Catch Shares

Catch Shares are expanding in California, Oregon and Washington starting in January.

Under the catch-share system, fishery managers set an overall catch limit at the beginning of the season. Each fisherman will own a percentage of that catch. Just like shares in the stock market, the quotas can be traded or sold. The idea is that a market-based system will give fishermen more flexibility.

Not everyone is happy. Larry Collins, president of the Crab Boat Owners Association in San Francisco, is doubtful.

Collins is concerned that a market-based system will bring market manipulation. Under the rules, you don't have to be a fisherman to buy fish quotas, so it's possible that speculators or even environmental groups could buy into the market.

"You want hedge fund managers deciding when the people catch fish? Is that who you want to own your fish, or do you want to own them?" Collins asks.

Collins is also concerned about fishermen who make smaller catches. In Alaskan fisheries that use catch shares, some smaller boats opted to sell their fish quotas.

"That concentrated the resource in fewer and fewer hands. Now, I tend to think that public trust resources should be used to employ as many people as possible," he says.

Both of these features are benefits not costs. It's true that speculation can create bubbles and other problems but speculators also make the market more future-oriented and this will help to avoid the collapse of fishing stocks by making prices a better early warning system. Moreover, if environmentalists want to buy catch shares to increase the fishing stock then I am all for it.  In Modern Principles, Tyler and I discuss how we bought and retired some SO2 making the air cleaner for everyone (you are welcome! :)). 

Fewer, larger boats is also a benefit not a cost. Under the current system the influx of small boats is simply a form of rent-seeking which raises net social costs–too many fisherman chasing too few fish. Catch shares reduce over-capitilization in the industry raising productivity (see also Modern Principles on this point).

The main problem with catch-shares is setting the size of the catch, which inevitably is a politicized process. Massachussetts congressmen, for example, are trying to withold funds from NOAA until catch shares are increased. Nevertheless with so many fishing stocks nearing collapse it is clear that some limits are needed. Moreover, before catch-shares are put in place few people in the industry appreciate that temporary limits can lead to long-term increases in catch as the fishing stocks recover to sustainable levels. After catch-shares are put in place, however, it is sometimes the fishermen who lobby for greater limits not for monopoly reasons but as they come to recognize that a smaller limit leads to a larger stock and larger profits.

Here is my previous post, Reversing the Decline in Fish Stocks, on catch shares with more links.

Hat tip: Daniel Lippman.

Comments

Another political problem with catch share is the allocation market. Iceland's current government is in the process of dismantling one of the world's oldest and most successful ITQ programs because of a widespread perception that original holders of quotas, who did not have to pay for them, earned windfall profits when they sold them. It's not obvious to me why current holders of quotas, who paid a lot of money for them, should lose out as a result, but politics works in strange and perverse ways. Thrainn Eggertsson has written about this issue here: https://docs.google.com/viewer?url=http://www.lin....

Catch share, if the shares are allocated on the basis of prior year catches (without announcement of the allocation mechanism in advance so as not to cause people to overfish in year n-1 so as to get a higher allocation) is actually a way to let smaller fishermen exit the business. From an allocative efficiency perspective, this might be good; from what its effect on the community, I'll let you make that normative decision.

What also happens is that canners can now vertically integrate. There might be some consequences to this as well, since the residual demand gets allocated to the non-integrated fisherman.

Finally, catch share could be compared to closed membership fishermen cooperatives. There, the fishermen form a coop, establish allocations, and fish to their group limit. Members buy and sell shares to each other. The only difference is that 1) non-members can fish, so if the price is set too high, non-members enter; 2) non-fisherman can't own shares. You could get to the same allocative efficiency point if you allocated shares only to fishermen or their fishermen cooperative.

Then the question becomes: who is a fisherman. Is the boat owner living in NYC who runs a hedge fund? Or, is it the guy who is out in bad weather fishing and lives in the community.

You are really comparing the use of a "stinted commons" with an unstinted commons. Hundreds of years of experience says that the former works better.

Beware the monitoring problem. When you have local fisherman doing the fishing, they have eyes and incentives to keep tabs on how much everyone else is fishing. When you have employees of an MNC or crew on large boats or people working for a NYC hedge fund, the incentive to monitor (a costly act, taking time and threaten social relationships) declines. As local fishermen exit, fewer eyes remain. As fisheries and canneries integrate, there are less opportunities to monitor and more opportunities to cheat.

Is there any policy that would set the number of fish that can be caught and then a distribution of permits that were tradable? It seems like with wildlife regulation the precedent is on quotas but I was wondering to what extent markets for tradeable permits might function?

Fewer, larger boats is also a benefit not a cost.

Actually, not true. Larger boats generally use the most destructive methods for other species and for the environment.

Catch shares actually make smaller boats more competitive with the larger.

it is sometimes the fishermen who lobby for greater limits not for monopoly reasons but as they come to recognize that a smaller limit leads to a larger stock and larger profits

Off-topic a bit (although I'm in a mood from the 'average girls per country post'), but that was interesting sentence structure. What would someone on the street think if you told them that "fishermen wanted greater limits"?

Are "greater limits" stricter limits, since the limits are more powerful?
Or are they looser limits, since the limits allow a greater amount?

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