Coastal ecosystems have been degraded by human activity over centuries, with loss of memory about past states resulting in shifted baselines. More recently conservation efforts have resulted in localized recoveries of species and ecosystems. Given the dynamism of ecosystem degradation and recovery, understanding how communities perceive long-term and recent changes is important for developing and implementing conservation measures. We interviewed stakeholders on three Caribbean islands and identified a shifted baseline with respect to the extent and degree of long-term declines in marine animal populations; stakeholders with more experience identified more species as depleted and key species as less abundant than those with less experience. Notably, the average respondent with < 15 years of experience listed no species as depleted despite clear evidence of declines. We also identified a phenomenon we call the policy placebo effect, in which interviewees perceived some animal populations as recently recovering following passage of new conservation legislation but in the absence of evidence for actual recovery. Although shifted baselines have a negative effect on conservation as they can lower recovery goals, the outcomes of a policy placebo effect are unclear. If the public prematurely perceives recovery, motivation for continued conservation could decline. Alternatively, perception of rapid success could lead communities to set more ambitious conservation goals.