Final answer:
The social marginal cost of harvesting salmon encompasses the private costs to fishermen as well as external costs to society, such as environmental damage and resource depletion. Sustainable regulatory measures are necessary to align these costs and ensure resource availability for future generations.
Step-by-step explanation:
The social marginal cost of harvesting salmon includes not only the private costs to fishermen but also the external costs to society that arise from overfishing and environmental damages, such as ecosystem disruption and biodiversity loss. These externalities may include the degradation of marine habitats and the depletion of salmon stocks, which can lead to a decrease in future availability of this resource for both commercial and recreational purposes. Furthermore, the broader impacts on associated industries and local communities that rely on healthy salmon populations can be significant.
Implementing regulatory measures like creating marine protected areas or granting dedicated access privileges to adjacent small scale fisher communities could help to address the externalities, align the private costs with the social costs, and move towards a more sustainable fishing approach. This adjustment would help in preventing the 'race for fish' and overcapitalization, potentially leading to a more socially optimal outcome that balances current economic benefits with the preservation of resources for future generations.