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Aug 3, 2006

Fishing Rights: A Challenge to All

In the above post on Oo.net, I came up with what I think is an elegant solution to the "problem" of fishing rights, so now I'm looking for input on my solution. Basically, it is:

Would-be commercial fishermen bid yearly for a license to sell a specific type of fish (in a specified country, since governments can't exactly guarantee anything about other countries). This license is known as the "primary" license. The holder of the primary license can also issue "secondary" licenses whereby others can acquire the right to sell fish of the specified type. Each type of fish will be bid individually.
Note: The government is not the default "owner" of this license; in the absence of anyone that wishes to bid for a license (such as on fish that have little or no commercial value) then the license remains "open", and no one can contest anyone else's use of that type of fish.

I invite everyone and anyone to try and poke holes in my solution or demonstrate how it would not work. You may need to read the entire thread to understand the question under debate, however, and it's a bit long.

If you're not an Objectivist and/or you don't understand or care to understand how Capitalism actually works, I will inform you that your ideas are "not even wrong". This doesn't mean that I hate you, it just means that I don't want to write a ten-page paper explaining the foundation of the discussion before I get around to the actual discussion. So, this is actually a fairly narrow question.

You won't get anything out of this other than (possibly) bragging rights. I'll go ahead and offer a few scenarios that occured to me and my rebuttals as a starting point:

Q: Jennifer, wouldn't this constitute at least the potential establishment of a coercive monopoly?
A: In a word, no. A coercive monopoly depends not only on the non-existence of competitors, but the impossibility of competitors, and all anyone has to do in order to defeat your monopoly would be to out-bid you for the license next year. The government would only be ensuring that you had the right that you'd paid for, just like registering a patent.

Q: What's preventing the highest bidder from issuing more licenses than the market or fish population can support?
A: What prevents a manufacturer from making more shoes than he can sell? The fact that he'll lose money if he does. If there are already a great many entrants into a specific field, the wise capitalist invests elsewhere. If he doesn't, he loses his shirt and the problem quickly vanishes.

Q: What happens if some political group raises a bunch of money and buys all the fish licenses so that no one can fish?
Hey, if that's how they want to spend their money, so be it. It's no different from someone buying a strip mall and turning it back into wilderness.

Q: What's preventing everyone from refraining from bidding and getting "free" licenses?
Self-interest. The problem of fishing rights really only arises in the case of industrial-scale fishing, at which point it becomes profitable to acquire this sort of license so that you can exclude or (somewhat) manage your competitors from a specific field. Besides, could you ever be completely certain that you'd managed to secure the agreement of every potential competitor? Trying to enact a deal of this kind would leave the door open for a very small venture-capital firm to acquire the primary license at a very low price, then charge everyone for secondary licenses!

Q: What happens with foreign countries that don't have fish licenses?
Nothing. In any situation other than anarchy, the government will have to do something about fishing rights. Currently, the tendency is towards telling you where you can fish, and when, and how much, and how, and so on and so forth. Entry into a market where all you have to do is buy a license would be much more profitable.

Anyone else have good ideas? I realize that this scenario is terribly concrete, but I think it's beneficial to your overall thought processes if you occasionally attack concretes from an abstract standpoint. In addition, by showing that the same principle can be applied to even this concrete makes your entire case all that more sound.

2 comments:

A V Fernando said...

I'm sorry, I'm unable to access the original thread. Even though I'm late to the party, I'm going to comment on this because fisheries management is a very real issue for some of us out here.

Fundamentally, I think your proposal misses that fish stocks are a public resource, similar to water, and a pure capitalism strategy to managing it leads to waste and poor husbandry of the resource.

Since I missed the original discussion, I'm making the following assumptions:
- Your proposed license is valid for 1 year.
- The purchaser of the primary license is buying effectively the right to manage a specific stock.
- The government is capable of perfect enforcement of the private management plan.
- Fish includes all seafoods.

I'm going to work through your objections and rebuttals first, because some of them are good.

1- Coercive monopoly
No particular disagreement.

2- Q: What's preventing the highest bidder from issuing more licenses than the market or fish population can support?
A: What prevents a manufacturer from making more shoes than he can sell? The fact that he'll lose money if he does. If there are already a great many entrants into a specific field, the wise capitalist invests elsewhere. If he doesn't, he loses his shirt and the problem quickly vanishes.


This is a much more serious problem than you admit to. A shoe manufacturer who loses his shirt harms no one but himself (and such people as are dependent on him such as his employees). The technology is in place for a single entity to eradicate some fish stocks. While this would only affect the person holding the license under your system, there are situations in which it is advantageous for the license holder to do so. This can have far reaching consequences, because to a large extent, the largest consumers of fish are fish.

As an example, in 2004 there were two Menhaden processing plants on the US east coast. Under your system, either one could buy the primary license and issue a secondary license to the competitor (or not). Menhaden processing is capital intensive, and the fishing for menhaden involves the use of support ships and airborne spotters. Current regulation provides a cap on how much can be harvested each year.

In 2005, one of the processing plants sold to land developers because the waterfront land on which it was based (and needed in order to exist), was worth more as upscale housing than as a menhaden reduction plant. (Although I'm not thrilled by this, as an objectivist you should be happy... that's how capitalism works)

Assume that your system had been enacted in say, 2000. The primary license shifted between the two companies at various times. Beaufort Fisheries, the plant that was sold, held the license in 2005. The owning family knows they're going to sell. What is their fishing strategy to maximize they're investment in that license?

The answer is total eradication of the menhaden stock. (Which is possible with modern technology). This yeilds the greatest benefit to the license holder. The problem is that menhaden is an important forage fish, especially for striped bass and king mackerell. Elimination of the menhaden means that other species, not as nutritious to these species will fill the niche that menhaden currently. Unfortunately, both the striped bass, and the king mackerell fisheries are far more valuable to North Carolina than menhaden. I'll cover your immediate objection that whoever owns the king mackerell license should also have bought the menhaden license later.

*- I will note that I strongly disagree with such environmentalists as Dick Russell who suggest that to preserve the Striped Bass recreational fishery the commercial menhaden reduction fishery should be halted. I will further note that 2006 was not a particularly good year for stiped bass in NC.

3- Enviro groups buy licenses, no fish landed.
No particular objection here, I will note that this already occurs in some fisheries where the license is attached to a specific vessel. (esp US west coast)

4- Q: What's preventing everyone from refraining from bidding and getting "free" licenses?
Self-interest. The problem of fishing rights really only arises in the case of industrial-scale fishing, at which point it becomes profitable to acquire this sort of license so that you can exclude or (somewhat) manage your competitors from a specific field. Besides, could you ever be completely certain that you'd managed to secure the agreement of every potential competitor? Trying to enact a deal of this kind would leave the door open for a very small venture-capital firm to acquire the primary license at a very low price, then charge everyone for secondary licenses!


Bullshit. Especially, The problem of fishing rights really only arises in the case of industrial-scale fishing, at which point it becomes profitable to acquire this sort of license so that you can exclude or (somewhat) manage your competitors from a specific field. In the example of the Spiny Lobster fishery in South Florida, the recreational fishery causes up to 90% of the environmental damage caused by all fishing for spiny lobster. (see the research of Dr. Eggleston, NC State. Figure here is from my notes from a seminar he presented at UNC-IMS, but he and his students have published their results) Fishing rights is all fishing. Period. Elsewise, North Carolina would not have been moved to enact a salt-water recreational fishing license. Of particular note, Eggleston showed that recreational fishermen increase effort until satiation (a predatory strategy applied by bivalves, and other lower order animals), where as commercial fishermen shift their effort as population species decline.

Further, the harvesting of fish (or almost any other resource) requires knowledge and expertise which in this case are held by fishermen. When the US released part of its strategic oil reserve in the late 1990's, two of the winning bids (that I am aware of, there may have been more) were not oil companies, but people who knew what the auction was about and submited high bids. They immediately sold their rights to the released oil to large corporations. This is problematic because:

-These people had no means by which to distribute or otherwise use that oil. They resold their rights. Had they not bid, oil company costs for that period would have been lower. That would have been to the good, either to the ultimate consumer, or to the shareholders of the oil companies, either of which are more numerous, and more worthy of support than 2 individuals out of 300 million.

-These bids slightly increased the value of the oil to the United States, but are in effect friction in the market. Ultimately the transaction was between the consumer and the government of the United States. An efficient market would have transfered the oil directly from the reserves to the consumer, but this is physically impossible. However, to use two middlemen when one was possible is not an ideal situation.


5- Q: What happens with foreign countries that don't have fish licenses?
Nothing. In any situation other than anarchy, the government will have to do something about fishing rights. Currently, the tendency is towards telling you where you can fish, and when, and how much, and how, and so on and so forth. Entry into a market where all you have to do is buy a license would be much more profitable.


OK, that's great except that to a large extent, commercially important fish migrate and are not specifically American, or Canadian, or Kiwi, etc. Under the current system, there is a significant amount of cooperation between governments (see _Hooked, Pirates, Poaching, and the Perfect Fish_ by G. Bruce Knecht). Some species (such as Patagonian Toothfish) are primarily harvested in international waters. Your system removes all incentive for governments to cooperate. They should only look to protect their license holder, since that is where their revenue comes from. And I'm sure that you're not proposing that the primary licenses be worldwide and adminstered by the UN :)

Here are my further specific objections to your scheme. Note that some may have been covered by your original thread, but as I said, I can not access it.

- Fishing is extremely capital intensive. Under your scenario, the ideal competitor is someone capable of buying _every_ primary license in the world, and then only fishing the apex predator, allowing the subordinate stocks to feed the intended harvest species. This results in 1. a lower number of species available to consumers. 2. The death of many people dependent on mid-chain species for subsistance. (Subsistance fishing is far more common than you may think in the US) Even if 2 does not bother you as a follower of Rand, 1 can not be seen as a benefit.

- There is no such thing as bycatch free fishing. Under current rules, fisherman can (to some extent) sell their bycatch. Under your proposed system, a fisherman is encouraged to use the most effective means of fishing for his target species and discarding the bycatch, unless he purchases specific bycatch permits. As an example, currently the most effective way to catch shrimp is to trawl. There is also a system called a skimmer rig, which does much less damage to the bottom, and has less bycatch. Under the current system, persons licensed to fish for shrimp are encouraged to use a skimmer, but under your system, shrimp license holders would be encouraged to trawl and discard their bycatch.

- There is no motivation to maintain the stocks. Since the license comes up for renewel by the highest bidder year after year (or x time after x time), a competitor capable of eradicating a stock has every incentive to do so, maximize short term profit and move to another species. Ultimately what happens is that commercially viable species are replaced as percentage of biomass by commerially marginal species (krill, planktons). This is the tradegy of the commons played out on a global scale. Loss of marine resources is a harm that potentially affects every person on earth.

-Fundamentally, because fish feed on smaller fish, permitting private ownership of a specific stock is wrong and not to the public good.

Well, I've gone on too long. Feel free to tell me I'm "not even wrong". Personally I think that fisheries regulation has improved since the 1980's when it was effectively thought that fish stocks were inexaustable, and are moving in the right direction (quotas being assessed and given to efficient producers).

-AV Fernando
Carteret County, NC

Jennifer Snow said...

You are, in fact, "not even wrong", but it's a fairly easy matter to explain why, although I don't expect you to agree with me or even care what I think.

The issue here is not protecting fish stocks or the sea bed or subsistence farmers or whatever, but establishing some means for determining who has rights in regard "wild" fish because it's theoretically more difficult to own a piece of ocean than a piece of land. That's not to say it's impossible, in which case this discussion is likely to be moot.

I do appreciate you pointing out that I disregarded how capital-intensive many forms of commercial fishing are.