In “Landing fees vs. harvest quotas with
uncertain fish stocks”, Martin Weitzman maintains that
the conventional view among both fisheries economists
and fisheries managers is that “prices” are inferior to
“quantities” as instruments for regulating the fishing
industry. Weitzman takes the opposite position,
appealing to two well-established ideas in economics: 1)
his own seminal insight on “prices vs.
quantities”(Weitzman 1974), and 2) the “powerful general
theme in economics that a ‘price signal’ can compress
into a simple reduced form all relevant information for
inducing correct decentralized decisions.” His paper is an
attempt to capture and formalize his intuition on the
subject using a standard dynamic fishery model with a stochastic stock-recruitment relation which introduces uncertainty, and evaluating the performance of both landing fees and harvest quotas in comparison to a hypothetical “perfect-information” optimal solution.
The basic model is a well-known type which
gives rise to a “bang-bang” optimal escapement target,
S*. Weitzman rigorously solves the optimizing fishery
manager’s dynamic programming problem for each
management regime, and shows that the result for a
constant landing fee (corresponding to S*) is identical to
the “perfect-information” solution, but that both are
superior to the harvest quota.
This result is undoubtedly correct for the models
being appraised. The basis for this finding is less clear,
however, since the assumptions which have given rise to
this result are not explicitly identified. Indeed, on closer
examination, the source of these striking results appears
to be unrelated to “prices vs. quantities” in the classic
sense. Furthermore, the theme in economics that a ‘price
signal’ can compress information and induce correct
decentralized decisions appears to be unrelated since there
are no differentiated decentralized decisions to be made in
Jaeger, W.K. Comment on “Landing Fees versus Harvest Quotas with Uncertain Fish Stocks.” In: Microbehavior and Macroresults: Proceedings of the Tenth Biennial Conference of the International Institute of Fisheries Economics and Trade, July 10-14, 2000, Corvallis, Oregon, USA. Compiled by Richard S. Johnston and Ann L. Shriver. International Institute of Fisheries Economics and Trade (IIFET), Corvallis, 2001.