Constraints to Welfare Gains under Extended Jurisdiction Fisheries Management: Discussion

Huppert has presented a good discussion of the constraints to welfare gains under extended jurisdiction fisheries management. While I certainly do not have any serious qualms with his presentation, one definitional point should be made at the outset. As used in the paper, at least as I interpret it, welfare gains really mean potential welfare gains or, more properly, the attainment of economic efficiency. In fact, phrases like "constraining the potential achievement of economic efficiency" and "retard progress toward economic efficiency" are used interchangeably with others like "constraints on the achievement of welfare gains." The former are superior in the context of this discussion because not achieving economic efficiency does not preclude welfare gains to at least some groups. In my comments I use the more straightforward term-economic efficiency. Huppert began by making the very basic, but still quite often neglected, point that an unregulated fishery can result in economic inefficiency as well as biological depletion. He then touches on the distribution issue and points out that there are three possible accounting frameworks. In my view, the fishing industry, including harvesters, processors, etc., are receiving the most attention, as opposed to the nation as a whole or the rest of the world. In his comments on using a worldwide accounting framework, Huppert touches on the issue of joint fishing arrangements between foreign interests and domestic companies. Depending upon the exact regulations concerning joint ventures that are promulgated, there may be serious problems in the interpretation of surplus yield (i.e., the difference between optimal yield, as defined in the law, and domestic capacity), and this may require some modification in the law. The distribution of the gains will depend critically upon the final resolution of this issue. Five potential barriers to economic efficiency are discussed. They are (a) overlapping authority (from the different states below and other nations above); (b) certain provisions of the act, especially restrictions on the use of taxes as a regulation tool; (c) the regional orientation of the councils; (d) the industry domination of the councils; and (e) the inadequate knowledge of recreational fishing, which may cause it to be neglected in decision analysis. I definitely think provisions exist in the act that retard progress toward achieving economic efficiency, one of which may be more serious than the constraint on the use of taxes. The provision that bothers me is national standard 5, which states: "Conservation and management measures shall, where practicable, promote efficiency in the utilization of fishery resources; except that no such measure shall have economic allocation as its sole purpose" (U.S. Congress, PL 94-265, sec. 301(a)(5)). If the last part was not included, this would be a useful national standard. However, if the term "economic allocation" is to be interpreted in the sense of an "efficient allocation of resources," the last phrase essentially negates the first one. Using this definition, this standard says that we should strive for economic efficiency except that we should not strive for economic efficiency. If this interpretation is used, the fact that taxes cannot be used becomes relatively unimportant. Not being able to use an economically useful regulation tool does not really matter if an economically rational management program is precluded. If the term "economic allocation" is to be interpreted as distribution, the prospects for Lee G. Anderson is an associate professor of economics and marine studies, University of Delaware.