Common Property Resources and Factor Allocation

Abstract

Two recent articles by Professors H. Scott Gordon and Anthony Scott present an interesting analysis of the conditions for economic maximization in a renewable resource industry the primary raw material for which is drawn from the public domain. While their criticism of the concepts which now govern fishery conservation programmes will be generally accepted among the handful of economists dealing with the fishing industry, some aspects of the problem call for additional consideration. In this paper I should like to elaborate and modify the general outlines of the analysis, largely in terms of a specific and important case: the Pacific halibut fishery.As Gordon and Scott point out, the core of the “over-fishing” problem inheres in the fact that the basic resource is incapable of ownership in any meaningful sense. When the demand for a given species exceeds the level at which supplies can be drawn from local waters at relatively constant costs, further exploitation of the fishery gives rise to higher costs at both intensive and extensive margins. The catch per unit of fishing effort will decline in the closer, more populous grounds as stocks are reduced, and greater costs must be incurred in pushing fishing activities to more distant grounds. If the grounds could be and were privately owned, the incremental income resulting from, say, secular growth in demand would, of course, accrue as rent in a purely Ricardian sense. Since they are not, and since there are no substantive barriers to the entry of new vessels, the increasing aggregate returns will simply be dissipated in excess capacity and higher monetary and real costs. If the reduction in stocks, viewed with grave alarm by biologist and legislator alike, now gives rise to restrictions on the catch designed to hold fish populations at some predetermined level or to rebuild them, the increases in price, aggregate returns, and excess capacity will continue. There is obviously no assurance that the final effect on economic output over time relative to total factor inputs is the same, better, or worse than in the absence of such restrictions.