Adapted and excerpted from "Alternative Entry Controls for Fisheries," by Francis T. Christy, Jr., in J. Carl Mundt, Limited Entry into the Commercial Fisheries, Institute for Marine Studies, University of Washington, Seattle, 1975. The publication contains proceedings of a workshop financed, in part, by a grant from RFF.
Economic waste in fish-catching industries is inevitable as long as fisheries are treated as a common property resource—that is, a resource whose flow of services can be used simultaneously by two or more economic units in such a way that use by one diminishes use by others, and no single user can exercise effective control over total use. To avoid such waste, the common property characteristic of fisheries must be removed by some scheme of direct or indirect entry controls administered by a public agency. Such controls can be divided into three broad classes: (1) those that limit the number of fishing licenses, vessels, or gear; (2) those that reduce the incentive to fish by imposing taxes or user fees; and (3) those that divide up the resource among the fishermen.
In evaluating one or a combination of these control methods, there are four important criteria to be considered: (1) economic efficiency, (2) biological effectiveness, (3) equitable distribution of values, and (4) political feasibility. None of these criteria is more important than the others, but all must be considered in choosing among different control schemes.
- Economic efficiency must take into account the fish-catching industry, including administration, research, regulation, and enforcement, as well as those of the fishing operation. In addition, efficiency must be considered over the long run. Fisheries are dynamic industries subject to changes in supply and demand and technology. Failure to take these and other changes into account has been characteristic of fisheries management in the past, generally resulting in exacerbation rather than enhancement of the economic conditions of the fishery.
- There are two important aspects of biological effectiveness—the choice of yield level and the problems of dealing with interrelated fisheries. The level of yield is not really relevant to an evaluation of schemes to limit entry because each of the schemes can be operated to meet whatever objectives society chooses, whether they be maximum sustainable yield from a stock, maximum net economic revenue, or an "optimum" yield designed to take into account interrelated fisheries.
The problem of dealing with interrelated fisheries is much more difficult. There are at least four kinds of interrelations among fisheries that complicate any scheme for management. One of the best known is a conflict in which a particular fish stock is valued by some persons for its recreational value, by some for its commercial value, and perhaps by others for its "esthetic" value (the love of whales or porpoises, the appreciation of the fisherman's way of life, the appreciation of archaic vessels such as Maryland's bug eyes or jacks, etc.). While the choice of the values or combinations of values is a matter for society, certain entry limit schemes may be more effective than others in allowing for an expression of that choice.
- The criterion of equity raises the question of fair treatment not only of the fishermen but also of society. A good case can be made that society should receive sufficient returns to cover, at least, the costs of administration and management, including those of regulation and enforcement and some of those of research. Indeed, this is the case that is likely to be well and frequently made by the federal government's Office of Management and Budget. In addition, it is entirely in keeping with our private enterprise system, where resources can be privately owned, that the entrepreneurs, rather than society, bear most of the costs of administration, research, regulation, and enforcement. While there are certain circumstances under which society might best bear some of these costs, they should be considered the exception rather than the rule.
- In evaluating the criterion of feasibility, it is assumed that the fisheries for which entry limits are to be applied are subject to U.S. jurisdiction. There must be some guaranteed minimum yield available to U.S. fishermen in order for an entry limit scheme to be feasible. The yield must also be available at a fairly uniform rate throughout the season. This may be important in a fishery that is governed by national quotas and subject to rapidly declining intraseasonal yields because of stock dispersal or thinning effects. In this situation, heavy foreign investment of effort at the opening of the season may lead to greater costs to U.S. fishermen, who are subject to an entry limitation.
License Limitations
The most direct technique for limiting entry is to license one or more of the fishing elements (fishermen, vessels, or gear) and limit the number of licenses. The choice of element (or combination of elements) depends upon the nature of the fishery and the other controls that might be necessary for conservation purposes. For example, in a lobster fishery, the simplest element to control might be the number of pots; in the haddock fishery, it might be the number of vessels; in another fishery, the length of long-line, number of hooks, and so on. The chief advantage to this approach is that it does not depart greatly from present management systems; and if provisions were made for gradual reductions in licenses, it would not create undue hardships for the fishermen. Over the long run, however, this approach may create a number of difficulties. As the number of licenses diminishes, the value of a license is likely to increase. The result may be that license holders would remain active long after they (or their equipment) would otherwise be efficient. Whatever the long-run results, it is probably quite true that a system limiting licenses will be politically more feasible than other systems of entry controls.
On the other hand, there are considerable disadvantages to this approach in terms of biological effectiveness, economic efficiency, and equity. The most important difficulty lies in defining what element should be licensed. Since in most fisheries there are wide possibilities for substituting one productive unit for another, a limitation on only one element would stimulate greater use of others. For example, a restriction on number of vessels would lead to the use of larger vessels; a restriction on number of vessels of a certain size would stimulate larger motors or more sophisticated gear. The result would be defeat of the purposes of the control (biologically and economically), more restrictive definitions, or greater reductions in the number of licenses.
Judged by the criterion of equity, a license limitation scheme by itself would not be successful. License fees would have to be imposed and the fees would have to be high enough to cover at least the costs of administration and management. If they are not, then society would be providing a subsidy to those fishermen lucky enough to acquire licenses at the initiation of the system. If the license fees are high enough, then the scheme would begin to approach that of taxes and fees described below.
In sum, it appears that a direct license limitation scheme would be politically the easiest to establish but that it would not necessarily meet the criteria of biological effectiveness, economic efficiency, or equity. And in the long run, such a scheme might be particularly damaging to the interests of the fishermen as well as of society.
Taxes and Fees
The second technique is to control entry by controlling economic sources through a tax or royalty, or a license fee applied to fishermen, vessels or gear. This approach, by extracting part of the economic rent, would discourage fishermen from participating in the catch. Those unwilling to pay the tax or fee would not enter the fishery or, if already in, would leave.
Whether the tax or license fee scheme would meet the criteria of biological effectiveness and economic efficiency would depend upon the amount of the tax or fee. It might require a fairly high tax or fee to reduce the amount of effort to the desirable level. Furthermore, there would have to be some flexibility in establishing the rates in order to deal effectively with changes in supply and demand. An increase in prices or a decrease in costs would, if the rates were kept constant, stimulate additional entry into the fishery. In fisheries subject to wide fluctuations in supply, it would be difficult to vary taxes or fees rapidly enough or in large enough increments to keep up with changes in yield originating in the biological sector. In these cases the tax or fee would have to be keyed to long-run averages, with other back-up controls to deal with short-term fluctuations in stock size.
A tax or fee scheme, if fully applied, would automatically be equitable since all economic rent would be extracted by society. There is no reason, however, to limit the scheme to this polar case. Some of the proceeds could, for example, be channeled back to fishermen in ways that would not induce fishing beyond the desired level.
The major, and perhaps decisive, objection to a system based solely on economic disincentives is related to political feasibility. Even if the long-run result would not be detrimental to fishermen, the transitional problems of regulating entry by imposing high taxes or license fees on industries that are already depressed cannot readily be overcome. Indeed, there is little value in recommending regulatory taxes or fees except in combination with one of the other schemes for entry controls.
Fisherman Quotas
The third technique for limiting entry does not by itself provide the means for directly reducing the amount of fishing effort, but it permits the fishermen to control their effort through whatever means and over whatever period they wish. This technique would operate by providing each fisherman with a share or quota in the yield from the stock, with the total of all such shares amounting to 100 percent of the desired annual yield. If there were fluctuations in total allowable catch, the pounds of fish available to each fisherman would be increased or decreased proportionately. Thus, this system would be the most direct technique for meeting the standard of biological effectiveness.
Economic efficiency could only be implemented indirectly. In order to facilitate this, the quotas would have to be transferable; fishermen would have to be able to lease or sell their quotas to others or to the administering agency. Through such a scheme, each fisherman would be in a position to use as much capital and labor as he wished. Those who wished to enlarge their shares in order to take advantage of economies of scale or technological innovations could do so by leasing or purchasing shares from others. And those who wished to retire from the fishery would receive some return from doing so. If a market were established for the resource itself, individual fishermen would have the incentive for using the most efficient amount of effort. While there might be difficulties associated with such a scheme, in those cases where it was applicable, it would be preferable to the other control methods in meeting the criteria of biological effectiveness and economic efficiency. It would also be much more adaptable than the other methods to changes in supply and demand.
By itself, a scheme of fisherman quotas would not be equitable. But, like the license limitation scheme, it could be combined with a system of taxes or fees to allow for the extraction of economic rents.
In terms of feasibility, the fisherman quota technique would be more difficult to adopt (but perhaps less difficult to employ over the long run) than the license limitation scheme. Although a form of fisherman quotas was recently adopted by British trawler companies and the system is not markedly different from the national quotas used in ICNAF, it is an unconventional technique at the domestic level and is likely to be opposed because of its strangeness.
A greater difficulty is likely to lie in making the initial allocation of individual shares. But if this can be achieved satisfactorily, the fishermen would acquire a property right of value—one that they would be free to use or to lease or sell. Unlike the license limitation scheme, they would not be required to stay in fishing in order to receive some benefits from their rights.
Summary
This paper is far too brief to do much more than initiate discussion on the various techniques for achieving rationality in the fishery industries. There are, however, certain conclusions that can be drawn. One is that it would be a very serious mistake to adopt a system whose only merit is that it would be politically the most feasible. The long-run consequences of such a step (and the long run could be only a few years) may be such that eventual improvement is precluded or achieved only at great cost to society. Whatever system is adopted must allow for the extraction of at least a portion of the economic rents. Unless society recovers some of the costs of administration and management, there is little reason to expect the federal government to continue to expend scarce funds from the public treasury. Finally, it should be emphasized that the system that most closely approximates a free market for the resource itself is the one that will be easiest to manage and most efficient.
A version of this article appeared in print in the June 1975 issue of Resources magazine.
