Managing the Fishery How can we regulate the fishery to avoid problems of open access?

Why manage fisheries? Otherwise, open access: externality of entry drives value of fishery to 0. May drive to extinction (or economic extinction) Non-extractive values ignored. Technology may destroy habitat, harvest individuals that should not be harvested (bycatch), etc (another consequence of open access) Technology may improve, so management must keep up.

How to manage fisheries? Depends largely on characteristics of fishery Biology & status of stocks History of extraction Commercial vs. subsistence, status of stocks Other values (non-extractive, recreational, fairness, distributional) Many failures, some successes

Some management alternatives Limits on catch Harvest quotas (for whole fishery) Individual transferable quotas (ITQ, IFQ) Marine reserves (area closures) Harvest tax Limits on effort Season closures Ex-vessel tax Regulated entry (licenses) Regulated efficiency (gear) Effort tax Internalization of externalities Cooperatives TURFs Notice: Many of these are “property rights” solutions

Small-scale fisheries Many small, multi-purpose boats Difficult to enforce regulations Local management most successful Kinship rights, social pressure Mainly limited entry, also gear, some area closures, etc. Often self-imposed. New entrants, technology, & markets are attractive; can be destructive

Tax on Catch Effort $ TR Total revenue [pH(E)] decreases with tax (t) on catch to (p-t)H(E) TC OA without tax Efficient fishery OA with tax Tax on catch: reduces open access equilibrium; right tax moves effort level to efficient amount of effort

Tax on Effort Effort $ TR Total costs increase with tax (t) on effort to (c+t)E TC= cE OA without tax Efficient fishery OA with tax Tax on effort: reduces open access equilibrium; right tax moves effort level to efficient amount of effort

Transferable quotas on catch Quota levels must be set at efficient catch level Must be transferable among fishers Value of quota is effectively the same thing as a tax on catch Efficiency requires observation of stock (difficult)

Transferable Quotas on Effort Effort $ TR TC OA without tax Issue effort permits Transferable quotas on effort: reduces effort to efficient level

Individual Transferable Quotas Regulator sets “total allowable catch” (TAC) based on many factors. Distributes quotas (auction, sell at fixed price, give away based on historical catch, or equal distribution) Quota rights can be traded. Some systems, buy right to harvest in perpetuity (as % of TAC)

ITQs and property rights Prior to 1976 coastal nations did not have rights to marine resources in “high seas” 1976 Magnuson Act & Law of the Sea: Grants rights to coastal nations to marine resources 200 miles from shore. But how to regulate within a country? ITQs effectively secure property rights to fish in the ocean. Lack of property rights is what causes problems with open access

Potential problems with ITQs Allocation of quotas? High-grading incentive Enforcement & administrative costs Most quotas held by largest firms “privatizing the oceans”? How set TAC in first place? TAC based on imperfectly observed stock

Alaskan Halibut Historically used season closures Prior to adoption of ITQ, season 1 day Poor fish quality, excessive investment for harvest, frozen most of year. ITQ adopted 1995: free allocation to fishing vessels based on historic catch. Debit cards, fish tickets for enforcement A success, longer season, higher profits, more fish, bigger/better quality fish

Cooperatives/Cooperativas Often devise own rules – social pressure to abide. Have exclusive rights to areas, self-enforce. Federal management supercedes - bargaining process with feds to determine management TURFs: Territorial User Rights (spatial property rights) Good when few spatial externalities

Baja California

Pacific Ocean Fishing Areas - Cooperativas PNA BP PUR BT EMAN CSI LR PROG PA

Resource “Concessions” Give exclusive access for 20 years Good chance of renewal if “stewardship” can be proven Same principle in reauthorization of MSFCMA (Magnusson) Reluctant to relinquish control? Make property right insecure This induces the wrong behavior.

Economics of Marine Reserves Marine reserves implemented for a variety of reasons What are their economic impacts? Could reserves ever increase rents to a fishery? YES! E.g. Source/Sink Increasing returns to scale (fecundity)