Tuesday, January 27, 2009

Reward system to solve free rider problem

Here is an interesting article from ENN that describes a competition for the development of by-catch reducing fishing gear.

I think this is a great idea. Here's why...

Inventing fishing gear that is more environmentally safe sounds like a great idea, but when you think about it, there's little incentive for an individual to undertake such efforts. Once invented, the "smart gear" will generate positive externalities (benefits that accrue to society at large) through the reduction of incedental catch that cannot be captured by the inventor. Hence, the inventor incurs a great deal of R&D expenses, but shares the gains with society. With open-access or common property fisheries, fishers have no incentive to invent or adopt new technology unless their profits increase or they are forced to do via a technology standard mandate.

By creating a monetary prize, we are in effect subsidizing a positve externality generating good (R&D to reduce by-catch).

Question: is this competition enough, or do we need an additional policy to go along with it?

1 comment:

Antonio Joyette said...

I agree with you Peter. The inventing of this type of equipment will certainly have benefits for the society. I am not sure the "prize" serves as much of an incentive. Perhaps there is some hint of expectation of philanthropy in such small reward.

On the question of support for the use of the invented equipment. It may not necessarily gain the favour of the fishing community if all it does is to reduce by-catch. (even though dealing with that in and of itself is time consuming). Profits is the major (if not the only) consideration for fishers. Therefore, I do believe there has to be some supporting policy from the government/ authority end. Such policies can mandate and regulate use of the invented - seeing that the reduction of by-catch is its major intermediate objective.

But, I support the idea and call for follow up policy support.