The following appeared as part of a business plan by the Capital Idea investment firm:

“In recent years the worldwide demand for fish has grown, and improvements in fishing technology have made larger catches and thus increased supply possible: for example, last year’s tuna catch was 9 percent greater than the previous year’s. To capitalize on these trends, we should therefore invest in the new tartfish processing plant on Tartfish Island, where increasing revenues from tourism indicate a strong local economy.”

Discuss how well reasoned you find this argument. In your discussion be sure to analyze the line of reasoning and the use of evidence in the argument. For example, you may need to consider what questionable assumptions underlie the thinking and what alternative explanations or counterexamples might weaken the conclusion. You can also discuss what sort of evidence would strengthen or refute the argument, what changes in the argument would make it more logically sound, and what, if anything, would help you better evaluate its conclusion.

The speaker notes that the tuna catch has increased by nine percent as a result of new technology, and he proposes investing money in a fish processing plant on the island to take advantage of the increased supply

By their very nature, investments require a significant risk, both in terms of money, as well as in terms of time, labor, and other resources. Analyzing the viability of a proposal requires that one consider its potential risks, and to weigh them against potential benefits. The speaker argues that the recent increase in tuna catches has resulted in an increase in supply, and thus presents an opportunity to invest in a fish processing plant. In support of this point, he cites the increased number of tourists in Tartfish Island as evidence of a strong local economy. However, this statistic does not take into account whether the island is economically stable enough to withstand the risk associated with the investment. If the population is transient, such as tourists, then the investment may be a poor one

In addition to gauging the likelihood of an investment’s profitability, investors should also consider the opportunity cost associated with making a choice. In this case, the speaker suggests that while the current increase in supply provides an opportunity to invest in the processing plant, it does not mean that investing in the processing plant is the best use of resources. In fact, the processing plant represents a potential loss of investment income due to lower profits. Unless the speaker can convince investors that the increase in supply will persist, or that the market will remain stable, the processing plant may not be a good investment

This argument addresses the overarching issue of sustainability. By accepting the increased supply, investing in a local processing plant, and drawing tourists to the island, the speaker is, in effect, throwing money into the ocean. The more money that flows into the economy, the more money will flow out as salaries and taxes. If the processing plant is not profitable, then the investors will lose money while the island’s inhabitants continue to suffer. However, if the processing plant is profitable, then the money invested will result in increased profits that will flow out as salaries, taxes, and profits. If the increased supply is a transient phenomenon, then the plant will turn a profit for a short time, but eventually the price and supply of tuna will return to normal, and the plant will be unprofitable. In this case, the investment loses money while the local population continues to suffer. If the increased supply is sustainable, however, then the plant will continue to turn a profit, and the local population will gradually increase as investments in the plant pay off

The speaker also assumes in his argument that the increased supply is permanent. This, of course, is impossible to determine. The speaker’s assumption that the increase in supply is permanent is based on the assumption that the processing plant is profitable. However, if the processing plant is not profitable, then the increased supply is a mirage, and the island’s economy will collapse as soon as the processing plant stops being profitable. In this case, the speaker has gambled away investors’ money, and the local population will suffer as a result

The speaker’s argument rests on the assumption that the increase in supply is permanent, and that the investment in the processing plant is financially sound. If either of these assumptions is erroneous, then the investment is imprudent, and the speaker’s business plan is unsound.

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