves the day … the Sheriff sees that the shark has a gas canister stuck in its mouth so he shoots the canister and blows up the shark. Yay economics!!