Trading fish

Alex Tabarrok has posted on Marginal Revolution a piece on the expansion of “catch shares” as a fisheries management tool. Under catch shares (also called individual tradeable quotas or ITQs), each fisher owns a percentage of the quota set for the fishery. The fisher can trade the share and it provides flexibility to the fisher about when and how they choose to catch their quota.

The use of catch shares as a method of allocating fishing rights has many benefits. Beyond the information obtained from the prices of the quotas and the opportunity for environmental groups to buy shares, there are some important incentives that they offer. The owners of the shares know that they have an established right into the future and it is in their interest that the stock over which that right exists is maintained at a reasonable level.

As pointed out by Quentin Grafton, Tom Kompas and Ray Hilborn in Science, a maximised economic yield (and maximised catch share value) generally occurs when there is a larger stock size. This is mainly due to the stock effect, whereby it is easier to catch fish from a larger stock. Catching the last fish in the ocean is very expensive. If fisherman have certainty in their future catch rights through their catch share, they will be more likely to support restoration of stock size to that which delivers the maximum economic yield.

Like John Tierney, I find the opposition to catch shares by some environmental groups perplexing from a strategic point of view. Catch shares have the potential to widen the group of allies who wish to preserve the stock. As noted by  John, research suggests that catch shares are superior to alternative allocation measures (although they are not perfect and require appropriate quota levels etc). I would suggest that the opposition is because many environmentalists do not trust markets. This  extends to doubt about the effectiveness of cap-and-trade systems for pollutants or the response to incentives provided by prices such as a carbon tax. To Oceana, ITQs are like the collateralised debt obligations at the centre of the global financial crisis. Despite the differences, evidence of one market crisis (whatever the cause) condemns all markets.

Many environmentalists are also opposed to the “corporatisation” of  fisheries, with catch shares seen as a pathway to ownership of the fisheries by large corporate interests. While this might result, it would not be significantly different to the current state of affairs. This would also depend on the initial allocation. If small fishers were given catch shares, it would be a benefit of the scheme that they have the ability to sell their share if they wished to use that money for an alternative use.

Having said this, some environmentalists are more actively advocating their use (such as the Environmental Defence Fund) as it becomes clear that fisheries with allocated catch shares have better conservation outcomes. Based on the examples in Alex’s post, they are being heard.