Fishing for sensible regulatory rules

The new economy

Posted: Friday, June 25, 1999

I don't have to tell you there are precious few things economists agree on, so it may surprise you to know that of the things that economists do agree on, one is directly related to Alaska: the need to regulate commercial fishing.

Economists - even free market zealots - agree that commercial fishing needs regulation. The reasoning behind this view is straightforward, at least to economists. Fish in the ocean are called a common property resource because are available for anyone to harvest in the absence of regulations. There is no incentive to conserve common property resources. If I don't catch the fish, you will, so there is no reason for me to limit my catch to make sure there are fish tomorrow.

Economists even know how much effort will be exerted to catch those fish. Because their focus is on making profits, commercial fishers will fish as long as the cost of catching the next fish is less than the profit they earn from that fish. This spells doom for salmon because the cost of catching the next fish would be very low - just string a net across the river and haul them in - if there were no regulations.

It's different for halibut: As more halibut are caught, they become more scarce and fishermen find that they have to fish longer and harder for the fish, so their costs rise. Very likely the halibut fishery would collapse before we ran out of halibut. But it could be that so many halibut are caught the genetic diversity of the stock is harmed. The result would be a long, slow decline into extinction. This is why economists need the input of fisheries biologists when designing regulations.

While economists agree that the commercial fishing industry must be regulated, they are in far less agreement regarding how to regulate the industry. And in the past there have been more than a few crazy policies.

For example, when it became apparent that regulations were needed to protect the Bristol Bay fishery in the 1950s, the solution was to let anyone fish, as long as they didn't use power boats. It would have been much more efficient to limit the catch and allow modern fishing methods, but that would have put a lot of people out of a job.

The two-day halibut openings we had until very recently were almost as inefficient: Almost anyone could fish halibut, but only on very restricted basis. The result was that too many boats fished halibut and too often in dangerous weather.

Most economists believe the Individual Fishing Quota (IFQ) system we have today is a vast improvement over past policies. Halibut fishers were issued quotas based on their harvests in previous years and then allowed to catch fish year round. With some exceptions, boat owners must be present on the boat, so there is little chance that the industry will become dominated by non-Alaskans.

Economists especially like the fact that individual quotas can be sold on an open market. This allows the more successful fishermen to buy quotas from less successful fishermen. IFQs allow better control of the halibut harvest, and the work is safer because there is little reason to go out in dangerous weather. Finally, fresh halibut is now available year round so the value of the fishery has increased.

While economists are in agreement about the need to regulate the commercial fishing industry, it is less obvious what should be done for subsistence fishing because the two groups have different incentives for fishing. Unlike commercial fishers, subsistence fishers are not working for profit; they are working for, well, subsistence. They have an incentive to limit their catch to make sure there are fish tomorrow. As long as subsistence fishers are not allowed to sell their catch commercially, the need for heavy-handed regulation is slight. The problem, of course, is that fish caught by subsistence fishers-as well as sport fishers and charter boats-are unavailable for commercial fishers. The need to serve all interested groups is what is making it to difficult to find a regulatory solution.

William S. Brown holds a Ph.D. in economics and has taught at the University of Alaska Southeast since 1991. He can be reached at: william.brown@uas.alska.edu.



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