Is My Fish Worth More Than Yours? Comparing the values of fish caught by commercial and recreational fishers using an economic framework
Tor Hundloe
Draft version 2c
last printed on 1 June 2004
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Contents Why is this book so important?
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The big argument — who gets access to fish stocks
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Us versus them
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How we think and act when making decisions about goods and services traditionally sold in markets
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The price we are willing to pay for the last unit we buy
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How market prices and economic values are derived
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We spend on what gives us more satisfaction than other things at that time
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Producers aim to keep production costs down, maximising profits
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Recreational fishers also aim to keep costs to a minimum
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We can use the same ideas to determine the economic value of recreational fishing
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Valuing the same commodity
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A simple model for deciding on the allocation of fisheries resources
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A framework and related measurement methods
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Where does that leave us?
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To sum up
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Why is this book so important? Australia is surrounded by vast seas, from which a wonderful variety of seafood is harvested. Yet in some fisheries there are simply too many fishers. That leads to arguments about who will have how much access to the particular fishery. 4
Nevertheless, some of the most important debates about access to fisheries resources are still being argued by appeals to emotion rather than to facts. We have some facts, so it’s time to start using them. Important questions in the debate include: how can the values of fish caught by commercial and recreational fishers be ascertained? How can these values be compared with each other (as in comparing “apples with apples”) to help in making decisions about who should be allowed to catch fish? And at the core is the question that draws the emotion: is a fish worth more to an angler than to a commercial fisher?
These questions are important because we need answers that allow us to optimise allocations of fisheries resources for the best economic (and environmental and social) returns to the Australian community, that “owns” the resource. However, to answer these questions takes some knowledge of economics, a subject that does not inspire many non-economists! To the rescue comes Professor Tor Hundloe AM, Professor of Environmental Management at the University of Queensland. In only 32 pages, Tor leads us step-bystep through the factors that allow us to compare those commercial and recreational values. And he does so in the light-hearted, enthusiastic way that always underpins his rigorous academic work and his role as a leading thinker on the “best ways ahead” for management of our natural resources. If you want to understand this economic, relax in an armchair for an hour — and enjoy his fascinating book!
Peter Dundas-Smith Executive Director Fisheries Research and Development Corporation
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You like to go fishing! You’re not Robinson Crusoe — about one-sixth of the Australian population dips a line in the water at least once a year. You like eating seafood — prawns, crabs, whiting, barramundi, you name it! You’re certainly not in a minority group. More and more Australians are convinced of the culinary delights of seafood, and of the health benefits. You can catch a seafood meal yourself or go to a restaurant with family or friends and have one prepared for you. And you can buy fresh seafood to take home to cook. The seafood in the restaurant meal or in the local fish shop has been caught by commercial fishers.
The big argument — who gets access to fish stocks We’re lucky to live in a country with such resources — and that our fisheries are well-managed. But for many Australians the pleasurable feelings about enjoyable seafood disappear when they discuss access to fish stocks. Often the discussion will end up in acrimonious debate. And it’s not only in private — it can be in the form of public assertions that one section of the community (say, commercial fishers) are spoiling the chances of a catch by recreational fishers. Since Australia is a very large country, with an off-shore fishing zone that’s even bigger, you might imagine there is no reason for serious arguments over sharing fish stocks. But in reality our productive fishing areas are small on a global scale. If one lot of fishers don’t catch as much as they did in the distant past or even last year (it could be a seasonal factor, it could be the destruction of coastal mangroves, it could be land-based pollution), the other group gets blamed. Despite Australia’s vast marine area and great variety of fish, we do not have an abundance of seafood and Australia is a net importer of seafood. We import both frozen and canned fish for domestic consumption. We export most of our wild-caught prawns, lobsters and abalone.
THERE ARE CIRCUMSTANCES — IN SOME FISHERIES — WHERE THERE ARE SIMPLY TOO MANY FISHERS
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There are circumstances — in some fisheries — where there are simply too many fishers. But in many situations that isn’t the case. So then, what are the two groups arguing about?
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Before we answer that, there is nothing wrong — particularly in a robust democracy like Australia — with healthy debate between different interest groups. This includes arguments about who gets access to fish. The people responsible for the management of fisheries — that is, government officers — are likely to make better decisions if they have the benefit of hearing first hand the arguments coming from opposing groups.
Us versus them But too often the debate is not rational. By that I mean it is not based on facts and logic. That does not necessarily mean that one or the other group is deliberately trying to win the argument by peddling propaganda. It can be an honest misunderstanding of the situation, or a miscomprehension of the facts, or the use of vastly different reference points. There can be misconceptions about the environmental impacts of either group (such as damaging the sea-bed, or discarding litter such as beer cans and plastic bags at sea). There can be misconceptions about the discarding of bycatch or depletion of bait species. However, the most common misconception is about the relative economic importance of the competing groups. More often than not, this is put in the context of who spends most on boats, gear, etc to catch fish. How many times have you heard something like the following expressed? •
There are at least 10,000 regular fishers in Nippy Bay and they spend an average of $1000 per year on fishing: that’s a total of $10 million per year. And they catch one million fish per year.
•
There are only 100 commercial fishers in the same bay and they also catch one million fish per year. But they only spend on average $50,000 per year which is a total for the fishery of $5 million.
•
Therefore, the recreational fishers are more important and the managers ought to prohibit commercial fishery and allow the two million fish to be caught by the recreational fishers.
On first glance this argument might sound persuasive. The recreational fishers do spend more money on boats, bait, gear, fuel, food, drinks, 4WDs, etc. F I S H E R I E S R E S E A R C H A N D D E V E L O P M E N T C O R P O R AT I O N
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Let us delve into this, but first let us note that a similar argument is sometimes made by the commercial fishers (in the situation where they spend the most money) in an attempt to prove that they should get the lion’s share of the fish.
How we think and act when making decisions about goods and services traditionally sold in markets A little simple economic logic is needed at this stage. Access to fish is, generally, a different matter from access to most things we value in life. Putting aside for the moment the range of reasons people go fishing, access to a fishing ground is about catching fish — and after catching them either selling them to people who want to eat a seafood meal, or taking them home to cook.
ACCESS TO FISH IS, GENERALLY, A DIFFERENT MATTER FROM ACCESS TO MOST THINGS WE VALUE IN LIFE
For the moment, let’s think of fish as a commodity we want to consume. This means fish are similar to other foodstuffs such as meat, chicken, pork or fruit and vegetables. Most of us obtain our fruit, vegetables, meats, cereals and other foodstuffs from shops. A few of us might grow some of our requirements; hardly anyone produces all their own needs. Food products are grown, harvested, packaged and sold to us in our capacity as consumers. The price of an item is determined “in the market” — that is, by the inter-relationship of demand and supply: our demand as consumers and the farmers’ supply as producers. The inter-relationship is expressed as a price, such as $3 a kilo for tomatoes. To state the obvious, a farmer will only grow (that is, supply) the produce if he/she gets a fair share of that $3. Others in the chain between the producer and the consumer (the transport company, the wholesalers, the retailer) all need to obtain their share of the $3: that is, their value added or mark-up. Unless the market-determined price gives all these people a return for their effort, the tomatoes will not be produced. F I S H E R I E S R E S E A R C H A N D D E V E L O P M E N T C O R P O R AT I O N
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PRICE REFLECTS THE PRODUCERS’ WILLINGNESS TO SUPPLY AND THE CONSUMERS’ WILLINGNESS TO PAY 8
The price we are willing to pay for the last unit we buy As consumers, we will have to be prepared to pay the $3 per kilo, or the tomatoes will not appear in the supermarkets. Our preparedness to pay is typically called ‘willingness to pay’ by economists. It is fundamental to keep in mind that our willingness to pay is limited by our ability to pay (that is, our budget for the week, month or whatever time period we use). We can go a step further. The $3 is the ‘value’ consumers put on the product: that is, the price is the value. We would not give up the $3 if we didn’t think the tomatoes were worth it — otherwise, the $3 could be spent on something else, say oranges. At this stage, note that if we purchase a kilo of whiting fillets at $12, that’s the price and the value we put on that kilo. The fact that the whiting fillets were available in a shop signifies that it was cost-effective for commercial fishers to take out their boats and nets, use fuel, and catch and fillet the fish for sale.
How market prices and economic values are derived There is much more to how market prices and these economic values are derived. Whiting fillets and tomatoes are not the only commodities we want to consume. Obviously there are other foodstuffs: there are services such as outings to the movies or the football; and there is the need to pay the electricity and water bill, to buy clothes and so on. As consumers with limited amounts of money to spend (a budget constraint), we have to make choices. Economists take a simple but logical view on how humans behave in their capacity as both producers and consumers. The economists’ perspective is simple because it does
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not attempt to delve into people’s heads to find explanations in psychology or genetic make-up to explain their behaviour. Economists simply say that if someone buys a kilo of whiting for $12, then the person must believe he or she will get $12 worth of satisfaction (a benefit, if you like, of $12) from that purchase — given all the other goods and services that are attractive to the person in question and which could be an alternative purchase for the $12. As producers (such as farmers, fishers or fabric-makers) we also have to make choices: before deciding to become a fisher rather than a fabric-maker we would have thought about which industry to invest our money and time in.
THE DISCIPLINE OF ECONOMICS WAS FORMED TO ANALYSE AND ANSWER QUESTIONS OF CHOICE AND VALUE
The discipline of economics was formed to analyse and answer questions of choice and value. We will need to develop our understanding of economics if we are to shed light on whether a fish is worth more to an angler than to a commercial fisher.
We spend on what gives us more satisfaction than other things at that time Satisfaction in this context is called ‘utility’ by economists. Economists work on the premise that as consumers we attempt to maximize our satisfaction (utility) by choosing the array of goods and services — given their market-determined prices — that brings about the greatest overall economic wellbeing we can afford. Staying with the example of paying $12 for whiting fillets, the reasoning is that if we rearranged our spending (e.g. spending the $12 on a visit to the movies rather than buying fish fillets) we would feel worse off. On that day, given the money we had to spend, purchase of the fish fillets would give us a little more satisfaction than going to the movies. F I S H E R I E S R E S E A R C H A N D D E V E L O P M E N T C O R P O R AT I O N
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Farmers, fishers and furniture-makers (the people whom economists call producers) are reckoned to operate with the same simple psychology. However, in the producer’s case, the aim is to maximize profit — obviously after covering all costs such as paying interest to the bank, purchasing fuel, maintaining machinery, etc. 10
As producers, we will attempt to produce as much as we can at the least possible cost. The complicating factor for a prospective producer is to decide what to produce and how. That is, the producer has to attempt to assess whether it might be more profitable to invest in a farm then in a factory, or a fishing boat rather than a fencing drill. This is obviously how an investor thinks before starting a business. And it is also how someone already in business thinks when contemplating selling up and starting in a new line of business. On to this simple psychology we need to add a somewhat more complex logic — not complex to understand, but complex in its application. Making choices can be difficult. The choices that consumers and producers can make cover an enormous range. We are helped by the fact that there are market-determined prices for most goods and services which we either want to consume or produce. And there are market-determined prices for most goods and services which we need to use as inputs to, say, catch whiting or grow tomatoes. That is, there is a market price for boats and for tractors, there is a market-determined price for what we have to pay mechanics, and so on. Furthermore, as producers it is not too difficult to calculate which industries are getting the best return (earning the most profits) at any point in time, and these will attract our attention if we are thinking of making a new investment. The existence of market-determined prices allows us to weigh up costs and benefits. A commercial fisher will apply the following logic: “It’s going to cost me so much to operate my boat, pay crew and transport my catch to market, and I expect that I’ll be able to sell my catch for that amount plus a profit”. We’ll come to how an angler will make the same type of mental calculations later. We can, and do, use this same reasoning for many choices we need to make. Not for one moment am I suggesting this type of cost-versus-benefit analysis applies to making decisions about love and marriage, war and peace. As far as this economist is concerned some things are beyond this calculation. However, there are an enormous number of choices confronting humans where the decision is based on economic common sense. And for these decisions economists work on the basis that we operate on this logic of making comparisons (or if not consciously, then certainly subconsciously).
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AN ENORMOUS NUMBER OF CHOICES CONFRONTS HUMANS WHERE THE DECISION IS BASED ON ECONOMIC
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COMMON SENSE
From a consumers’ perspective, we can put it this way: •
for each and every purchase we will compare the price we are asked to pay to the level of satisfaction we expect to get from that good or service, and
•
we will allocate our budget so that we could not obtain greater satisfaction by buying one extra unit of any particular good or service and buying one unit less of another good or service.
The extra unit is what we call the marginal unit. Allow me to put the concept in formal economic terms. We allocate our available budget as in the table. Note that if we are spending our budget wisely, the satisfaction from a seafood meal will obviously have to equal “18 units of satisfaction”, that of a movie “12 units of satisfaction” and that of “other commodities” “15 units of satisfaction”. Marginal utility of commodity A
=
Price of commodity A
Satisfaction from an extra seafood meal $18
Marginal utility of commodity B
=
Price of commodity B
=
Satisfaction from an extra movie $12
Marginal utility of other commodities Price of other commodities
=
Satisfaction from all other extra purchases $15
What does this mean in terms of our purchase of whiting fillets, tomatoes or anything else? Simply that if we are willing to pay $12 for a kilo of fillets, we have calculated (not with an electronic machine, but in our heads) that we could not spend that $12 on anything else and get the same level of overall satisfaction. That is, the price of a kilo of whiting fillets, in this case $12, is the value of such to us. F I S H E R I E S R E S E A R C H A N D D E V E L O P M E N T C O R P O R AT I O N
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Producers aim to keep production costs down, maximizing profits
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Without going into the detail, we can think of a similar type of logic applying to our decision-making as producers. Note in passing that with some exceptions (unemployed and retired people, etc.) we are all producers just as we are all consumers. Of course, most of us are not in a position to purchase our own farm, fishing boat, factory or whatever and combine our labour and management skills with these capital items; rather, we supply our labour and/or managerial expertise as an ‘input’ to business. However, we do have some choice — in practice not anywhere near as much as we have as consumers — in choosing what occupation to work in and hence what payments in wages we can expect. As owners of businesses (farms, firms and fishing boats) we have a greater choice — certainly at the stage of making the original decision to start our business: fishing or farming? Printing or plumbing? What will make the decision for us, all other things being equal, is the expected profit from the particular business we choose. We will work hard to keep our costs as low as possible in producing what we are going to sell. It’s a very obvious point but — as we will see — this notion of keeping costs to a minimum is the key in comparing the economic value of commercial versus recreational fishing.
AT THE CORE OF COMPARING THE ECONOMIC VALUE OF COMMERCIAL VERSUS RECREATIONAL FISHING IS THE SIMPLE LOGIC THAT BOTH TYPES OF FISHERS WILL WISH TO SPEND AS LITTLE AS POSSIBLE TO CATCH A FISH
Recreational fishers also aim to keep costs to a minimum Recreational fishers do not set out to spend as much money as possible to catch fish — quite the reverse. The fact that some of them seem to spend considerably more than commercial fishers to catch the “same fish” is easy to explain. First, the high expenditure F I S H E R I E S R E S E A R C H A N D D E V E L O P M E N T C O R P O R AT I O N
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on 4WDs, food, drinks, etc. is made because these fishers are doing more than simply catching fish. They are paying for the enjoyment of a day “on the water”, or a day “at the beach”, often in the company of friends sharing the experience, a few drinks and a bite to eat. Even travelling to the fishing spot can be a pleasurable activity rather than a cost. There is considerable data available to show that there is a vast difference in what a recreational fisher is willing to pay for the likelihood of catching one more fish than what he or she outlays for a “fishing trip”. In the situation where recreational fishers do not value the non-fishing benefits of their trips and still spend considerable money to attempt to catch a fish, they are wasting resources, such as fuel. Once fishers recognise this as the likely outcome, they will either stop fishing at that location or even stop fishing altogether. If some recreational fishers keep paying big money time and time again regardless of the fact that they are not catching as many fish as they expect, you can rightly assume that they value more than just the fish on their outing. I’ve mentioned some of these other values already. So far, we have concentrated on how we think and act when we are making decisions about goods and services that are traditionally and commonly sold in markets. We have identified the price we are willing to pay for the last unit we purchase — say of tomatoes or whiting fillets — in a given period as the good’s economic value. And we have recognised that the notion of seeking to maximize profits and satisfaction means that we will attempt to keep costs of producing the good or service to a minimum. That is, the fewer expenses we incur as a commercial fisher in catching a kilo of whiting, the better off we are, since we can make a little more profit; and the less the cost of our recreational fishing trip, the more money we have to spend on movies, restaurant meals, or the next fishing trip and be, likewise, better off.
We can use the same ideas to determine the economic value of recreational fishing It is necessary to ascertain how we can apply the same simple ideas and logic to determining the economic value of goods and services which are not bought and sold in markets because this is the case for the good/service we call recreational fishing. (We won’t complicate matters here by including commercially organised recreational fishing where one has to pay a charter boat operator).
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It is obvious that if we cannot apply the same principles to recreational fishing as we do to the market-determined activity of commercial fishing, we cannot compare the two on the same footing. And if we cannot do that, we cannot use a logical argument that one or the other should be reduced to allow for the other to expand. 14 IF WE CANNOT APPLY THE SAME PRINCIPLES TO RECREATIONAL FISHING AS WE DO TO THE MARKET-DETERMINED ACTIVITY OF COMMERCIAL FISHING, WE CANNOT COMPARE THE TWO ON THE SAME FOOTING.
What this economic principle implies is that we would adjust access to fish from one group to the other if, given the present relative catches of the same species in the same fishery, more economic benefits could be obtained by doing so. With the danger of jumping ahead of ourselves, if the return to the commercial fisher of a net full of whiting was $6 per fish on the beach, and if we knew a recreational fisher would be willing to pay more than $6 per fish for a few more whiting, the adjustment should be obvious — increase access to the recreational fisher but importantly, only to the point that the willingness to pay for a few extra fish by an angler was the same amount of money as the commercial fisher could get for the same fish. We shall see how this works in practice later. Although the theory is clear-cut and obvious, the problem we face is how to get a value for recreationally caught fish which is based on the same principle applied to commercially caught fish. For the recreationally caught fish we do not have the reference point of the market price. At this point we need to recall that the market price is a budget-constrained measure of willingness to pay by consumers. And, of course, it is willingness to pay for an identifiable, single product — say a kilo of whiting fillets. The first point to note is that the measure we need to use to obtain a true (apples-with-apples) economic value for recreational fishing is a budget-constrained willingness to pay for fish.
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We have to identify the actual sum of money involved by a means that replicates what the market does. That is, we have to use techniques to obtain the recreational value that rely on the same psychology and logic we use when we make market transactions. If we don’t use exactly the same thinking process we will not be able to make genuine comparisons between recreational and commercial fishing. 15 WE HAVE TO USE TECHNIQUES TO OBTAIN THE RECREATIONAL VALUE THAT RELY ON THE SAME PSYCHOLOGY AND LOGIC WE USE WHEN WE MAKE MARKET TRANSACTIONS. IF WE DON’T USE EXACTLY THE SAME THINKING PROCESS, WE WILL NOT BE ABLE TO MAKE GENUINE COMPARISONS BETWEEN RECREATIONAL AND COMMERCIAL FISHING.
Valuing the same commodity The second point to make is that we have to value the same commodity. Here is one of the real problems with valuing recreational fishing in economic terms. As an occasional recreational fisher, I recognise that — depending on the circumstances — I obtain satisfaction (the economist’s “utility”) from a range of things associated with my fishing trip. At the most general level, I look forward to relaxation after a hard week’s work; doing something completely different from laying bricks or battering the keyboard — in my case it’s the “talk and chalk” of a lecture theatre. If I’m joined on the fishing trip by family and friends (or just the dog), there is the pleasure of times shared, yarns spun while the fish aren’t biting. The conversation with the dog is a bit one-sided. The appeal of the outdoor environment — the long spread of the beach, the nearby rugged headlands, distant green mountains — adds to the pleasure. In most of the fishing locations that I visit, part of the satisfaction I get is this outdoor experience, comparable to having a picnic in a National Park. Then there are fishing trips I make in my small runabout. Boating in itself is part of the satisfaction of the trip. Driving a boat, while trickier for me than driving a car, is far more relaxing — the “highway” is nowhere near as crowded and the pace is more peaceful. F I S H E R I E S R E S E A R C H A N D D E V E L O P M E N T C O R P O R AT I O N
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If you are relating to any of this, you and I are on the same wave-length. We will soon be able to be confident that we can compare recreational fishing to commercial fishing, putting aside the extraneous benefits of the former.
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That reminds me — so far, I’ve neglected to mention the satisfaction I obviously get from catching a feed of fish. If I happened to be involved in a “catch and release” tournament, the satisfaction would be from the actual number of fish caught. I know many anglers who claim that if they catch fish that’s a bonus. I also know others who, before they depart on a fishing trip, have an expectation (which some are able to express in terms of what mathematicians call probability) of catching fish. In terms of numbers of fish, this could be very vague — “a few”, or “a bagful”. Or it could be focused — “I’m expecting a feed of whiting for the family dinner and I’ll stop when I catch a dozen”.
RECREATIONAL FISHING IS ABOUT PLEASURE.
To apply the economic principle we discussed above, it is going to be necessary for our anglers to be able to think in terms of the value of catching fish on a particular trip. And since we are doing this valuation exercise because we are contemplating changing access to fish from one group to the other (commercial to recreational or vice versa), we are going to have to be able to think in terms of the value of an extra fish or two. The question is: what are we willing to pay for the extra fish as an angler, or as a commercial fisher? If I’ve lost you, it will pay to re-read page 11 — and to think about how you make decisions about spending, say, a pay rise of $12 per week (fuel for the runabout? going to a movie? a kilo of whiting fillets?). Now, if you are like me you will look forward to eating your catch: fresh fish, cooked in a pan at the camp-site or taken home and shared with the extended family.
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A simple model for deciding on the allocation of fisheries resources Let’s put this theoretical framework into a very basic model of how to decide on the allocation, or reallocation, of fisheries resources. Simplification helps. Let us assume that only two groups, commercial and recreational fishers, have an interest in an existing fishery. Others, such as recreational divers, could also have an interest in access to the fishery. We also assume we know the total combined catch, and that it is sustainable. This means that concern about these matters is not going to get in the way of focusing on the central issue. The problem, in this hypothetical case, is a public controversy over shares to the resource.
THE PROBLEM … IS A PUBLIC CONTROVERSY OVER SHARES TO THE RESOURCE.
Let us imagine the total harvest is 1000 tonnes per year of a targeted species and the existing share is half to each sector (500 tonnes each). For the framework to apply, this particular allocation needn’t be the starting point — it could be any mix of shares. Now let’s start by asking what is the minimum amount of information required if shares are to be re-allocated on the basis of the economic principle we have been discussing. One way of posing the question is: can we alter the shares (from commercial to recreational fishers, or vice versa) so that the economic gains to one sector more than compensate for any economic losses to the other sector? It must be noted that this does not imply that compensation will be paid; that’s a totally different issue. Here we’re only concerned with whether or not the sharing of the resource is in the right proportions on economic grounds. To start to address the matter, we can ask a very basic question: if another fish swam into a commercial fisher’s net, what price would the fisher get for that fish if it landed on F I S H E R I E S R E S E A R C H A N D D E V E L O P M E N T C O R P O R AT I O N
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the beach? This is the so-called “marginal fish”: more realistically we should think of a few extra fish, not one, being landed. And the change could even be a few dozen kilograms if the fishery resource was large and the method of capture (such as a trawl net) meant that additions to a fisher’s catch were only sensibly measured in larger units. The crucial issue is that each and every additional fish is able to be sold at the prevailing price; that is, the increased commercial catch does not reduce the price per fish to the fisher. Note: at this stage of building up a simple model of resource sharing we are assuming that the extra catch does not require the fisher to make an extra trip or outlay money on more gear, or incur any other additional cost. The fisher’s costs remain the same as for the marginally smaller catch. This means the value to the fisher of the extra fish is their selling price (on the beach). Let’s not be concerned with how the extra fish become available for capture by the commercial sector, other than that the commercial sector’s gain in catch means a reduction in fish available to the recreational sector. This would, presumably, be the case in the fully exploited fishery if nothing other than fish harvesting altered the available catch. The minimal piece of information we have is that the extra fish caught by the commercial fishers can be sold on the beach for, say, $5 each. We can assume a wholesaler or processor buys the fish on the beach or at the wharf. In our simple model, the fish are all the same size and weight. This simplification in no way alters the logic of the framework. Note: When we go from hypothetical examples like this to the real world, some simplifying assumptions are still going to be necessary. For example, we might have to use the concept of the average fish (in size, weight, quality) to avoid being bogged down in complexity. Now we have three possible outcomes. The recreational fisher values the extra fish at $5 (the same as the commercial fisher); the recreational fisher values the fish at less than $5; the recreational fisher values the fish at more than $5. Unless these additional fish are valued by a recreational fisher at $5 or more, the economic solution to the reallocation matter is a shift in access to fish from recreational fishers to commercial fishers. Conversely, if the additional fish that the recreational fishers were to forgo to the commercial fishers were valued at more than $5 each by the recreational fishers, the reallocation would go in the other direction.
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A framework and related measurement methods It is extremely important not to confuse a technique (or method) of obtaining the value of a recreationally caught fish with the economic framework outlined above. No economist disputes the validity of the framework. However, there can be debates among economists about what is the best method to use in a particular circumstance.
NON-MARKET ECONOMIC TECHNIQUES NEED TO BE USED TO OBTAIN THE VALUE OF AN EXTRA FISH TO A RECREATIONAL FISHER
A number of points must be noted before discussing the measurement methods. The first is that it is the expected improvement in catch — an extra fish is not guaranteed. This is simply a reflection of the reality of fishing: by changing the relative shares we are changing the possible success rates. The second is that the value we need is for the extra fish, not for any other satisfaction or pleasure the fisher gets from the fishing trip, such as enjoying the natural beauty of the location or obtaining relief from everyday stress. The third is that the value we want is for the fish landed on the beach, not fried in the pan or taken home for a meal later. What happens to the fish after landing adds value to it, just as value is added to a commercially caught fish which is trucked to wholesale fish markets, then sold to a retailer and finally prepared for a meal either at home or in a restaurant. Each step as described here adds value to the fish: a fish served in a restaurant is far more expensive (and valuable) than one landed at the wharf. A fish taken home and prepared as part of a meal is more valuable than one landed at the beach. There are problems of attempting to equate a restaurant meal with a home meal, a take-away meal, or a fish eaten from the frying pan at the camp-site. These are all different products. Not only does the fish have to be caught, but it has to be prepared (which involves costs in resources and time), and the fish is usually just one item of many in the meal. Then there is the additional difficulty of comparing the ambience of a restaurant meal to the ambience of a camp-site meal, and so on.
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This means that every effort should be made to obtain from recreational fishers the value of only the fish, as it is landed.
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Remember that we are gathering data, either on the beach or at home, from recreational fishers who have a wide range of propensities to go fishing (some maybe once a year; at the other extreme, maybe weekly or even more often) and a wide range of abilities to catch fish. To be realistic, the marginal fish should be an extra fish per trip. For some fishers this might mean five fish not four per trip; for others 21 fish not 20 per trip. In a year this might mean anything from one extra fish (if one trip is made) to 50 or more (if weekly or more frequent trips are made). Note: We need to make the concept of the marginal fish as realistic as possible. This is particularly important if the valuation method is based on the fisher responding to scenarios such as making more fish available to be caught by the recreational sector through a reduction in the allowable catch for the commercial sector. This would be the case using any of the hypothetical market techniques, such as the contingent valuation method. Where a surrogate market technique is used — in particular the travel cost method — the value to the fisher of each additional fish is able to be read of the demand function which has been derived. As discussed earlier, to obtain an economic value of an extra recreationally caught fish we need to select a measurement method (alternatively called valuation technique) which is based on the same internal logic as decisions made via a market (as in the case of commercially caught fish). There are two major categories of what economists call non-market valuation methods or techniques. The first is where a so-called “surrogate market” exists. This means that a person’s preference for something — in our case a recreational fishing outing — can be calculated by observing this person’s budget-constrained willingness-to-pay in terms of travel, for example. The amount one pays, or the distance one travels, to a fishing spot reveals information on how valuable that fishing experience is to that person — hence, calculations based on using surrogate markets are called “revealed preference” methods by economists. Obviously there is a relationship between distance travelled and the value of the expected catch. Someone coming from a long distance places a high value on fish, all other things being equal. An example of this measurement method is presented later; here we just need to recognise that where we can observe and record a fisher’s behaviour we have the basis to calculate his/her willingness to pay. The other general category is based on a hypothetical market, that is by gathering data on budget-constrained willingness-to-pay by interviewing fishers. Economists
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call techniques based on this approach “stated preferences” — because fishers state their preferences rather than reveal them through their actions. For obvious reasons — generally the difficulty of obtaining unbiased information — the hypothetical market / stated preference approach is usually only applied when surrogate market / revealed preference approaches cannot be applied. The most commonly used stated preference technique is called the “contingent valuation method”. As in most scientific investigation, there is an order of priority in selecting methods depending on the circumstance; different circumstances can require different methods. It is now time to explain how to apply these two categories of valuation methods within the over-arching economic framework. Take a fishery with 10,000 recreational fishers, say, catching an average of five fish per trip and making on average 10 trips per year. Their total catch is 500,000 fish per year. If each fish weighs 1 kg, the total weight of the recreational catch is 500 tonnes. Commercial fishers are also targeting the same species. Given this information, if we use a contingent valuation survey method to obtain the value of recreational fishing, and ask the recreational fishers to put a value on one extra fish per trip (which is marginal at the individual level), the marginal increase in the available catch for the whole recreational sector would be 100,000 fish per year, or 100 tonnes. That would be 100 tonnes not available to the commercial sector. Note: A change of such magnitude could be considered too large to be deemed to be marginal. However, the need to put realistic questions to individual fishers suggests that it would be difficult to obtain much more precise information, such as their willingness to pay for an extra fish per year as opposed to an extra one per trip. Precision has to give way to what is realistically practical in gathering useful data. If rather than a contingent valuation survey, a travel cost analysis were undertaken to find the recreational fishing value, the economist would have obtained information on the value of an extra trip — say, 11 fishing trips per year instead of the 10 trips. In this situation, recreational fishers would be expecting to catch an extra five fish in the year, applying the same hypothetical data as above. In this case, the reallocation would be only 50 tonnes. On two grounds, the travel cost method is likely to be preferred in this situation. First, we eliminate potential bias by relying on observed behaviour. Second, the small “margin” of 50 tonnes should give more precision than the larger one of 100 tonnes.
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The first step in obtaining economic values for the recreational sector would be to estimate, via either the travel cost or contingent valuation methods (or other non-market valuation techniques based on two general categories), what value recreational fishers actually place on their catch now, given the existing share arrangements. Obviously, if the fifth fish they catch per trip (recall on average they presently catch five fish) is valued at about $5 by them (the same as for the commercial sector), there would be no economic reason to change the relative shares. Note: It should be noted that the analyst might have to be satisfied with an average value for the five fish and not attempt to obtain marginal values for each of the five fish presently being caught. In this case if the average value was $5, the status quo would remain. If the recreational fishers placed a value of less than $5 on the additional fish, a reallocation to commercial fishers should take place. To ascertain the extent of this reallocation we would need to have estimated the value to the recreational fishers of, say, four fish per trip rather than the present five; or the value of one less trip, nine as opposed to 10. This information could be got by a sophisticated contingent valuation survey, or by reading the values off a “demand for recreational fish” schedule constructed from a travel cost survey. If the travel cost method is used, obtaining the value of a decrease in fish availability is no different to getting the value of an increase. The estimates can be read off the demand curve. If a contingent valuation survey is used, it will be necessary to phrase “willingness to pay” questions which deal with both decreases and increases in the number of fish. Note: A potentially complicating factor is that if the reallocation to the commercial sector was a significant number of fish (or tonnage) this could entail commercial fishers making extra trips, purchasing more gear or even an additional boat. The increases in these variable and capital (fixed) costs would influence the net economic benefits of the commercial fishery. There could be further complicating factors in the situation where significant re-allocations were found to be appropriate. In most cases commercial fishing applies very different fishing gears to those used by recreational fishing; hence, a switch from one type of fishing to the other has potential biological and bio-economic impacts on the fishery resource. In this case, a bio-economic model of the fishery would be needed to put more precision into the analysis. If the study of the recreational sector indicates that an extra fish is worth more than $5, the reallocation has to be towards this sector. The extent of the reallocation would be guided by the value gained from successively adding extra fish per trip. (The first additional fish,
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plus another, and so on, until the marginal value of a fish to a recreational fisher equals the marginal value of a fish to a commercial fisher). These recreational values can be readily obtained from a contingent valuation study or a demand schedule based on a travel cost study. If the value of the second extra fish is consistent with economic theory, it will be less than the first extra fish. This is the idea — evident in most economic behaviour — that as a person obtains additional amounts of a good, the value of the good to that person declines. It follows that the person will be willing to pay less and less per unit as more and more is obtained. How much less is an empirical issue to be determined from the analysis. For example, it is possible that the first (extra) fish caught by the recreational sector is worth more than the value to the commercial sector but the second (extra) recreational fish is worth less than the commercial value. Hence, the reallocation to the recreational sector would not be greater than the one extra fish per fisher per trip. That’s where the reallocation would cease.
Where does that leave us? Let me illustrate both the travel cost and contingent valuation methods. As noted above, there are a number of variations to these generic techniques. If you understand the generic types you will understand the variations. The travel cost method is not about simply adding up the costs of travelling to a favoured fishing site. It is about using such information to construct a demand schedule or demand curve for visits to the site. Our fishing site, as is the usual case in Australia, has no entry fee associated with it. It is, hence, not like a market good where people pay to visit a site (such as a theme park, or a beach in some countries). What we are attempting to do with the travel cost method is to show that fishers do reveal their budget-constrained willingness-to-pay to visit it (to fish in it); however, this is done indirectly rather than in paying an entry fee at a “gate”. Before continuing, we would expect fishers’ willingness-to-pay to reflect their expectations of catching fish. All other things being equal (it is worth re-reading these words), a highly productive fishing site will be more highly valued — fishers would on average be willing to pay more — than for a less productive site. In line with this comparison of “good” and “poor” fishing sites, the travel cost method is often used to ascertain if the benefits to fishers are greater than, say, the costs of cleaning up a polluted waterway. Or it is used to compare the fishing benefits to the
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benefits of some incompatible use of the site (say, the construction of a harbour). In both cases, the comparison is between “good” and “poor” fishing.
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THE TRAVEL COST METHOD IS OFTEN USED TO ASCERTAIN IF THE BENEFITS TO FISHERS ARE GREATER THAN, SAY, THE COSTS OF CLEANING UP A POLLUTED WATERWAY.
In our case we want to calculate whether altering the existing success rate of recreational fishers — by decreasing or increasing the number of fish able to be taken by competing commercial fishers — provides economic benefits or not. Put another way, two otherwise like bays will provide different opportunities for recreational fishers if one bay has a significant number of commercial fishers operating in it and the other bay has none. The latter should be more highly valued by recreational fishers than the former. To explain how the method works let us start with an imaginary bay, as in figure 1. Some recreational fishers live close to the bay, as in Zone 1. Others live further afield, as in Zone 2. Then there are those living a considerable distance from the bay in Zone 3. FIGURE 1. DEFINITION OF ZONES SURROUNDING THE BAY
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Let’s start with a very simple proposition. Assume that the population of residents is exactly the same for each zone, and that 10% of people in each zone use the bay for fishing once a month. It would follow, all other things being equal — the important caveat which we have needed to make before — that the fishers living in the most distant zone would place a greater value on the bay than those living closer. It is this logic which underpins the travel cost measurement modelling. In table 1 we explain the procedure using more realistic (real world) numbers. We start by obtaining from census data the actual population of each zone: in our case, 2000 people, 4000 people, 8000 people. TABLE 1. FISHERS USING THE BAY Zone
Population
Average travel cost of visit ($)
Fishing trips
I II III Beyond III Total
2000 4000 8000
10 30 40
800 800 800 0 2400
Visitation (visits/1000 population) 400 200 100
Next, via a normal survey technique we calculate the number of fishers (or fishing trips) made from each zone per month (or per year). In our simple example we discover that 800 trips are made from each zone and that beyond zone 3 no trips are made. Our next task is to standardise the trips per population unit, in this case per 1000 people. The arithmetic is purposely made simple. From Zone 1 with a population of 2000 people, 800 trips are made. This equates to 400 trips per 1000 people. Zone 2 has four times our standard population of 1000, hence the 800 trips need to be divided by four, giving the result of 200 trips. Zone 3 has eight times the standard population and the 800 trips have to be divided by 8, giving 100 trips. So far, so good (I hope!). The next step is to use the numbers in table 1 to derive a demand curve for recreational fishing in the bay. A demand curve shows the relationship between the numbers of things purchased given the price of a thing. At very high prices we expect no purchases will be made. At very low prices we expect many things to be bought. At this point, refer to figure 2.
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FIGURE 2. DERIVED DEMAND CURVE FOR THE TRIPS TO A BAY
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The things to be bought are measured on the horizontal axis, commencing at zero on the left moving rightwards. In our case the maximum is 2400 fishing trips — adding together the number from each zone. On the vertical axis we measure price — what fishers are willing to pay (given their budgets) per fishing trip, commencing with no payment (zero dollars) at the bottom and increasing.
SURVEYS OF FISHERS OBTAIN DETAILED INFORMATION ON THE COSTS THEY HAVE INCURRED IN MAKING THEIR FISHING TRIP.
We have gone to fishers (on the beach and at the boat ramps) and gathered detailed information on the costs they have incurred in making their fishing trip. Fishers coming from Zone 1 spend on average $10 per trip, those from Zone 2 spend $30 and those from Zone 3 spend $40. Figure 2 is a demand curve derived from the data we have gathered. Recall there is no entry fee to use the bay for recreational fishing and there are 2400 fishing trips made in total at present. That gives us point A on the demand curve. F I S H E R I E S R E S E A R C H A N D D E V E L O P M E N T C O R P O R AT I O N
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Now comes a necessary thought process if we are to obtain the appropriate (marketequivalent) values. Let us assume a government authority imposed an entry fee, as exists for some national parks. If the entry fee was $10, the new cost to fishers from Zone 1 would be $20; from Zone 2 it would be $40; and from Zone 3 it would be $50 (see table 2). 27
TABLE 2. FISHERS USING THE BAY Zone
New cost with fee ($) (C)
I II III Total
20 40 50
Visitation (visits/1000 population) (V (V) 300 100 0
Population
Visits made
2000 4000 8000
600 400 0 1000
We now can insert point B — $10 and 1000 fishing trips — on our demand schedule (figure 2). If we continue the process by making additional adjustments of $10 to the entry fee we would derive the demand curve shown in figure 2. In a real-world exercise we would seek more precision by making the increments, say, $1 per trip. We would end up with a smooth demand curve from which we could read off values at $1 intervals. There is a further step involved before we can use this approach to calculate recreational fishers’ values for one, two, three or more extra fish (the marginal fish) and that is to ascertain the association between a fishing trip and catches. Think of it in these terms. If the probability of catching an extra five fish increased because the competition from commercial fishers was reduced, would you make an extra trip per year (or some other time periods)? In other words your willingness-to-pay per fishing trip is directly related to your expected catch of fish, and your expected catch is related to the allocation of shares between recreational and commercial sectors. While much more could be noted about this measurement method, space does not permit that here. The travel cost method has been used for about 40 years to obtain economic values for unpriced goods or services. Its first application was to measure willingness-to-pay for outdoor recreation. Recreational fishing is nothing more than a specific type of outdoor recreation.
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FOR ABOUT 40 YEARS, THE TRAVEL COST METHOD HAS BEEN USED TO 28
OBTAIN ECONOMIC VALUES FOR UNPRICED GOODS OR SERVICES.
There are situations where the simple travel cost method fails to give useful results. Variability in income and other characteristics of fishers may have to be incorporated in the analysis. It is important to recognise that income has an effect on willingness-to-pay. Take our simple example. If the average income in Zone 3 was much higher than in Zone 1, more people than the 100 per 1000 in Zone 3 would be likely to make fishing trips to our bay. Take another situation where difficulties can occur. Multi-purpose trips, where visiting the bay to fish is only part of a day’s outing, can complicate — or even render useless — the travel cost method. I won’t list the catalogue of potential difficulties, many of which can be surmounted by using sophisticated versions of the technique, but simply warn you that they exist. Now let us turn attention to that other category of measurement technique, the stated preference approach, of which contingent valuation is the most common method. It is based on getting people to state (honestly) what they are willing to pay for a good or service, an extra whiting, a day on the water or whatever. The fundamental task is to have respondents believe that whatever sum of money they nominate they could (or will) be made to pay it. Unless this can be done — by encouraging an expectation that, say, a government will charge each and every one the amount they nominate — the technique will fail. Where this method has been used, it is generally the community as a whole which pays, through a new tax, not through each individual. The method has been used extensively to value areas that are subject to conflicting land use, such as a national park versus mining. It leads itself to ready applicability to value the quality of a fishing experience (that is, more or less fish).
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The means whereby an unbiased answer can be obtained on the amount a respondent is willing-to-pay is to frame the question in the context of a tax increase. For recreational fishers the concept of an increase in the licence fee is a sound approach, particularly if there is a history of fees being increased. A slightly modified actual example of this approach is presented in box 1. In this situation a new recreational licence fee (of a certain magnitude) was to be introduced and used in part or full to buy out some commercial fishers, thereby changing the allocation to the recreational sector. There is much, much more to be written about this approach. The main message is to be aware of the pitfalls, in particular all the types of bias which can enter into the calculation. Obviously, one has to be very skilled in using this approach. If undertaken with due care the method provides robust results. It is used extensively in North America to obtain values for natural resources that are not bought and sold in the market.
THE CONTINGENT VALUATION METHOD HAS BEEN USED EXTENSIVELY TO VALUE AREAS THAT ARE SUBJECT TO CONFLICTING LAND USE, SUCH AS A NATIONAL PARK VERSUS MINING.
BOX 1: AN EXAMPLE OF SURVEY QUESTIONS USED TO OBTAIN VALUES
The number of fish available to the recreational sector will be funded through the introduction of a recreational fishing licence. The licence will be introduced on 1st January, and would cost $ ….. for a one year licence. (Different dollar amounts are read out to different respondents; e.g. $5, $12, $30.) The result is expected to be a 20% increase in the number of fish available to be caught by recreational fishers in the bay.
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Given that your average catch is about ….. fish, this could mean about an extra ….. fish per day, depending on your fishing skill and experience (the interviewer has previously asked about the respondent’s average catch and added one fifth to it). 30
The new licence fee is additional to any other fishing licence you have to purchase. The revenue raised from the new licence would go into a dedicated fund, only to be used to increase the number of fish available to recreational fishers in the bay. The money could be used to “buy out” (compensate) commercial fishers who — at the right price — are willing to leave the fishery. Do you support this proposal to increase the number of fish available to recreational fishers, funded by an annual licence fee of ($ …), OR do you prefer to keep the number of fish available at current levels, and pay nothing? Increase number of fish and pay licence: Yes or No Keep fish at current numbers and pay nothing: Yes or No
To sum up What to make of all this? The first point is that it is possible to obtain proper comparisons between recreational and commercial fishing using the economic framework we use in our day-to-day decisions. It is most important to recognise that there is only one such framework. It is not my framework — it is the framework used by all economists. It is pointless to argue that we can choose different economic frameworks. Of course, we can choose different types of frameworks to determine how to allocate fisheries resources. The most simplest — and clearly unacceptable — is the “toss of a coin”. Then there is the political process in which politicians are threatened by the voting power of this or that group. Or there can be appeals to history: who was there first or “first in, best dressed”? The number of ways of dividing a cake is only limited by the ability of people to think of new ways. These ways, however, have nothing to do with economics The arbitrary nature of such frameworks does not sit well with the desire by most for there to be an objective, rational process. With arbitrary frameworks, who knows whether today’s winner won’t be tomorrow’s loser! F I S H E R I E S R E S E A R C H A N D D E V E L O P M E N T C O R P O R AT I O N
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In fisheries there has been a tendency to assert that the more one spends on all the items associated with fishing, the more valuable in economic terms the fishing is. We have shown that this is not sensible as an economic measure. We have seen how we must start from the actual existing allocation between commercial and recreational fishers and seek to determine whether re-allocating a small number of fish to one or the other group meets the appropriate economic criteria. We obtain the value of a few extra fish to the recreational sector by observing the actual amount they would offer using a surrogate or hypothetical demand schedule. This demand schedule is no different in concept from a demand schedule for apples or oranges (goods we purchase at the greengrocer’s) at market-determined prices.
IN FISHERIES THERE HAS BEEN A TENDENCY TO ASSERT THAT THE MORE ONE SPENDS ON ALL THE ITEMS ASSOCIATED WITH FISHING, THE MORE VALUABLE IN ECONOMIC TERMS THE FISHING IS … THIS IS NOT SENSIBLE AS AN ECONOMIC MEASURE.
As I reach the end of this short text I realise that not everyone will either understand or be convinced. It is my experience after more than 30 years of practising and teaching economics that not all people are “cut out” to think as economists. There is no shame in that. I’m not ashamed that I don’t think like a nuclear physicist. However, professional integrity demands that I don’t pretend to know the answer to problems in nuclear physics and that I don’t criticize people in that discipline. They’re the experts; I’m not. To end on this note is an indication that I am not too optimistic that I will have convinced all readers to put down their “verbal spears” and apply a common framework and common sense to the question of the allocation of fisheries resources. Still, if I have convinced enough people to stop one unnecessary, acrimonious fight, I’ve achieved something that, hopefully, others will learn from. I have left to the very last the important issue of how to apply economic valuation in a time-dependent (or dynamic) framework. The simple answer is to develop a market for the right to catch fish. This has been done for a number of commercial fisheries. There
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is nothing intrinsically unsound in allowing both commercial and recreational fishers to purchase individual, saleable catch quotas. He or she who — at any point in time — values a certain fish most will purchase the right to catch it. That’s no different from a wholesale or retail vegetable fruit market — or the Sydney Fruit Market — only in this case what is purchased is the right to attempt to catch fish. 32
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