One fish, two fish, your fish, my fish
In the contested space of resource sharing, economics can provide one means of taking the conversation forward
By Sarah Jennings and Annabel Boyer
Access to fish underpins myriad different benefits to people – food, income, employment, recreation and cultural identity to name a few. As our society increasingly looks to the blue (ocean) economy to deliver food and energy solutions for a growing population, our coasts and oceans will become more crowded, competitive and contested spaces – keeping issues of marine resource allocation and reallocation on centre stage.
When swimming freely in Australian waters, fish are a publicly owned resource, which makes it important to manage them to ensure that society as a whole gets as much benefit as possible.
In some cases, this maximum benefit might mean letting one group of users have sole access, but more often than not maximising benefits – whether social, economic or cultural – requires sharing the resource across different users or groups of users.
Conflicts over the right to use natural resources have been important human issues throughout history. Fish are no exception. Access to fish stocks was the prize in the notorious Cod Wars in the North Atlantic Ocean during the 1950s, ’60s and ’70s, and more recently this has been a flashpoint in territorial disputes over the South China Sea.
Having a transparent, evidence-based process for determining allocation is valuable as a means to confer legitimacy on allocation decisions, as well as ensuring that we are making the most of this precious resource.
Possible approaches come down to two broad alternatives – administrative models or market/economic valuation-based models. In a market/economic valuation-based model the driver is either the trading of shares in an established market or the application (by administrative decision) of economic valuations to competing uses of a resource.
To date, variations of an administrative model, with the government ultimately making the final decisions, have been the preferred approach in Australia and internationally.
Economics can provide a clear framework for the allocation of resources using the logic of the ‘equi-marginal rule’, which can be illustrated by asking what happens when users have different marginal benefits.
Suppose that, after deducting costs, a fisher gets a benefit of $5 from landing the last kilogram of fish in their allocation, while a second fisher enjoys a net benefit of $10 from their last kilogram of landed catch. Reallocating the marginal kilogram of catch in favour of the second fisher effectively increases the total benefit created from the resource.
Applying the equi-marginal rule to the initial allocation of a resource makes sure that each unit of the resource (cubic metre of wood, litre of water or kilogram of fish) goes to the user who values it most; or equivalently, for a given allocation, that the last unit allocated to each user is worth the same amount. Whenever there is a gap between the marginal value for different users, reallocation can improve efficiency or make the economic pie bigger.
An advantage of a market-based approach, wherein fishing rights are exchanged in an established market, is that – under ideal conditions – people reveal all the information needed about marginal values when they signal their intentions to buy and sell goods.
Market forces make sure that things end up in the hands of those who value them most. Markets can also do away with the need for costly surveys, resource-heavy administrative processes and excessive lobbying activities.
Challenges in practice
Harnessing market forces to apply the equi-marginal rule by creating a market for harvest shares can be challenging. While allocating harvest shares within a single sector, such as a commercial fishery, using individual transferable quota has worked quite well; extending the market-based model to inter-sectoral allocations raises new issues.
For example, for sectors such as recreational fishing there would need to be an organisation with authority to hold the sector’s total allocation, raise money and buy and sell fishing rights on behalf of individual fishers. Fisheries Victoria is trialling a system in which it will be mandatory to tag Rock Lobster in the recreational sector. Based on FRDC research on the Shark Bay Pink Snapper fishery in Western Australia, the tags provide a means of measuring catch as well as allocating fishing rights within an overall catch limit.
The alternative of using the equi-marginal rule to guide allocation decisions administratively is also not simple. Even in the most straightforward of cases, such as where a total allowable catch is to be shared across two commercial fishing fleets, you would need information on the prices and costs of each additional kilogram of fish caught by each fleet to work out the best initial allocation. You would then need to check this information regularly to see if the best allocation had changed.
This becomes even more difficult when that extra (kilogram of) fish could swim into either a commercial fishers’ net or hook itself on the line of a recreational or customary fisher.
For fish caught by these other sectors, we do not have the convenience of being able to draw on information about market prices to calculate marginal values, and other valuation methods are needed.
The emergence of new fisheries based on previously underutilised species or on species that have changed their distribution due to climate change provides potential opportunities to trial different ways of making initial allocations and of allowing for reallocation of rights, including using the market.
But most fisheries have been fished for a long time, and history matters. Sometimes this spans generations and, in the case of Indigenous fisheries, there can be continuous traditions going back thousands of years. Indigenous title to marine resources is often recognised through judicial and legislative systems. Historical catches also often provide the basis for allocations between recreational and commercial fishers.
In determining how fisheries resources are shared, stakeholders care about both the final outcome and the process used to determine the shares. They want to have a voice in decisions that affect them. Allocation policies that include strong participatory processes can help move the process from one of conflict to one of compromise.
Markets work best where there are many buyers and sellers, rights are clearly defined across all users and economic efficiency is the goal. Administrative processes, including those that apply economic valuations to competing uses, may be preferred where there is a need to be more responsive to goals other than economic efficiency. This includes distribution – where the ‘currencies’ for expressing value of different user groups are not easily translatable to a common metric (dollar or otherwise). Administrative processes may also be preferred where the market fails to give voice to the interests of some legitimate stakeholder groups. What is clear is that there is no one-size-fits-all approach.
Regardless of the approach adopted, the spirit of the economists’ equi-marginal rule can play a pivotal role in guiding fish onto the hook or into the net of those who value them most. When values and priorities change or conflicts arise in relation to fisheries resources it can provide a clear path forward.
The FRDC’s Human Dimensions Research Subprogram (previously the Social Sciences and Economics Research Coordination Program) has identified resource allocation in its draft 2017–2020 RD&E Plan as a priority area for investment. It will be looking for opportunities to co-invest in projects that contribute to the development and testing of resource allocation and benefit-sharing mechanisms that strike a balance between economic efficiency and distributional and procedural fairness, while ensuring sustainability.
Sarah Jennings, email@example.com