Efficiency Controls and the Captured Fishery Regulator

Abstract

Rent dissipation in open access fisheries is well studied (Gordon J Polit Econ 62:124–142, 1954; Homans and Wilen J Environ Econ Manag 32:1–21, 1997) and has been shown to induce efficiency losses of over $50 billion per year in global fisheries (Costello et al Proc Natl Acad Sci 113(18):5125–5129, 2016). While fisheries are increasingly managed with quota-based approaches, over half of the world’s fish catch is still largely unregulated. This lack of complete management stems, in part, from the reluctance of fishery regulators to limit entry or directly regulate harvest. This often leaves restrictions on efficiency—such as technology or season restrictions—as the only means to achieve management goals. We study the situation when a regulator is “captured” in the sense that he cannot directly control entry but acts in the representative fisher’s best interest. Incumbent fishers are faced with the problem that potential entrants appear just like incumbents, so current profits must be weighed against the incentive for entry. We find that when the regulator is captured by industry members, he unambiguously allows overfishing—reaching a lower stock and higher effort than is socially optimal. This steady state has zero rents, but, interestingly, a higher stock and effort than in the pure open access equilibrium.