Ron Arnold attacked Jane Lubchenco, administrator of the National Oceanographic and Atmospheric Administration (NOAA), for seeking to impose industry-killing restrictions on fishing off the New England coast. Iain Murray of the Competitive Enterprise Institute rose to Lubchenco and the Obama Administration’s defense, arguing out that the industry’s woes are a legacy of fishery mismanagement and that NOAA’s efforts to implement “catch-share” management systems (aka ITQs or IFQs) are a step in the right direction. Murray’s right and Arnold’s wrong.
Absent restrictions on entry, fisheries fall victim to the tragedy of the commons, as so many have. Efforts to limit entry through regulatory restrictions on gear, fishing effort and the like have failed miserably the world over. What has succeeded, however, is the recognition of property rights. Most commonly, this has meant allocating transferable shares to portions of the annual fishery catch among those who fish in an area. This limits the catch, but it also aligns the incentives of the fishermen with the sustainability of the underlying resource. It’s precisely the sort of property-based approach to environmental protection those on the right should endorse. Indeed, one of the Bush Administration’s (many) environmental failings was its failure to push more aggressively for the implementation of catch-share systems in domestic fisheries.
Arnold wants to call catch-share regulations “cap and trade” for fisheries. This is inaccurate and unfair. While both a catch-share system and cap-and-trade involve the allocation of transferable rights in a common pool, they are not the same, and they do not create the same incentives for participants. In cap and trade systems, as for carbon emissions, the value of the emission right is solely dependent upon the government set cap and its value as a factor input in the production of energy or for some other purpose. In the fishery context, the interest of the share owner is directly tied to the value of the underlying resource. Those with catch-shares have an interest in seeing that the total catch (the “cap”) is set at the optimal level, as this will maximize the present value of the catch-share. Indeed, in the fishery context, for reasons I explain in this paper, once rights are allocated, fishery participants have every incentive to set the cap themselves at the optimal level –and, provided the transaction costs are low enough, have greater incentive and ability to do so than any government agency. Not so with cap-and-trade for carbon.
As Murray notes, there may be reasons to criticize the Obama Administration’s environmental policies, but Lubchenco’s efforts to bring catch-share management systems to more fisheries is not among them.