Fish and cartels

The fish were hopping last week–I saw schools of tuna churning up the ocean foam in feeding frenzies, clearly visible from an airplane on the shuttle between Saipan and Guam.

As enduring as the ocean itself is the constant talk about fishing coops. Or fishing cartels. Or similar ideas that seek to steer more of the ocean’s bounty (i.e. money) into certain pockets. The concept has appeal if for no other reason that fishing is a time honored and noble profession, and it would seem fundamentally fair for fishermen to be able to earn a decent living doing it.

Good intentions, however, can’t entirely replace economic reality. All the ideas about coops and cartels don’t seem to spell out much detail about how they can corner the market in fish. And that’s what most coops and all cartels are about: cornering the market so that prices are pushed up.

The most famous cartel of them all, of course, is OPEC–the Oil Producing and Exporting Countries. They produce enough of the world’s oil to be able to influence prices by adjusting their production.

Some farmers, on a roughly similar note, have coops, in which they sell their product to the coop, which can then have a big enough slice of the overall market to be able to have some pricing leverage.

These cartels and coops have good cooperation and good brainpower behind the scenes taking care of some pretty complicated matters. If you want to learn a thing or two about applied price theory, corner a manager of a large U.S. farmer’s coop. Buy him a martini. Buy him two. Ask a lot of questions. Wow.

A fishing cartel would pose a lot of interesting challenges. First would be how to enforce production limits on cartel members. Linked to this is that some fish are oily but fish aren’t oil: you can leave oil in the ground for your wells to pump later, you can leave grain in the silo to be sold whenever the market is favorable…but the fish you leave in the water may get netted by somebody else. A cartel that imposed limits on how much members could catch might repel members.

Another challenge: Gaining a market share large enough to influence the global market for fish. Maybe this can be done. Maybe not. I’ve seen no studies one way or the other, but it is a point worth studying.

A mere coop–one that doesn’t use the muscle of cartel power to influence prices via production adjustments–wouldn’t have a whole lot to offer. It might be a nice club to join–or it might not be–but there wouldn’t be any substantial, intrinsic economic advantage in the gig. Which isn’t to say such an animal would be a bad idea, but it wouldn’t trigger free money from the heavens.

The last three so-called experts in fishing economics I encountered knew diddly squat about economics and nothing about commercial fishing. Having worked on purse seiners in waters from the western corner of the Philippine sea to the eastern brine of Panama’s sloping coast line, I can attest that large scale commercial fishing is an intensely competitive business. When you inject the economics of price theory and cartels, you’ve got a very interesting situation on your hands.

If I had my way, the average fisherman would make ten times more than the average bureaucrat makes. Plans for cartels and coops, though, will have to be extremely well thought out and detailed if they’re to have any chance of succeeding. Running a cartel, much like fishing itself, is a challenging business indeed.