Contracting Problems and Regulation: The Case of the Fishery

Abstract

The inefficiencies of common property fisheries are of continuing concern to economists.' The early work by Scott Gordon (1954) and Anthony Scott (1955) outlined the problem and later studies by James Crutchfield and Giulio Pontecorvo (1969) and Frederick Bell (1972) provided empirical estimates of the losses that result. Those studies were followed by the dynamic models of Colin Clark (1976), and James Quirk and Vernon Smith (1970) of optimal harvest rates and the use of corrective taxes or quotas to achieve them. But in spite of a large and growing literature and the persuasiveness of the outlined efficiency criteria, most fisheries retain common property aspects with overcapitalization and excessive labor input. Why those conditions persist and the failure of the regulatory response to them are the issues addressed in this paper. We examine a number of fisheries, but focus on the Texas shrimp industry, which is one of the nation's most valuable fisheries for a single species and which shares the common property characteristics observed elsewhere. It is considered overcapitalized and catch per unit of effort is falling.2 Examination of the fishery reveals the many margins along which rent dissipation occurs and the nature of the regulations necessary for controlling fishing effort to avoid those losses. The regulatory environment in Texas is complicated by conflict within the fishery between inshore and offshore fishermen. The latter assert that bay shrimping reduces the number of shrimp that successfully migrate to the Gulf. The inshore fishery is highlighted by another issue-the recent resettlement of some 30-45,000 Vietnamese refugees, including many fishermen, along the Texas Coast (Marine Advisory Service, Paul Starr). Their entry has been met by hostility and violence from existing shrimpers who recognize that they are in an environment characterized by the absence of property rights. Bay shrimpers have lobbied the Texas Legislature for broad limits on new entrants. Yet, ironically, the sale of additional boats by individual shrimpers to the Vietnamese has facilitated entry of the refugees into the fishery. Regulations in the Texas shrimp and other fisheries are incomplete, leaving many options for rent dissipation uncontrolled, because of high contracting costs among fishermen and political factors that mold government actions. Contracting costs are high among heterogeneous fishermen, who vary principally with regard to fishing skill.3 *Montana State University and Texas A&M University, respectively. We benefitted from comments by Terry Anderson, Raymond C. Battalio, Gardner Brown, Oscar Burt, Micha Gisser, Wade Griffin, John R. Moroney, Anthony D. Scott, Peter Temin, and participants in workshops at Texas A&M University and the University of Washington. Research assistance was provided by Scott Barnhart and Phil Mizzi. Funding was provided by Sea Grant, Texas A&M University. 'Throughout this paper we use the terms common property and open access interchangeably. Here the terms describe a situation where no property rights, group, or individual exist(s) for the resource. 2Catch per unit of effort in the inshore Texas Gulf and Federal Gulf waters is presented for 1963-77 by W. L. Griffin, C. G. Tydlacka, and W. E. Grant. They show catch per unit of effort generally falling in inshore and offshore waters. While catch per unit of effort fluctuates from year to year, it falls from approximately 360 kg shrimp per unit of effort to 220 kg from 1963 to 1977. The common property nature of the fishery is reflected in the following statistics. Since 1975 the number of vessels has grown by 23 percent (Nelson Swartz). For fish houses the record of entry is similar. Between 1970 a d 1977, the number of firms grew from 259 to 287, though during that period, many left the industry as others entered. The number of fish houses was calculated from license data supplied by the Texas Parks and Wildlife Department. The record of entry by fish houses suggests that monopsony as discussed by Colin Clark and Gordon Munro is absent in the fishery. 3There may be minor differences in labor-leisure choices and capital, but our statistical evidence and discussions with fishermen indicate that catch variations are largely due to skill. Government regulations in the Texas bays restrict capital, and our empirical evidence shows boats to be relatively homogeneous.