If you want to know the real value of recreational fishing, the last place you should look is inside an economic impact assessment.
People often make fun of economists for knowing the costs of everything and the value of nothing, but when it comes to economic impact assessments, it’s even worse. There, to paraphrase Laval University’s Professor of Economics Stephen Gordon, consulting economists take the costs of everything, add them to the benefits, multiply them by two, and pretend that the resulting figure is economically meaningful.
When I lectured at the University of Canterbury, Associate Professor Seamus Hogan wanted to set an honours project asking a student to work out whether there really were any economic questions to which an economic impact assessment could provide a plausible answer. He never got a chance to assign that project, but we do know what value economic impact assessments actually deliver: really big numbers meant to influence policy.
The New Zealand Marine Research Foundation’s commissioned economic impact assessment of recreational fishing in New Zealand says that fishing generates $1.7b in economic activity. Legasea argues “We now have a handle on the value of recreational fishing” and that the results provide “enough evidence to support a recalibration” from commercial fishing to high-value recreational fishing.
But there are two problems. First, even if the economic impact assessment figures were correct, that still provides no basis for deciding whether the next fish caught would be more valuable in a commercial boat or on a recreational hook. And, second, the numbers come from an economic impact assessment. Let’s deal with the second one first.
Economic impact assessments try to gauge the ‘weight’ of some sectors’ activity in the overall economy. It is not a measure of costs, or of benefits, or of value added, or of utility, or of how much people enjoy the activity.
The number that comes out of an economic impact assessment doesn’t even tell us how much less economic activity there might be if some activity disappeared. The authors of the Marine Research Foundation’s commissioned economic impact assessment kindly remind the readers as much, but those caveats never make it into reporting on economic impact figures.
But there are other problems as well.
Almost half of the reported economic impact comes from ‘multiplier effects’ as spending by fishers flows through to retailers, and on to their suppliers, and so on. But every dollar spent on fishing is a dollar that was not spent elsewhere: there are then offsetting ‘divisor effects’ that should be considered in the places where people would be spending money, if they were not fishing.
Multiplier effects only really work when spending brings idle resources into production. When that spending is by foreign visitors, divisor effects then apply in their home countries.
But even there, caution is needed. If foreign visitors happen to fish as part of their trip here, but they would have come here even if there were no fishing, any multiplier effects from that foreign expenditure on fishing need an offsetting divisor effect from the other activities they might have undertaken. The report estimates 28,000 international fishers came here primarily to fish, but the multiplier effect estimates are based on spending by 594,662 marine fishers. Adjust your estimates downwards accordingly.
Similarly, the report’s estimate of the GST take from recreational fishing expenditures tells us nothing about the government’s real tax take. If people would have otherwise spent money on other things, that spending would also have attracted GST.
And counting fishers’ spending on groceries and restaurants during fishing trips as an economic impact of fishing, as the report does, only makes sense if fishers would not have eaten anything if they had stayed home.
But even if all of that were handled properly, the resulting figure still would not tell us whether recreational or commercial fishing were more valuable – and that’s the main problem with economic impact assessments. The figures tell us how much economic activity there is around recreational fishing, but tell us nothing about how much a recreational fisher values catching the next fish – and whether that fish really is more valuable on a recreational hook than in a commercial boat.
For its part, the Ministry for Primary Industries seems to agree. Its review of the economic impact assessment notes that policy cannot really be based on these things. Instead, we need measures of economic value: how much fishers get out of fishing over and above the cost of getting out on the water and catching the fish.
Nobody has those measures. But we can approach the problem the other way round.
Commercial fishers need to lease annual catch entitlements (ACE) for their annual catch. And so we know the value that commercial fishers place on the next fish caught for each species. We can use that number as a bit of a benchmark for the value of the fish caught by recreational fishers – or at least of how much we might expect commercial fishers would be willing to pay for fish currently caught recreationally.
Let’s take the snapper fishery (SNA1) along the northeast portion of the North Island as an example. This is New Zealand’s largest recreational fishery. Commercial fishers are willing to pay about $5 per kilogram for snapper ACE. So if the typical recreational fisher caught around half the bag limit twenty times per year, and released a few small fish, the commercial value of the fishing rights associated with that catch would be about $1000, or $50 per day.
And so we come to the question that only fishers can answer, and they will not all agree. If you had to buy ACE for your day’s fishing, at $50, would it still be worth it? Or, to put it another way, if somebody would pay you $50 not to fish for one of those days, would you take the money? If the fish, and the day’s fishing, is more valuable to you than the money, then the fish is more valuable on your hook than in a commercial boat.
Answering that kind of question for recreational fishers overall just cannot be done by adding up the costs in an economic impact report. You find it out instead using systems like British Columbia’s, described in The New Zealand Initiative’s coming report, “The Overseas Catch.” That system lets recreational fishers lease the entitlement for additional catch from commercial fishers, and vice versa. That kind of trading lets fishers demonstrate the value they place on a day’s fishing – and helps ensure that fish wind up on the right hooks.
*The New Zealand Initiative is a research institution supported by a membership organisation that includes business leaders and political thinkers.