22 September 2008

Sustainable Fisheries

Many fisheries are overexploited because access to the common pool resource is not restricted. Fishermen, in a race to catch what's available, put in tremendous effort to get some share of the fish ahead of others, and the result is a tragedy of the commons, i.e., everyone is poorer.

Economists have known for many years (at least since Gordon's 1954 article [PDF]) that privatization is one solution to common pool problems.* Privatization -- by giving each fishermen exclusive access to an area or a fixed quota of fish from an area -- will allow the owner to manage the resource in a sustainable (and profitable) manner and reduce over-exploitation.

The tradable version of these rights are called Individual Transferable Quotas (ITQs), and they have been used in New Zealand, Iceland and some US fisheries since the 1980s.

For economists, ITQs are a no-brainer, solving a known problem with known tools, and the empirical evidence has confirmed that ITQs can bring fisheries back from the brink.** Others were more skeptical -- claiming that ITQs were special solutions for special circumstances.

New research knocks skeptics down a few notches. Here's the NY Times version, but I prefer the Economist's version:
Christopher Costello and Steven Gaines of the University of California and John Lynham of the University of Hawaii assembled a database of the world’s commercial fisheries, their catches and whether or not they were managed with ITQs... they found that ITQs halted the collapse of fisheries (and according to one analysis even reversed the trend). The overall finding was that fisheries that were managed with ITQs were half as likely to collapse as those that were not.

...The new data show that before their conversion, fisheries with ITQs were on exactly the same path to oblivion as those without.
Note that these principles also apply to farmers racing each other to pump from aquifers.

Bottom Line: Property rights matter, and those who work with resources should embrace them, lest they overwork themselves on the way to destroying those resources. (There's a lot of space for improvement -- only 121 of over 10,000 fisheries are managed with ITQs.)

* Another solution is for those who have access to the common pool to agree on community institutions that will limit exploitation. This solution is strongly associated with Elinor Ostrom.

** My favorite example (related by Jim Wilen, a really amazing UC Davis professor and expert on fisheries) is of the Alaska halibut fishery. Before ITQs were introduced, the "season" lasted three days, during which fishermen took great risks to catch whatever they could. When they returned to dock, the price of fish crashed as supply overwhelmed demand. After ITQs were introduced, fishermen could choose when and where to catch halibut. They put in less effort (the season lasted for months), got higher prices, and benefited from a healthier fishery. Now (according to the above-cited articles) they want to reduce total catches to make their ITQs even more valuable.

2 comments:

  1. One does note that this contribution derives entirely from UC. The State of California is getting value for its dollar.

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  2. Took a closer look at the "supporting material" for the Costello paper last night and think it is pretty robust. The fact that ITQ and non-ITQ fisheries don't seem to have differential trends before an ITQ is implemented but DO show a widening (statistically offsetting) gap in failure probability AFTER ITQs are implemented suggests there is a fundamental treatment effect from the characteristics of the ITQ itself that accrues over time.

    Since many fisheries go through some form of "regulated open access" on the way to rationalization and these fisheries are much more likely to select into the ITQ treatment one would expect a differential trend toward failure BEFORE ITQs if it was the hard caps or regulatory capacity that caused the improvement, not the property rights themselves. These effects may actually be captured in the treatment dummy, ITQ(i) (although testing this would require a similar analysis controlling for or sub-sampling on pre-ITQ regulatory status) suggesting that the institutional pre-conditions for ITQs (hard TACs, strong top-down monitoring and enforcement traditions) may reduce the probability of collapse at any point in time but do not help to slow the trend toward eventual overfishing (at least by the Myers and Worm catch-based definition).

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