Fighting Over a Red Herring:
The Role of Economics in Recreational-Commercial Allocation Disputes
Joshua K. Abbotta
a
Associate Professor, Arizona State University, Global Institute of Sustainability, School of Sustainability
and Center for Environmental Economics and Sustainability Policy, PO Box 875502, Tempe, AZ 85287
Fighting over a Red Herring:
The Role of Economics in Recreational-Commercial Allocation Disputes
Abstract
This paper turns a critical eye on the current role of economics in informing inter-sector allocation
disputes. I argue that much of this analysis relies on a notion of efficiency that is flawed on both static
and dynamic grounds and fails to address the inefficiencies of existing management institutions. I
propose that reallocation is rarely a first-order concern. Rather, it is a “red herring” that detracts from
far more necessary fundamental reforms within the recreational sector. These reforms would
significantly improve the accountability and efficiency of the sector and establish the necessary
institutions to resolve allocation disputes in an adaptive, efficient manner through arms-length
transactions. I propose a general framework for reform of mixed recreational-commercial fisheries and
discuss realistic rights-based policies to better manage fishing mortality for private recreational anglers
and facilitate transferability across sectors. I close with an appeal for more policy-relevant work by
fisheries economists on recreational fisheries.
Fighting Over a Red Herring:
The Role of Economics in Recreational-Commercial Allocation Disputes
Compared to commercial fisheries, innovation in the management of marine recreational fisheries
has been glacial. At roughly 12% of global harvest (Cooke and Cowx 2004), recreational harvest has
rarely played a dominant role in the depletion of marine stocks (Cooke and Cowx 2006; Post et al. 2002).
Yet recreational fishing has contributed significantly to overall depletion for specific fisheries (Coleman
et al. 2004; Cooke and Cowx 2004). Within the US, 23% of the landings of “populations of concern” –
those that are either overfished or experiencing overfishing – are accounted for by recreational harvest
(Coleman et al. 2004). This proportion rises to 64% for the US Gulf of Mexico (Coleman et al. 2004). Yet,
with very few exceptions, recreational fisheries are managed under open access or regulated open
access institutions – typically some combination of nominal license fees, restricted seasons, and size and
bag limits – that have failed to contain both fishing mortality and economic dissipation.
Managers are also increasingly tasked with negotiating growing tensions over the allocation of
harvest between competing recreational and commercial interests. These tensions have been
exacerbated by growing recreational demand in many fisheries (Cooke and Cowx 2006), and by
increased commercial demand for quota arising from rights-based reforms. For example, total allowable
catch in the US Gulf of Mexico red snapper fishery is roughly equally divided between a commercial
sector regulated under ITQs and a regulated open access recreational fishery. Disputes over inter-sector
allocations have increased recently as the commercial fishery has seen a steady increase in the value of
ITQ shares and recreational effort continues to expand despite tightened bag limits – often leading to
substantial over-harvesting of the recreational sector’s allocation. Recreational interests have lobbied
for increased allocations by drawing attention to the importance of recreational fishing for sustaining
coastal communities – comparing these concentrated impacts to the more diffuse impacts of
commercial fishing. In response, commercial interests have stressed their far greater accountability for
their harvest relative to the “runaway” recreational sector.
How can economists contribute in a pragmatic way to resolving the challenges of mixed
recreational-commercial fisheries? In principle, accountability and efficiency can be established by
creating a joint ITQ market with free transferability across sectors (Arnason 2009). However, numerous
real-world challenges make the adoption of this approach improbable. A sparse literature has
considered more incremental, second-best approaches (Abbott and Fenichel 2013; Fenichel and Abbott
2014; Homans and Ruliffson 1997; Johnston et al. 2007; Sutinen and Johnston 2003; Woodward and
Griffin 2003) or considered the ability to extend ITQ management to the for-hire (e.g. charter or
headboat) sub-sector (Abbott and Wilen 2009; Abbott, Maharaj and Wilen 2009). Other work has
responded to the immediate demands of policy makers by attempting to assess the economic efficiency
of changes in allocation across sectors – relying on comparisons of the relative marginal valuation of
harvest. (e.g., Agar and Carter 2012a; Agar and Carter 2012b; Agar, Carter and Waters 2008; Easley
1992; Gentner 2009; Gentner et al. 2010; Schuhmann and Easley 2000).1
This paper turns a critical eye on the current use of economics in informing inter-sector allocation
disputes. I argue that much of this analysis relies on an idealized and institutionally naïve notion of
efficiency that is flawed on both static and dynamic grounds. I argue that issues of inter-sector allocation
are rarely a first-order concern. Rather, inter-sector allocation is often a “red herring” that detracts from
a far more fundamental and difficult issue – how best to integrate recreational fisheries into the overall
fisheries management strategy to achieve objectives of accountability and efficiency both within and
between sectors.
Section 1 examines the unique challenges recreational fisheries present to fisheries managers. I also
summarize how the literature to date has conceptualized and measured allocative efficiency across
sectors. Section 2 develops two criticisms of the current approach to inter-sector efficiency. The first
draws upon recent work (Holzer and McConnell 2014) to argue that the assumptions underlying the
application of the textbook “equimarginal principle” are violated in cases where fishing mortality is
allocated inefficiently within one or more sectors. The second critique takes a dynamic view rooted in
the institutions of fisheries management to argue that prioritizing reallocation between sectors before
pursuing efficiency-enhancing reforms within sectors detracts from the achievement of long-run
efficiency. Section 3 proposes a more constructive trajectory for policy reform. Section 4 fleshes out this
trajectory by describing a handful of second-best, yet rights-based, approaches for more effective
management of recreational fisheries. Section 5 concludes the paper.
1. Evaluation criteria: accountability and efficiency
Effective management of recreational fishing first requires that recreational anglers be made
accountable. Accountability necessitates that managers have reliable and timely estimates of fishing
mortality for at least the recreational sector as a whole and then institute policies and enforcement to
achieve control over this mortality (MacKenzie and Cox 2013). Recreational fisheries typically have low
catchability relative to commercial fisheries but present a far larger and more diffuse population of
anglers that fish from a variety of ports and use a variety of modes (e.g., fishing from a pier, private
boat, or for-hire vessel). These characteristics make it difficult to measure and control recreational
fishing mortality. Catch/landings accounting in recreational fisheries is often nonexistent or of low
quality relative to commercial fisheries in the same jurisdiction (Figueira and Coleman 2010; Ihde et al.
2011). Even relatively advanced survey protocols, such as the NOAA Marine Recreational Information
Program (MRIP), are limited in their ability to provide timely and sufficiently accurate estimates of total
catch or landings for in-season management. Most recreational fisheries operate under regulated open
access management via the use of bag and size limits.2 These measures limit the landings of an angler on
a given trip, but do little to contain total effort or fishing mortality (Cox, Walters and Post 2003; Lewin,
Arlinghaus and Mehner 2006). In rare cases where total allowable catch (TAC) limits have been set for
recreational fisheries, such as the US Gulf of Mexico red snapper fishery, a combination of imperfect
catch monitoring under derby conditions and the lack of political will to revise season closures dates
have often resulted in systematic overshoot of recreational allocations. Obviously, accountability
remains a challenge for recreational fisheries.
Selecting between competing management strategies or allocations requires evaluative criteria. The
criterion overwhelmingly favored by economists is economic efficiency (Agar, Carter and Waters 2008;
Arnason 2009; Bishop and Samples 1980; Easley 1992; Edwards 1991; Plummer, Morrison and Steiner
2012; Randall 1987).3 Efficiency allocates resources according to their potential to maximize net benefits
– the sum of total consumer and producer surplus measures. Within the recreational sector, producer
surplus arises from for-hire operations while consumer surplus accrues to recreational anglers.4
Efficiency in mixed commercial/recreational fisheries can be parsed into two components. First, given
the allocation of fishing mortality to each sector, management must maximize sector-level net benefits.
Second, conditional on the total allowable fishing mortality5, the allocation of this quota across sectors
must maximize total net benefits.
The relevant good to allocate is fishing mortality – the sum of fish landings and the portion of catch
which dies upon discard (Abbott and Wilen 2009; Anderson 1993). For fisheries with minimal mortality
rates for discards and/or very low discard rates a system based upon allocation and enforcement of
landings will closely approximate one based upon direct measurement of fishing mortality. Fisheries
with complete mortality of discards and non-trivial discard rates will require allocation and enforcement
of catch to mimic a system based on fishing mortality. Systems with intermediate rates of discard
mortality and retention rates necessitate the separate treatment of landings and discards (Abbott,
Maharaj and Wilen 2009; Anderson 1993). Most discussions of recreational/commercial allocation, even
in fisheries with significant discard mortality, have framed their analysis in terms of landings – often
because they are easier to monitor and enforce than fishing mortality.
In considering the “value of a fish” across sectors, economists strive to estimate the horizontally
summed derived demands for fish conditional on economic (prices) and stock conditions – the
relationship between the quantity of fishing mortality (or landings) and its marginal valuation as an input
to commercial fishermen or recreational anglers. In the commercial context, analysts have relied upon
data on ex-vessel prices, landings and fixed inputs to econometrically estimate industry-level inverse
demand curves for harvest or landings quota using duality approaches (Agar, Carter and Waters 2008;
Gentner et al. 2010).6 Alternatively, when the fishery is managed under an ITQ system, lease prices for
quota provide direct economic data on the marginal WTP for a unit of harvest at particular allocation
and stock levels (Grainger and Costello 2014; Newell, Sanchirico and Kerr 2005). The overall recreational
demand for fish inputs depends on multiple behavioral adjustments on the part of anglers including 1)
changes in the number and composition of participating anglers; 2) changes in the number of trips; and
3) changes in the number of fish caught and landed per trip.7 In practice, data limitations have caused
most practitioners to hold the first two margins constant, treating them as fixed with respect to
allocation changes. Recreation demand models rely upon use and interview data to identify how anglers
tradeoff variations in travel costs across sites with expected catch and/or landings per trip (Johnston et
al. 2006).
While the aforementioned methods are theoretically capable of identifying derived demands, data
limitations such as high correlation between stock status and allocations and limited variation in
recreational bag limits present strong challenges to identification of the slopes of sectoral demands in
the neighborhood of the status quo allocation, and provide even less information to identify their shape
for “non-marginal” allocation changes. Faced with these challenges, analysts have often substituted
strong and potentially consequential assumptions, such as perfectly elastic demand within the
recreational sector, in place of data (Agar, Carter and Waters 2008; Gentner 2009; Gentner et al. 2010).8
2. The “red herring” of inter-sector efficiency analysis
Most discussions of efficiency in fishery allocations make extensive use of the “equimarginal
principle.” For simplicity, assume two sectors, each with their respective derived input demand curves
for fish mortality or landings. If it is efficient for both sectors to fish, the equimarginal principle states
that the efficient allocation occurs where the marginal benefit of an additional unit of allocation is
equalized across sectors (Fig 1). This logic has been repeatedly expressed in the literature (Bishop and
Samples 1980; Easley and Prochaska 1987; Edwards 1991; Green 1994; Plummer, Morrison and Steiner
2012) and figures prominently in reallocation assessments (Agar and Carter 2012b; Agar, Carter and
Waters 2008; Gentner 2009; Gentner et al. 2010; Plummer, Morrison and Steiner 2012). When only
“local” information on demand is known for one or more sectors, comparing the respective marginal
values across sectors at the current allocation provides qualitative guidance on the direction in which
allocations should be adjusted, but little guidance on the size of the implied adjustment (Agar, Carter
and Waters 2008; Gentner et al. 2010).
While intuitive and simple to communicate, there are two critical reasons why this approach to
reallocation is fundamentally flawed. The first, a static argument, draws upon recent work (Holzer and
McConnell 2014) to argue that the management scenario envisioned by the simple textbook
equimarginal principle bears little resemblance to the real-world contexts it is applied to. The second
argument takes a dynamic view rooted in the political economy of fisheries management to argue that
focusing on fiat reallocations of quota between sectors, given the current state of management in most
fisheries, is at best a distraction and perhaps even harmful to fostering a trajectory of efficiencyenhancing reforms.
2.1 The static argument
The equimarginal principle relies on a restrictive but hidden assumption – that access to fishing
mortality within each sector is allocated efficiently – in a manner that follows the ordering of marginal
willingness to pay (WTP) down the derived demands of each sector. In other words, at a presumed
efficient allocation (Fig 1), property rights within each sector must offer exclusive access to fish mortality
to each user in quantities up until the point where their individual demand intersects the equalized
marginal value between the sectors (i.e. the implied price in an inter-sector quota market).
Management institutions within each sector function as rationing mechanisms for allocating fishing
mortality across users. However, very few institutional settings allocate access to harvest or fish
mortality according to WTP. Only transferable quota markets, Pigouvian taxation, or certain auction
designs, coupled with effective enforcement, are likely to approach efficient within-sector allocations.
Holzer and McConnell (2014) note that the penetration of these mechanisms in resource and fisheries
management is quite low.9 They develop a stylized model of the generalized valuation of a resource
under different “access scenarios” – defined by the probabilities of allocating successive units of the
resource to individuals with given marginal valuations. The marginal expected valuation function that
results is the combination of the distribution of demands across anglers and the way that management
institutions allocate the resource across this distribution (Fig 2). In general they find that “knowledge of
marginal values is insufficient for inferring the aggregate value of the resource. It is critical to
understand the rules governing access and the sorting of marginal values they induce” (Holzer and
McConnell 2014).
While few commercial fisheries in the waters of developed nations operate under open access,
access to catch is still frequently allocated by first possession – to whoever manages to catch it first. In
the case of derby fisheries, catch flows toward vessels with the greatest capacity and willingness to
catch fish in a short interval of time. These attributes may not align closely, if at all, with the factors
influencing the marginal value of fish as productive inputs.10 This observation is confirmed by the
aftermath of the introduction of ITQs where the eventual distribution often differs dramatically from the
pre-ITQ allocation. Consolidation under ITQs shows that many vessels with access under the derby are
completely excluded under an efficient allocation mechanism. Even most real-world market based
management present access scenarios that deviate considerably from efficiency-based allocation – with
restrictions on transferability, “owner operator” restrictions, and special allocations to crew, processors
and community sectors.
The regulated open access allocation mechanisms that persist in recreational fisheries are likely
even less efficient than in commercial fisheries. Holzer and McConnell argue that theory and experience
alone make it difficult to determine whether management systems for recreational fishing give high
valuation individuals a larger probability of harvesting the resource (so that the expected marginal
valuation schedule slopes downward in increased allocations), or favor the claims of low valuation
individuals (so that the expected marginal valuation schedule slopes upward), or allocate in a random
fashion (so that the expected marginal valuation schedule is flat – see Fig 2).11 One set of factors that
influences this relationship is the correlations between fishing skill, income and cost of access, where a
positive correlation between skill and income and a negative correlation between skill and cost of access
will tend to allocate catch from high to low valuation anglers (Holzer and McConnell 2014). Fisheries
regulated by restrictive seasons will tend to favor those with low opportunity costs of fishing time during
the season (and hence greater ability to substitute activities over time) and closer proximity to the
fishing grounds (due to a fishing trip consuming less travel time). There is little reason to expect these
factors to systematically correlate with the heterogeneity driving WTP per fish across anglers.
Figure 2 demonstrates how the use of the conventional equimarginal analysis can mislead allocation
decisions. Holzer and McConnell show that a “generalized equimarginal principle” may apply.
Specifically, for allocation rules that either favor high valuation individuals or allocate fish randomly, the
efficient allocation can be found by the intersection of the marginal cost curve to the commercial sector
and the expected marginal valuation curve for recreation. As drawn, this supports expanding the
allocation to the recreational sector relative to the level suggested by the simple equimarginal
principle.12 When allocation rules favor low valuation individuals then efficiency dictates allocating the
entire quota to either the recreational or commercial sector depending on which has the highest
expected total value. Even the “cautious” strategy of comparing marginal values at current allocation
levels for guidance on the direction of reallocation is invalid. The ordering of marginal valuations
between sectors may not be preserved for the management-dependent expected marginal valuations –
there is no guarantee that the “marginal fisherman” on the sector-level demand curve gets the marginal
fish. Non-market management institutions ration access to the resource along gradients aside from
WTP. The extent to which these “rationing rules” distort the expected valuation of each increment of
fishing mortality depends critically on how tightly correlated these gradients are with WTP.
Understanding the nature of allocation within each sector is critical when considering the question
of how to best allocate fish between sectors. Valuation deprived of its institutional context is of little
direct use for informing even the most rudimentary of allocation questions. Some analyses for Gulf of
Mexico reef fish have pointed to a higher marginal value of harvest in the recreational sector relative to
the commercial sector to justify some degree of reallocation to recreation (Agar and Carter 2012b; Agar,
Carter and Waters 2008; Gentner et al. 2010). Yet, even such tentative qualitative guidance is
unsubstantiated by the evidence at hand and could result in a loss of net benefits if the additional
recreational harvest accrues to anglers with valuations sufficiently below the marginal valuation
suggested by the “market” demand curve for recreational fish. Using logic predicated on market
institutions is only sensible to the extent that allocation institutions within each sector closely
approximate market outcomes. The equimarginal principle, as currently applied for allocation analyses,
has little credibility.
2.2 Dynamic and institutional arguments
The notion of efficiency that dominates the literature on inter-sector allocation, including the
advances of Holzer and McConnell, is fundamentally static (but see Schuhmann and Easley 2000). It
relies upon marginal comparisons of the current value of fish mortality across sectors as opposed to the
relative value of the allocation as a capital asset between sectors. Changes in biological, economic and
socio-demographic variables will necessitate frequent adjustments in allocations to maintain efficiency.
In the absence of inter-sector quota markets, these adjustments necessarily presume a technocratic
management authority that possesses the information, resources, capacity, and political will to revisit
allocations on a regular basis.
This “social planner” conception of fisheries management bears little resemblance to the realities of
management in most jurisdictions. Changes in allocation are rarely achieved by fiat. Rather, they emerge
from a complex and often heated political process where conflicting interests collide. Given the current
state of data and modeling, managers rarely find that they have the information to make allocation
decisions with the degree of support and confidence required to confer legitimacy on the decision –
raising significant risk of litigation. In other words, the transaction costs of reallocation are formidable,
explaining why reallocations have been infrequent and have rarely deviated markedly from status-quo
levels (Kearney 2002; Plummer, Morrison and Steiner 2012).13 In this friction filled environment,
allocations become the de facto property rights of the respective sectors. It is therefore inappropriate to
allocate durable property rights on the basis of myopic, “snapshot” notions of efficiency. At best this
provides a precise answer to the wrong question.
Even a forward-looking technocratic allocation is likely to miss the mark if efficiency is truly the goal
of economic policy advice. A voluminous literature in institutional economics and political economy
demonstrates how the prior assignment of property rights can create substantial inertia against the
evolution of more efficient management institutions or foster rent seeking (Mueller 2003), as powerful
constituencies with vested interest in the old system of rights exercise their power in the policy process
(Libecap 1989; North 1990). Expanding upon these arguments, Acemoglu and Robinson (2013) argue
that reforms yielding apparent efficiency improvements may perturb the balance of political influence in
ways that yield a cascade of socially destructive, rent seeking feedbacks. In other words, even small
changes in allocations may be exceedingly difficult to reverse and contain within them the commitment
to a great many more steps in the same direction – non-convexities rooted in the political economy of
the system (Dasgupta and Maler 2003). This potential for institutional hysteresis or even irreversibility
implies that economists with a sincere interest in providing advice for fostering long-run efficiency
should exercise caution and contemplate how short-run management decisions either enhance or
detract from this objective.
Taking the “long view” of efficiency also requires acknowledging that efficiency of allocations across
sectors is only part of the picture – policy reforms to foster efficiency within the commercial and
recreational sectors are also badly needed. Gains from these reforms are likely to be substantial given
the persistence of rent dissipating forms of management in many commercial fisheries and the
overwhelming predominance of regulated open access institutions in recreational fisheries – perhaps
dwarfing the gains realistically achievable by reallocation under current management institutions.
The marginal value of fish in each sector, and therefore efficient quota allocation, is inextricably
linked with the efficiency of within-sector allocation mechanisms. For example, efficiency may justify a
far larger allocation of quota to a commercial fishery governed by ITQs when paired with an open access
recreational fishery than would occur if the recreational fishery were “rationalized”. Allocation changes
should, accordingly, be considered jointly with within-sector management changes. Nevertheless, they
are far more likely to be considered sequentially in an environment where the accumulation of prior
changes in property rights structures necessarily constrains the feasible policy set moving forward.
Proper sequencing is critical.
Empirical work and theory from transaction costs economics suggest that the rigidities to change
grow in the number of individuals, the heterogeneity of economic interests and preferences and as
uncertainties about each party’s valuation of the good increases (Banzhaf, Fitzgerald and Schnier 2013).
So, while potential Pareto improvements in within-sector management may be challenging to achieve,
matters affecting the assignment of rights between large and heterogeneous sectors may be even more
difficult to resolve. While centralized fishery management can theoretically sidestep these transaction
costs by dictatorial reallocations of rights, friction often reigns in practice.
One argument for prioritizing within-sector reforms over changes in allocations is based in the
likelihood that the transaction costs associated with reaching a mutually satisfactory allocation are likely
at their largest at the beginning of the reform process. However, as within-sector reforms progress,
uncertainty about the workings of these reforms and their effects on the value of fish in both
commercial and recreational sectors will be resolved. Efficiency enhancing reforms may consolidate
participants and lessen heterogeneity, reducing transactions costs to future reallocations. Some
reforms, such as the use of cooperatives in commercial or recreational for-hire fisheries or angling
management organizations in recreational fisheries (Sutinen and Johnston 2003), may provide a
platform for agents within each sector to resolve their internal heterogeneity and participate in the
management process as a united front. By contrast, commercial and recreational stakeholders faced
with the prospect of reallocation before within-sector reforms have taken place face a great deal of
unresolved uncertainty. Furthermore, because of the costs associated with revisiting allocation
decisions, stakeholders suspect that the initial allocation will remain in effect for some time and serve as
a baseline for future reallocation discussions. As a result, their bargaining position is predicated not only
on obtaining an advantageous allocation under current management but also an allocation that protects
their interests under future, uncertain management as well. Given the high stakes and profound
uncertainty, acrimony and gridlock are very likely if reallocation is pursued in anticipation of substantial
within-sector management changes.
3. A modest proposal for reform
Given these critiques, how can economists advise fisheries managers on how to foster increased
efficiency and accountability in mixed recreational-commercial fisheries? While policies should be
crafted to the local context, I believe a handful of “design principles” are broadly applicable.
First, any sequence of reforms should be approached with an eye toward first pursuing relatively
cost-effective steps that enhance the accountability and efficiency of the overall fishery, that increase
the flow of information to regulators and stakeholders, and that reduce the transaction costs associated
with necessary policy changes in the future.
Second, reallocation policies that honor the legitimacy of prior property rights, even if these rights
are de facto in nature, will likely achieve a far greater degree of support from stakeholders than topdown reallocations that ignore these claims. This does not mean that regulators should be resigned to
enshrining the status quo, but it does imply that the design of measures to compensate those affected
by reallocation is at least as important as deciding the efficient allocation itself.
Third, where possible, management institutions governing the allocation of fishing mortality within
and across sectors should be designed so that they are adaptive in nature – providing and incorporating
information that enhances the ability to efficiently reallocate resources while reducing the transaction
costs (including management costs) associated with doing so. Market-based approaches, where feasible,
possess these properties (Hayek 1945).
Fourth, it is important to build into the design and execution of policies the generation of the data
and modeling necessary to predict (ex ante) and evaluate (ex post) reallocation scenarios, enhancing the
legitimacy of the process supporting reallocation decisions in the eyes of stakeholders. The required
depth of these analytical investments will likely rise substantially to the extent that reallocation
approaches ignore the second and third guidelines by pursuing “top down” reallocations that ignore the
value of prior property rights.
With these principles in mind, a generic plan for enhancing the efficiency and accountability of
mixed recreational-commercial fisheries may proceed as follows.
1. Establish accountability for fishing mortality in both the recreational and commercial sectors
through enforceable output controls, where feasible, or through enforceable input controls
where necessary.
2. Using the best available information, allocate annual shares of total allowable fishing mortality
across recreational and commercial sectors (and distinct sub-sectors) according to their
historical share of fishing mortality.
3. Reform management institutions within each recreational and commercial sector to promote
efficiency and individual accountability for fishing mortality. Wherever possible base these
reforms on incentive-based approaches with transferable (within sector) rights that
simultaneously enhance allocative efficiency and provide a data stream on the valuation of
fishing mortality. However, do not initially allow transferability across sectors.
4. After within sector management institutions have stabilized, approach the question of intersector reallocation of fishing mortality. Where possible, leverage the institutions created in step
3 to facilitate transferability across sectors, creating an efficient and adaptive mechanism for
reallocation with a built in compensation mechanism. In the absence of market integration
across sectors, pursue a range of second-best strategies such as partial auctions of quota or
voluntary cross-sector buyouts. In the case of non-market reallocation, compensation
mechanisms must be incorporated into program design – ideally self-financed by those that
benefit from a greater share of the allocation.
While this framework should be adapted freely, the sequencing is critical – especially the deprioritization of reallocation activities relative to the “low hanging fruit” of securing increased
accountability and efficiency within each sector. To the extent that within-sector reforms entail
transitioning to rights-based forms of management, this process will go far more smoothly by
acknowledging the prior claims of incumbents at the sector and (ideally) individual level rather than
confounding challenging within-sector reforms with contentious allocation battles or their bitter
aftermath.
Experience from commercial fisheries has shown that recognizing prior claims through
“grandfathering” has been pivotal in securing buy-in across heterogeneous users, often serving as a
relatively non-contentious focal allocation (Anderson, Arnason and Libecap 2011; Libecap 2007). In
many cases grandfathering of transferable rights has been followed by extensive market-driven
reallocation – thereby addressing within-sector allocation dilemmas that would have proven formidable
to resolve in a top-down manner. Transferability accomplishes this feat by transforming the perceived
“zero sum” game of top-down reallocation to one of voluntary, mutually beneficial transactions. Apart
from fostering allocative efficiency, this mechanism has much to commend it in that it is flexible,
adaptive, incorporates new biological and economic information, and economizes on transaction costs
(Hayek 1945). The logic behind the four-step trajectory is to place mixed recreational-commercial
fisheries on a path whereby inter-sector reallocation naturally emerges as the apex of a logical yet
incremental process of reform – not as the pressing issue that forestalls other progress.
Rights-based approaches for fostering efficiency and accountability within commercial fisheries can
be counted among the great practical contributions of fisheries economics. The truly novel challenges
for implementing the aforementioned plan lie in extending this success to the recreational sector
through the design of efficient, yet realistic, policies, and, second, in the development of mechanisms to
facilitate efficient and adaptive reallocation of fishing mortality across sectors.
4. Rights-based policies for the recreational sector
The recreational sector can be divided into the for-hire sector14, consisting of headboats (e.g. party
boats) and charter vessels that provide access to the resource for a fee, and private anglers that access
the resource using their own vessels or fish from shore. Strategies for “rationalization” of the for-hire
sector have been developed elsewhere (Abbott and Wilen 2009; Abbott, Maharaj and Wilen 2009).
Despite many subtleties, the for-hire sector shares many commonalities with the commercial sector and
can in principle be managed using tested approaches such as ITQs and cooperatives.15
Private recreational fishing presents unique challenges to extending rights-based approaches.
Allocating rights to individual anglers is made difficult by weak data, and monitoring harvest at the level
of the individual angler may be prohibitively costly. Directly extending ITQ systems to recreation is
therefore impractical in most cases. However, there are pragmatic alternatives that may foster many of
the same efficiency and accountability benefits. These include the use of fish harvest tags or rightsbased instruments targeted at inputs of fishing rather than outputs, either potentially complemented by
the partial devolution of management to angling management organizations (AMOs).16
4.1 Fish harvest tags
Harvest tags authorize the individual take of a specified number of animals of a given species over a
season. While currently used in only a small handful of fisheries (Johnston et al. 2007), they have seen
extensive use by state natural resource agencies as a means to limit harvest for game species, provide
data for management and create a means for allocating access when demand exceeds the regulated
supply (Freese and Trauger 2000; Johnston et al. 2007). This cap is achieved by allocating a fixed number
of tags per season conditional on the size of the wild population. Harvest tags have a number of
attractive features for managing marine recreational fisheries. First, since many fishermen are also
hunters, there is a degree of familiarity with the policy instrument that could help foster acceptance and
compliance. Second, when combined with ample enforcement and angler education, tags provide a
means to set a firm upper bound on fish harvest and establish a more stable basis on which to
contemplate allocation across sectors. Third, by containing seasonal harvest, they undercut the need for
welfare dissipating season closures. Fourth, there is considerable latitude in the design of harvest tag
programs to tradeoff efficiency vs. fairness in their allocation. Most harvest tag programs have
emphasized fairness by allocating most tags via lotteries, with state-run auctions being used for a small
share of tags as a tool to raise revenues. However, greater within-sector efficiency could be achieved by
measures such as full auctioning of all tags and authorizing the resale of tags to ensure availability of
fishing opportunities throughout the season. Alternatively, managers could auction tags to certified
private concessions (e.g., sporting goods stores, bait shops, or angling management organizations) that
then price the permits to anglers throughout the season to maximize profits – thereby maintaining
short-term access to recreational fishing while fostering efficient pricing.
One limitation of harvest tags is that, by assigning rights to only the part of catch that is landed, the
price of discards is zero. Therefore tags only fully internalize fishing mortality when discard mortality is
zero. If anglers react to harvest tags by highgrading or catch-and-release fishing upon exhausting their
tags, then fishing mortality may be significantly higher than anticipated for species with high discard
mortality. In practice estimates of discard mortality could be enhanced by requiring that the holder of
the tag report on landings and discards when the tag is used. A number of hunting tag programs have
mandatory reporting requirements that suspend a hunter’s access to future tags if they fail to report
(Johnston et al. 2007).
4.2 Input controls on angler days
Given the challenges of monitoring anglers’ fishing mortality, and the potential disconnect between
fish landings and mortality, it may be wise to consider alternative policies that target observable inputs
to fishing mortality to enhance efficiency (albeit in a second-best sense) while also controlling fishing
mortality sufficiently to provide a stable environment for allocations across sectors.17 One such
approach is a rights-based system for private anglers where the unit of account is fishing days. The
regulator would set a hard cap on total fishing days and then allocate them by some mixture of auction
and lottery directly to anglers (ideally with resale allowed) or be auctioned to concessions who then
allocate them in a secondary market to anglers. Importantly, these input rights would not come with
temporal restrictions on their use, allowing anglers to fish when it is of greatest value to them. However,
once a day pass is used it must be validated to void the pass for future use, and anglers would be
required to possess a validated pass for the duration of the trip – a system analogous to that used on
many public transit systems.18
Allocating fishing days using price-based means can achieve efficiency in the allocation of fishing
days; however, except in highly restrictive assumptions, this will not equalize the price per unit of fishing
mortality across anglers, which is necessary for first-best efficiency. Highly-skilled fishermen and those
with high retention rates will pay a lower implicit price per fish and therefore take too many trips
relative to low-retention, low-skill anglers (Fenichel and Abbott 2014). Once an angler has decided to
fish they face no marginal incentive to curb either their landings or discards mortality and may fish more
intensively and land a greater fraction of their catch than is optimal (Abbott, Maharaj and Wilen 2009).19
Another challenge is that managers must forecast expected fishing mortality per trip and then scale this
to the quota on angler-days. Anglers’ behavioral adaptations to the policy may cause a structural change
in mortality per trip that will likely change over time as stocks rise and fall. Nonetheless, mandatory data
reporting of landings and discards can be instituted in a similar fashion as with harvest tags20 – providing
a database for refined forecasts over time.
Both harvest tags and day passes are second-best policies under realistic conditions. The relevant
question is under what circumstances is one instrument preferable to the other? Harvest tags send
strong signals to fishermen about the scarcity of fish landings. They are therefore very well suited to
fisheries in which landings dominate as the source of fishing mortality and are particularly unsuitable to
fisheries with high incidences of catch and release fishing and high discard mortality rates. With proper
calibration, day passes can be effective at internalizing the fishing mortality associated with the average
trip but will provide no incentives to anglers undertaking these trips to conserve fishing mortality in
terms of either discards or landings, and will generally bias the disposition of catch toward the latter.
This makes day passes less suitable for fisheries with low discard mortality rates. An alternative hybrid
approach would combine both day passes and harvest tags in a single system. The former would
establish a cap and implicit price on total angler-days for all anglers, including catch-and-release anglers,
and provide an extensive dataset on catch and discards. The latter would specifically limit fishing
mortality from landings.
4.3 Angling management organizations
Compared to the rights-based approaches taking hold in commercial fisheries, which make
fishermen effective shareholders in the fish stock, the approaches described above offer anglers a far
more circumscribed property right (Arnason 2012). Angling management organizations (AMOs) were
proposed by Sutinen and Johnston (Sutinen and Johnston 2003) as a way to introduce many of the
benefits of stronger, more durable property rights to private recreational anglers while also partially
devolving management responsibility and costs to fishermen. An AMO is a non-governmental
organization comprised of groups of individuals who own shares in the AMO as individuals own shares in
companies. Fisheries managers assign each AMO (there could be several, perhaps demarcated by port) a
durable property right to a share of the recreational TAC every year and then grant the authority and
responsibility to manage fishing mortality within this cap to the AMO. Shareholders would then have the
freedom to allocate and manage this TAC to achieve whatever social and economic objectives they see
fit. However, shareholders must demonstrate that they remained within their quota allocation or be
faced with deductions in the subsequent year.
AMOs are for-profit entities, with shares being publically traded. Importantly, shares in the AMO
itself and shares of the TAC assigned to the AMO are distinct, with ownership of AMO shares bearing no
relationship to the degree of access to the TAC. Instead, AMO shareholders possess the authority to
allocate and manage the quota to maximize its value as a capital asset to shareholders, including harvest
tags or day passes, subject to ground-rules that preserve equality of opportunity to fishing access,
including prohibitions against shareholders granting themselves or colleagues preferential access. The
for-profit and publically traded nature of the AMO gives shareholders a strong incentive to efficiently
manage their allocation of the TAC and a long-run interest in the fish stock, with shareholders receiving
the benefits in capital gains and dividend distributions.21 AMOs can also be designed to be self-funding
in terms of their costs of management and enforcement – providing incentives for cost-effective
management with assurances of accountability for fishing mortality enforced by the credible threat of
government punishment of the AMO for violations.
While rights-based in nature, harvest tags and day passes are poorly suited for achieving armslength transfers between private anglers and the recreational for-hire and commercial sectors. The
rights of private anglers are seasonal in duration, providing no basis for an asset market in quota share.
Within-season (lease) markets may be hampered by the (potentially) non-market means of allocation in
the private recreational sector, high transaction costs of coordinating transfers involving a large number
of recreational smallholders, and differences of units of account between private anglers’ seasonal
fishing rights (e.g. fishing days) and those in the commercial or for-hire sectors. However, as entities
representing the interests of a group of shareholders with a durable property right to a portion of the
TAC, AMOs are well-suited to facilitating both long- and short-run transfers between other AMOs and
with individual vessels or cooperatives in other sectors. Since AMOs are publically traded for-profit
entities, their portfolio of quota is an asset (long-run) that serves as an input (short-run) to the AMO’s
activities – where the value of the AMO is tied to its ability to utilize these assets to generate (and
capture the producer surplus from) a valuable flow of recreational fishing services to angler
“customers”. Therefore, like vessels under an ITQ, it will exchange quota with other AMOs and for-hire
and commercial entities according to the expected net present value of profits from the marginal unit of
quota, relative to its market clearing price.22 In other words AMOs, coupled with rights-based reforms in
the commercial and for-hire sectors, provide the necessary institutional pre-conditions to put the simple
logic of the equimarginal principle to work in resolving fisheries allocation issues.23
5. Conclusion
Economists possess a powerful and respected toolkit. Economic arguments, while rarely decisive in
public decision making, do garner respect and contribute to the scientific basis of policy making.
However, the continued relevance and credibility of economics in the policy process depends on
practitioners ensuring that their analyses are not only technically correct in that they answer a
theoretically well-specified question, but are actually salient to the institutions and policy questions at
hand. I have argued that much of the economic analysis for inter-sector allocation falls short in this
regard by providing a static answer to a fundamentally dynamic question and assuming idealized
management institutions that fail even as tolerable approximations.
The pressure to supply “a number” to policymakers that are unaware of (and/or uninterested in) the
limitations of data and the role of assumptions in economic analyses is substantial. “After all,” one may
think, “reallocation is going to occur regardless of whether economists contribute to the discourse, so
isn’t a flawed economic analysis better than none?” However, there is a point beyond which the gap
between the “story” of the economic model and the underlying reality becomes so wide that there is
little reason to believe that following the advice of the model will foster the normative impetus behind
the model – increasing net benefits. In this context we may be wise to learn from the medical
profession: “first, do no harm.”
Short of professing ignorance, how can economists contribute to reallocation policy? I see two paths
forward. First, economists can generalize the equimarginal method of analysis to accommodate the
inefficient rationing mechanisms for fish reflected in current within-sector management institutions.
Holzer and McConnell offer strong initial steps in this direction, but implementing this approach will
require a great deal more research into how various forms of management institutions interact with
angler heterogeneity to allocate fish across the distribution of WTP. Furthermore, the static nature of
this approach will need to be extended to accommodate the reality that allocations are not revisited on
a regular basis. This approach has the virtue of at least addressing reallocation questions as they are
currently posed. However, it ignores that there may be far more “low hanging” fruit for increasing the
efficiency of mixed recreational-commercial fisheries from pursuing reforms of within-sector
institutions. It also does nothing to encourage reallocation mechanisms that adapt more naturally to
biological and economic variability while economizing on transaction costs.
The alternative I’ve proposed is to defer talk of allocation changes (or minimize their magnitude) in
favor of first implementing appropriate management reforms within the for-hire and private
recreational sectors (and the commercial sector, if needed). These reforms will enhance accountability
and efficiency within the recreational sector and build the necessary institutions to facilitate adaptive
and decentralized reallocation of fishing mortality. This approach is ambitious, and made difficult by the
lack of empirical precedents. But it envisions a trajectory for the management of mixed recreationalcommercial fisheries that is far superior to the alternative of tweaking a fundamentally inefficient and
unsustainable management approach.
The research needs are substantial. There is surprisingly little to be found in the literature about the
mechanism design of realistic second-best instruments for recreational fisheries. Case studies are also
badly needed. Wherever possible, I suggest that economists and other scientists partner with managers
and fishermen to develop exploratory “policy experiments” in which alternative management
approaches are tested in a short-term, small-scale way – thereby confronting theory with data and
building shared knowledge about “what works” in recreational fishery management. Fisheries
economics has done much to improve the management of commercial fisheries. It is high time that the
same can be said for their recreational counterparts.
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Figure 1. Efficient allocation of quota between sectors
and across three anglers in the
recreational sector
. Notice that the first angler receives nothing under efficient allocation.
Figure 2. Marginal benefits to recreation under efficient within-sector allocation versus the expected
marginal benefits under monotone decreasing (downward sloping), monotone increasing (upward
sloping) and random access (flat) scenarios. Efficient allocation within the commercial sector is assumed
here. See (Holzer and McConnell 2014).
Endnotes
1
While of dubious economic value (Edwards 1991), economic impact analysis plays a strong role as well.
Fishing licenses may be required but are rarely limited in quantity and often sell for nominal fees.
3
Many factors aside from efficiency play important and justified roles in allocation decisions. However, I ignore
them here in order to focus my arguments to economists, who have largely utilized efficiency as the normative
basis of their analyses.
4
If the fish stock has value as a public good then efficiency would also require the consideration of the surplus to
conservationists from preservation (Arnason 2009).
5
Another dimension of efficiency considers the decision of the time path of total fishing mortality across all
sectors, incorporating stock feedbacks, to maximize economic yield (Grafton, Kompas and Hilborn 2007).
6
The coverage of valuation methods is intentionally terse. For a more systematic review in the context of
allocation analysis, see (Abbott 2013).
7
See (Fenichel, Abbott and Huang 2013) for a discussion of the importance of modeling all three margins of
behavior and (Abbott and Fenichel 2013) for an empirical demonstration.
8
Carter and Liese (2012) address this limitation by having anglers select between hypothetical trips of varying
catch and landings rates and cost levels. They then utilize this data to estimate a demand curve for increased
recreational allocations of grouper and snapper species (Agar and Carter 2012a; 2012b). This stated preference
approach circumvents the limited variation in revealed preference data, and can be combined with revealed
preference data to reap the advantages of both approaches (Whitehead et al. 2011).
9
Agar and Carter (2012a; 2012b), while ultimately providing advice based on the simple equimarginal principle, do
note the lack of a mechanism in recreational fisheries for efficiently allocating access to the resource.
10
Derby allocation tends to favor crew with a high tolerance for physical risk and high stamina, factors with little a
priori link to willingness to pay for harvest. Ability to harvest cost-efficiently, an important factor in the monetary
valuation of harvest, may have little correlation with the rate of catch in a derby. Derbies foster “input stuffing”,
with those making higher levels of distortionary investments garnering a larger share of the catch (Deacon, Finnoff
and Tschirhart 2011).
11
Even the assumption of monotonicity of the expected marginal benefits function only holds under restrictive
assumptions.
12
These results are not generalizable and could as easily been drawn to show greater commercial allocations. The
actual direction of bias will depend on the distribution of marginal values in the population and the nature of the
allocation rule.
13
Within commercial fisheries, large scale reallocation of rights has primarily occurred through the implementation
of tradable property rights or through vessel buybacks. Both are notable in that they contain within the policy
design the means to compensate those whose de facto property rights are retired or reallocated – thus heading off
allegations of a regulatory “taking”.
14
Approximately 22% of US marine recreational landings derive from the for-hire sector (Figueira and Coleman
2010).
15
Full-scale implementation of a rights-based management system for for-hire vessels has yet to occur. However, a
small scale trial, with an associated program evaluation, is currently underway for twenty US Gulf of Mexico
headboats.
16
My discussion of these policies is necessarily terse. See (Abbott 2013) for a more thorough overview and
discussion of input controls, and (Johnston et al. 2007) and (Sutinen and Johnston 2003) for detailed discussions of
harvest tags and angling management organizations, respectively.
17
The management of recreational fisheries without observability of individual fishing mortality bears a close
resemblance to the management of non-point source pollution from agriculture and automobiles. See (Fenichel
and Abbott 2014) for a theoretical treatment of recreational fisheries in this light.
18
Validation could occur at dockside, local resource management offices, at licensed concessions, or using smartphone technology.
19
These adaptations would be strongest for fishermen who highly value fishing for food production, so that
greater retained catch per trip is a strong substitute for a smaller number of trips under the day pass system.
Distortions in the allocation of catch between discards and landings are of minor importance when discard
2
mortality is nearly 100% (as in some deepwater offshore fisheries) but could be consequential for fisheries with a
low mortality rate.
20
One method to incentivize data reporting is to institute a “deposit-refund” system in which the day pass fee
includes a special surcharge. If the angler submits their catch rate information (perhaps online or through a smartphone “app”) then this surcharge is refunded.
21
These incentives may extend beyond quota management to include other ways to maximize the value of the
recreational fishery such as habitat enhancement or protection and improvement of access facilities.
22
The decision making process within AMOs depends on the regulatory constraints under which they operate, the
degree of competition for anglers between AMOs and other substitutable recreational services, and the corporate
governance structure of the AMOs. Each is an important design element that warrants further research.
23
Transferability between AMOs and other sectors fosters efficient allocation between groups even if the
allocation of fish to anglers inside AMOs is inefficient due to distributional or political considerations. Even if a forprofit AMO allocates harvest tags or fishing days via a lottery, it will still buy or sell quota according to its expected
net present value at the margin.