1 Regulation as a policy contest: The effect of changed environmental conditions on the probability of conservation of a renewable resource Urs Steiner Brandt Presentation at the Workshop on: Social & Natural Scientific Advice in Marine Renewable Resource: Closing the Gab between Politics & Theoretical Ideals in Fisheries Management University of Southern Denmark, Esbjerg, June 2007

2 Public choice theory to explain regulatory outcomes Buchanan and Tullock (1975): In order to present a positive theory of regulation … it is necessary to resort to public-choice theory, since the interests of those who are subjected to the control instrument must be taken into account. This paper takes the political economy point of view (to its extreme) that regulation is (totally) determined by a contest between relevant interest groups.

3 Structure of the model

4 Fisheries management as a political contest In this paper, the chosen fisheries management scheme is determined by a contest between two opposing stakeholder groups: the fishermen and the biologists. The probability of a policy that results in overfishing or in conservation is dependent on the relative benefits the two groups receive if their preferred policy is the outcome of the contest. This set-up makes it possible to predict how climate change induced changes in the underlying bionomic model affects the probability of overfishing.

5 The objectives of the interest groups The biologist has the aim of reducing current fishing effort in order to protect the fish resource. The fishermen: The biologists: The objective of the fishermen is maximize profit, while only partially concerned about the future rent in the fishery.

6 Objectives of biologists Their agenda is to increase the stock size of the resource to an “acceptable” level. (This could be motivated by safeguarding the stock in case of unforeseen (stochastic) temporary shocks that could force the stock below its minimum level with long lasting adverse consequences. An example: ICES To prevent cod stocks in the North Sea, Irish Sea and west of Scotland from going the same way (as the Canadian cod stocks collapsed in the early 1990s), ICES has been calling for a complete ban on cod fishing in these areas and for the development of recovery plans to rebuild the stocks.

7 The intertemporal utility for the biologists read: Objectives of the biologists Biologists are maximizing utility by closing the harvest activity.

8 Objectives of fishermen The intertemporal utility for the biologists read: where

9 Benefits to the contenders There are only two possible outcomes in the political stage, either high level of harvest, or zero harvest.

10 The political contest model This is done by assuming the existence of a contest success function that specifies the probability of approval of the proposed policy corresponding to the rent-seeking effort of the interest groups (Epstein and Nitzan, 2002, page 138). Two main drivers of the model: Higher relative contribution increases probability of winning Higher relative gain from winning increases contribution

11 The political contest model

12 First results The probability of conservation is increasing in the relative gain to the biologists and decreasing in the relative gain to the fishermen.

13 Introducing climate change There are many ways how climate change related effects might affect the fish resource: This paper analysis the situation where future profits are expected to be reduced for the same level of catches in the present period. Affect the level of recruitment, Affect size and quality of the fish resource, Lead to emigration or immigration of species in specified geographic areas, Increase the natural variability, Increase the scientific uncertainty of the resource.

14 How climate change affect the gain from winning Useful results: Remember that In order to evaluate the effect of changed environmental conditions on the output of the contest model, it is necessary to calculate how this affects the gain from winning the contest.

15 How climate change affect the gain from winning Measures how the gain from winning the contest for the biologists is affected by climate change in period t, t = 1,2. Biologists : Harvests are larger in period one due to changed climatic conditions, while the baseline is identical; therefore the net gain in utility from winning is decreased for the biologists. The utility from losing is reduced, but the utility from winning is also reduced.

16 How climate change affect the gain from winning Measures how the gain from winning the contest for the fishermen is affected by climate change in period t, t = 1,2. Fishermen : Harvests are larger in period one under the changed climatic conditions, while the biologists' proposal is unchanged and the net profit for the harvesters from winning the contest increases in the first period. The profit from losing is reduced, while the profit from winning is also reduced.

17 Effect of CC on the probability of conservation Given these ambiguous result, can we determine the effect of changes in climate on the probability of conservation? The result is clear: negative climate effects reduce the probability of conservation. Intuition ???

18 Extensions Making policy proposals endogenous Introducing a probability that stock will collapse Endogenous: Considering how choice of policy proposal affects the choice of contender: When fishermen reduce harvest in period 1 implies less aggressive biologists. Collapsing stock: If higher catch implies higher probability of collapse, then it cannot be excluded that:. Now both group invest less in the contest, when k is smaller, and the result on conservation is uncertain.

19 Conclusion By treating the determination of the fisheries management as a contest between interest groups with opposing objectives, it is possible to endogenously determine the probability of conservation as determined by the interest groups’ relative gain of winning the contest.