Craig Gleason and Eli Zackheim
Environmental Economics: Salmon Case Study
Professor Turner
December 10, 1999
Depopulation of Salmon in the Columbia
River
The Pacific Northwest is renowned for the aesthetics and cleanliness of its environment. From the rocky yet fertile coastline, to the green valleys, to the towering glacial mountains, to the high deserts, Oregon and Washington boast great biological health in terms of diversity and sheer numbers of flora and fauna. One of the most treasured environmental landmarks, which actually forms much of the border between the two states, is the Columbia River. The fifth largest river in the United States, the Columbia has its headwaters in a series of lakes extending from British Columbia southward into Northeast Washington. The river continues south and meets the Snake River on the Oregon-Washington border, where it heads west, and gorges through mountains until spilling into the Pacific Ocean. It is the Pacific Northwest’s greatest hydroelectric power source, a worldly acclaimed recreational venue, a huge contributor to the commercial fishing market, and an astoundingly scenic stretch of land and water. It goes without saying that the Columbia River is a highly valued and resourceful milieu.
The focus of this paper is the rapid salmon depopulation in the Columbia River that began about 20 years ago and has been in the public eye since the mid 1980s. The river has always boasted one of, if not the most prolific salmon runs in the contiguous U.S. The most abundant species include Chinook, Coho, Sockeye, and Jack Salmon (all of which are good-eatin’). However, the situation is starting to look grim. Coho and Jack Salmon have all been placed on the Oregon State endangered species list, and Sockeyes are not too far away. In the Columbia River, all of the species’ numbers have been depleting annually and Coho Salmon are nearly extinct. Nevertheless, with certain efforts we believe the salmon population of the Columbia River can be restored. It is not a lost or worthless cause, either economically or environmentally speaking.
It is atypical of an economic aim or case study to focus on a single species or a group of species within the same genus. This is in great part due to the basic principle of fungibility, which, in an environmental scope, holds that the extinction of a single species or type of animal should not concern humans too much as long as there exists an equal and plentiful substitute upon which we can rely in the future. Also, the use values, or consumption of animals and the environment have historically been of greater human worth than the nonuse values, or the values placed on just knowing that certain types of natural settings and animals exist. This, however, is a tradeoff that is currently shifting to a more eco-friendly balance.
We believe that Columbia River salmon do deserve their own case study, as they are a significant good in the local and regional economy. In addition, there are few to zero known substitutes for salmon, which have their own distinctive, and well-reputed taste. So it is in our best interest to look out for them. Also, people have begun to value their existence in nature more and more since they began receiving national attention. We have identified a few common market failures that contribute to the demise of Columbia River salmon and we have formulated some possible solutions that could benefit both the salmon and the economy. That is the main reason why we feel it is economically useful to focus on this single type of fish.
We have identified four market failures in the local economy that contribute to the declining numbers of salmon and lead to inefficient market conditions. The first market failure is the Columbia River as a public good. The second and third fall under the title of market imperfections, and include imperfect competition among commercial fisheries, and the spread of imperfect information. The fourth market failure consists of negative externalities in the form of pollution.
Sections of the Columbia River do exist as public goods. As such, the use of the river is both non-excludable in that anyone is allowed to use it, and non-rival in that the consumption of one person does not limit the consumptive potential of the next person. The situation encourages overuse of the river and congestion, which adds stress to the salmon habitat. These problems are the result of poorly defined property rights along many stretches of the river, a fairly typical dilemma for a resource that literally belongs to two states. The salmon themselves are not a pure public good because public and commercial fishing license fees constitute some degree of excludability. However, these fees are relatively cheap, and licenses are easy to come by. Basically, anyone can fish at just about any time if they have a license, the right equipment, and some time to spare. In essence the salmon are an unprotected resource because of the open-access nature of the river and the desire to harvest the salmon for food and profit. This desire is enhanced by the knowledge that there is a limited and depleting supply of salmon in the river (Columbia River Basin Research). With such parameters, it is most profitable for harvesters to remove as many fish as they can sell or eat in the near future, all at once. It follows that both the use of the river and the amount of fish extracted from it are difficult to control.
This category consists of two interrelated market failures that play a huge role in the rapid depopulation of Columbia River salmon. The first of the failures is imperfect competition in the commercial fishing market. Though the majority of salmon harvesters may be public fishermen, the overwhelming majority of salmon harvested are done so commercially. This results from the fact that there are a very small number of commercial fisheries that absolutely dominate the market. Furthermore, there is some indication that a loose coalition exists between these firms to ensure and solidify such market domination (Washington State Department of Fish and Wildlife). The situation resembles that of an oligopoly, in which the firms can decide the amount they will supply. In addition, the firms become price-makers rather than price-takers. In effect, firms mitigate their dependence on market demand and the entire market is swayed to benefit producers more than consumers.
In deciding how much to supply and in setting their prices, the large commercial conglomerates sort of cheat the consumers. They do so by spreading imperfect, more like false, information. For years now, the issue of salmon depopulation has been at the forefront of the media in the Pacific Northwest. Consumers realize that salmon are a fairly scarce resource that continues to be depleted. The commercial fishing industries play a significant role in conveying and emphasizing that message to the general public. This gives the firms the ability to jack up their prices, as consumers are willing to pay more for a resource they perceive as scarce. However, in practice firms harvest without any consideration of the scarcity message with which they feed the public eye. This economic subterfuge allows the firms to supply at a level higher than found in a typical oligopoly, while enjoying a similar price mark-up. Hence the market failure of imperfect competition is exaggerated by the failure of imperfect information, and the result is a tremendously inefficient economic picture.
Another market failure is the existence of negative externalities, mainly in the form of pollution. A vast waterway like the Columbia River at the base of mountains is naturally susceptible to all sorts of runoff as it is the final destination of entire watersheds. It is also well traveled by ships and boats, lined with industries and farms, and dammed quite extensively. All of these characteristics render the Columbia River extremely vulnerable to many different pollutants.
Dams are a major obstacle for salmon in two respects. First, from the thermal pollution emitted by generating electricity and in slowing down the flow of water, the water temperature is warmer around dams. Heating of water causes a reduction in dissolved gases, primarily dissolved oxygen (DO), which is vital to salmon survival. It is also estimated that dam turbines kill 25% of juvenile salmon, in addition to preventing the movement of salmon smelt, which are not yet strong enough to navigate the artificial ladders (Columbia River United Project).
Boats, industries, agriculture, automobiles, and fishing wastes are responsible for the majority of pollutants found in the Columbia River. Metals such as lead, iron, arsenic, silver, mercury, copper, and aluminum were all found to be above the 1992 Environmental Reconnaissance Study Safety Standards (Columbia River United Project). These pollutants are all directly poisonous to fish and an indirect threat to humans through salmon consumption. Dioxins, which are chlorine-based effluents that leach out from shoreline paper mills, also pose a threat to the health of salmon and other fish. Oils and petroleum from vehicles, boats, and fishing wastes are a major concern as well. Nitrous oxides from vehicular emissions and agricultural runoff can also find their way into the river.
All four of these market failures have led to the reduction of the salmon population in the Pacific Northwest region, specifically in the Columbia River. A comprehensive study and further information gathering will allow us to examine the market as a whole and possibly produce some viable solutions as to what needs to be changed within the system. One of the best tools to use would be conjoint analysis. A simple prospect follows.
Conjoint
Analysis
Before a conjoint analysis questionnaire itself can be used, background information concerning the current practices of salmon fishing, commercial and public, and measures of pollution emitted by the fisheries and other industrial sources operating on the Columbia River will need to be researched. The background information will then be provided to the respondents so that they can make educated decisions. The goal of this conjoint analysis survey is to get a clear understanding of the social valuation of Columbia River salmon, in and out of the market, by using the background information in a multi-variable, rank-scenario-type questionnaire.
Questions Used to
Obtain Background Information
-To the Fish and Wildlife Department:
Estimate the contributions of 1) commercial fisheries – including their pollution,
2) Pollution by other local industries, and 3) public fishing to the depletion
of Columbia River Salmon.
-To commercial fishermen:
What is your average salmon catch in lbs./week?
What is the typical market price per lb. of salmon?
What pollutants do you emit into the water and how much of each?
What current catch limits or restrictions, if any, do you currently face?
-To pollution sources:
What pollutants do you emit into the water and how much of each?
Do you know of the effects these pollutants have on the salmon population? If so,
Please briefly explain.
What sort of pollution control, if any, do you currently employ?
How is your pollution regulated?
-To public fishermen:
How much did your fishing license cost and what privileges does it give you?
What are your catch restrictions per outing (size and number of salmon)?
What is your average salmon catch, in lbs./month?
What do you pay for 1 lb. of salmon at the grocery store?
Conjoint Analysis
Questionnaire
-Demographic Information
Gender : Age:
Yearly Salary: Occupation:
Hometown: Ethnicity:
Number of Children: How often do you eat salmon?
-Scenario-Type Survey
Following a summary of the background information obtained from the above questions, the following variables will be evaluated:
-pollution levels
-market price of salmon
-license fees
-size and number of catch restrictions on license holding public fishermen
-restriction policies on the catch of commercial fisheries
-future depletion and/or repletion rates of salmon
These are the variables
with which the public would be surveyed. A
sample survey of nine scenarios each to be given a ranking from 1 (not at all desirable)
to 5 (very desirable) is shown below. Scenario
# 9 represents the status quo. Independent
and dependent variations of the variables are addressed, so it is possible to assess which
of the variables are valued most, and how the variables are related. Finally, given the market failures, background
information, and survey results, the most efficient scenario would be determined. Note:
This is only a sample and should not be taken as the actual conjoint analysis survey
to be used if such a project is ever undertaken. Once
enough background information is collected, these variables could be investigated more
thoroughly.
SCENARIOS
Level of Pollution |
Market Price Per lb. Salmon |
Public Fishing License Fee |
Public Fishing Catch Maximum |
Commercial Fishing Catch Restrictions |
Depletion / Repletion Rates of Salmon |
|
1 |
Potentially Hazardous |
$7.50 |
$25 |
2 fish/day |
Lenient Restrictions |
- 3.5 % / year |
2 |
Potentially Hazardous |
$7.50 |
$30 |
4 fish/day |
Heavy Restrictions |
- 1.0 % / year |
3 |
Moderate |
$8.00 |
$25 |
2 fish/day |
Moderate Restrictions |
- 1.5 % / year |
4 |
Moderate |
$8.50 |
$25 |
3 fish/day |
Moderate Restrictions |
- 1.0 % / year |
5 |
Low |
$9.00 |
$30 |
3 fish/day |
Moderate Restrictions |
- 0.5 % / year |
6 |
Low |
$10.00 |
$20 |
1 fish/day |
Lenient Restrictions |
- 1.5 % / year |
7 |
Very Low |
$11.00 |
$25 |
3 fish/day |
Heavy Restrictions |
+ 0.5 % / year |
8 |
Very Low |
$11.00 |
$20 |
2 fish/day |
Moderate Restrictions |
0.0 % change / year |
9 |
Moderate |
$9.50 |
$24 |
2 fish/day |
Lenient Restrictions |
- 2.5 % / year |
By eliminating the effects, or at least reducing the severity of the market failures described earlier, we believe that the salmon can rebound. We also feel that the salmon market can undergo drastic improvements and arrive at or near efficient conditions that should be sustainable well into the future. We have formulated a few different policies with which these goals could possibly be achieved.
To deal with the river as a public good, we feel that it will be necessary to have more clearly distinctive property rights assigned for many parts of the river. This would best be accomplished by assigning “ownership” of the river to the Fish and Wildlife Departments of Oregon and Washington. In theory, each department would work together to reach a Coasian agreement encouraging pollution control and repopulation of the salmon. By assigning ownership, we merely mean that the Fish and Wildlife Departments will be acting as executors on behalf of the government. They will not retain actual possession of the river properties, but will be the sole organs responsible for determining policies to better the environment. In reality this policy, although potentially effective, would be hard to bring about. There are just too many organizations involved - commercial fisheries, industries along the riverbanks, environmental protection organizations, and power plants - for a Coasian solution to work effectively. Another problem could arise in that the stripping and reassigning of property rights might shake things up to the point where any sort of economic balance would take way too long to restore, creating a volatile and undesirable situation.
Another policy that deals with this market failure is an increase in license fees. This would make the river itself more excludable. And the funds generated from the price hike could be allocated back into such endeavors as environmental cleanup and restocking of salmon. This is one small step, but equally small are the risks, and the rewards could be well worth the effort.
For the two market imperfections identified, we have come up with a general solution that can be attained through a number of ways. Essentially, we feel that the oligopolistic nature of the commercial fishing conglomerates can be tolerable as long as a few requisites are met. First, the amount of fish supplied by the firms must be reduced to the equilibrium oligopoly level, which lies at a quantity less than market demand. This could be done through a simple command and control policy or through the distribution of transferable catch permits. This move to a lower quantity of salmon supplied is in the interest of the salmon. Firms would still be allowed to hike prices above marginal costs, as is typical in the oligopoly model. However, the excess profits derived from the price markup, or at least a sizable fraction thereof, would be governmentally forced back into investment in the repopulation of salmon. This could be done through environmental cleanup, technological innovations to lessen pollution in their boats, and/or donations to fish hatcheries. Firms should have no problem with this sort of policy since in essence they are using their profits to invest back into their continued business in the future. If it happens that salmon are successfully repopulating and the situation looks sustainable, firms will be allowed to increase supply, while still throwing excess profits towards the good of the salmon as long as the salmon do not revert back to depopulating. This policy seems to be flexible and easy to introduce. There are no extremely drastic changes. And it could lead to economic and environmental sustainability.
Finally, in dealing with externalities many different policies could be implemented. The most simple policy would be a command and control of effluents that are produced by the local industries. This of course is difficult, as the costs of setting a standard for each individual source are too high. A better solution would be to figure out the efficient level of pollution that should be emitted from all of the sources combined, and then to sell the correct amount of transferable permits. It is also important that incentive for technological innovation be supplied rather than denied. Probably the most qualified candidates for technological change would be the dams, a blatant and relatively unchecked murderer of salmon.
We have derived a number of possible policies that could be at least a start in the right direction. Further analysis, cost-benefit in nature, ought to be employed in order to determine which policy or combination of policies is best designed to get the process underway. We are confident that continued research into this query will lead to a more efficient market and eco-friendlier conditions for salmon in the Columbia River.
Columbia River Basin Research School of Fisheries, University of Washington
http://www.cqs.washington.edu/index.html