Overview of Fisheries Management: An Economists Perspective

1
Overview of Fisheries Management An Economists
Perspective

• Gordon Munro
• Fisheries Centre, University of British Columbia
• Vancouver, Canada

2
Introduction

• In the discussion to follow, we shall focus
  solely upon the management of marine capture
  fisheries
• Our objective is to give an overview that will
  provide a foundation for the lectures to follow
• consequently, we shall take a broad brush
  approach, and leave the detailed discussion to
  the following lectures.

3
The Economists View of Natural Resources

• Economists view all natural resources as forms of
  capital
• Capital is any good, asset, capable of yielding
  valuable services over a period of time
• natural resources, such as fish stocks, clearly
  fall under this definition
• natural capital differs from capital made by
  humans, only in that it comes to us an endowment
  from nature

4
Building Up and Depleting Stocks of Capital

• Building up, increasing, stocks of capital is a
  process of positive investment
• positive investment means incurring a cost,
  sacrifice, today for the hope of a return, a
  payoff, in the future
• Many forms of capital can be depleted mined
• consequence is that we enjoy a lot today, at the
  cost of having less tomorrow

5
Links with Biology

• Does this capital theory approach to fisheries
  economics have any links with biology?
• the answer is a definite yes
• if we are to invest in a fishery resource, we
  must understand the growth function of the
  resource
• A key principle every economic model of a
  fishery has a biological model as its foundation
• The link is so close that we now talk in terms of
  Bioeconomics

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Marine Capture Fishery Resources as Common
Property

• Historically, marine capture fishery resources
  have been common property (common pool)
  resources
• ineffective, or non-existent, property rights to
  the resources
• these resources are difficult to see and are
  mobile difficult, costly, to set up property
  rights.
• a common property fishery, in which there is a
  complete absence of property rights and
  regulations, we refer to as a pure open access
  fishery - e.g. high seas fisheries

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Common Property and Incentives

• Economists have made the point, for over 50
  years, that common property results in
  exploiters of the resources having incentives,
  which are perverse from societys point of view
• Fishermen have no incentive to invest in
  (conserve) the resources. To the contrary, they
  have a powerful incentive to disinvest -to mine -
  the resources
• everybodys property is nobodys property

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Perverse Incentives, Initially of Little Concern

• While overexploitation of local inshore fisheries
  was a concern for centuries, little worry about
  major ocean fishery resources, until first part
  of 20th Century
• mining of any resource limited by costs of
  extraction. State of technology seemed to
  protect ocean fisheries, until 20th Century
• Thomas Huxley, 1883 Probably all great
  sea-fisheries are inexhaustible----

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The Awakening

• With rapid advance in fishing technology, e.g.
  steam power, fishing costs fell dramatically, and
  resource overexploitation became a real concern
• Experience of two World Wars convinced scientists
  that fishing could have significant impact on
  ocean fishery resources - reasons for
• by late 1940s, management of major ocean
  fisheries come to be taken seriously.

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Ongoing Mining of the Resources

• While fisheries management on a world wide basis
  came to be taken seriously after World War II,
  mining of world fishery resources has by no
  means been eliminated.
• The following is an example from the North
  Atlantic, one of the most heavily exploited set
  of fisheries in the world.
• comparable examples can be found in other parts
  of the world.

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Mining of Fishery Resources The Example of the
North Atlantic
Biomass
Biomass tkm-2
1.8-2.51.5-1.81.2-1.50.9-1.20.7-0.90.6-0.70.
4-0.60.3-0.40.2-0.30.1-0.20-0.10-0
Courtesy V. Christensen
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High Seas and Extended Fisheries Jurisdiction

• Pure open access fisheries the norm on the high
  seas, aggravated by the coming of distant water
  fleets
• example of fisheries off Namibia before 1990.
• international attempts to control such fisheries
  weak, or non-existent
• Led to establishment of EEZ regime through UN in
  1982
• now supplemented by 1995 UN Fish Stocks Agreement

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Approaches to Management

• The root of the problem, we have argued, lies in
  the fact that common property fisheries
  confront fishermen with a perverse set of
  incentives
• the obvious approach to resource management is
  what the FAO calls an Incentive Blocking Approach
  to Management
• if fishermen have an incentive to overexploit a
  resource, block them from doing so by imposing
  TACs, gear restrictions, time limits etc.

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A New Form of Open Access (Common Property)

• Economists have argued that conserving the
  resource, through the use of TACs etc., is not
  sufficient
• The fishermens incentives have not changed. The
  restricted harvest now becomes the common
  property. Fishermen compete for shares of
  restricted harvest -Regulated Open Access

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Consequences of Regulated Open Access (ROA)

• ROA leads to excess fleet capacity, and hence
  economic waste
• even if resource is effectively conserved,
  economic return from fishery to society (resource
  rent) likely to be fully dissipated
• example of Pacific halibut - off North America
• pure open access fishery, followed by US/Canada
  management regime in 1920s
• resource conservation big success
• but fishery was an economic disaster -negative
  contributions to Canadian and US GDPs.

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Attempts to Control Capacity

• If fishermen have an incentive, under harvest
  controls, to create excess capacity, obvious next
  step is to block them by controlling vessel
  number and sizes limited entry
• results generally very disappointing number of
  vessels controlled, but effective capacity still
  increases reasons for
• Fundamental Law impossible to overestimate
  ingenuity of fishermen in circumventing
  regulations

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Other Consequences of ROA

• Excess capacity increases difficulty of
  controlling harvests
• Setting TACs done under conditions of uncertainty
  what is the correct TAC?
• fishermen have every incentive to pressure
  managers into setting very liberal TACs
• In too many cases, overall result - fishery
  resources continue to decline, if not collapse
• examples from North America Northern Cod, New
  England groundfish fisheries
• Consider following figure from Michael
  Sissenwine, US marine biologist (former senior
  scientist NMFS)

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Incentive Adjusting Approaches to Management

• Disillusionment with Incentive Blocking
  Approaches has led to increased emphasis on the
  Incentive Adjusting alternative
• change fishermen incentives, rather than blocking
  them
• One way to do this is through use of taxes, on
  harvests or fishing effort
• not unknown, but, rightly or wrongly, little
  used.

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Use Rights

• Most common approach is to create de facto
  property rights first to harvests, and then to
  resource itself
• individual harvest quotas (IQs and ITQs), but
  also community based fisheries management schemes
• Objective is to create a system in which it is in
  the selfish interest of fishermen to invest in
  the resource (natural capital)
• fishermen assured both of enjoying some of
  benefits of such investment, and of suffering
  from consequences of excessive disinvestment of
  the resource

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Two North American Examples

• ITQ schemes off Pacific Canada
• fishermen contributing funds to biological
  research developing more conservationist
  harvesting methods
• improved conservation promptly reflected in
  market values of their quota
• North American Indian (First Nations) community
  management of Pacific salmon pre European
  settlement very effective
• consequences of excessive disinvestment of
  natural capitalstarvation!

22
Biologists and Incentives

• Importance of fishermen incentives to management,
  no longer stressed by economists only importance
  coming to be recognized by marine biologists as
  well
• example - Prof. Ray Hilborn, U. of Washington -
  paper prepared for the Royal Society (UK), with
  fellow biologists J. Orensanz and Anna Parma -
  Institutions, Incentives and the Future of
  Fisheries

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Special Issue I Ecosystem Management

• Single species management no longer seen as
  adequate ecosystem approach, which at a minimum
  recognizes species interaction
• A set of assets is referred to as a portfolio of
  assets
• Economics of fisheries in an ecosystem approach,
  becomes a problem in portfolio management.
• a very common problem to economists.

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Special Issue II Uncertainty

• All investment takes place under conditions of
  uncertainty this is especially true in the case
  of investment in fishery resources
• Economists have various means of coping with
  uncertainty, eg. insurance. One very important
  way is through prudent portfolio management
• this creates a case for Marine Protected Areas a
  buffer against environmental shocks, and
  inescapable resource management errors.

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Special Issue III Shared Fishery Resources

• Marine capture fishery resources are mobile.
  Consequently, it is inevitable that, under the
  EEZ regime, some fishery resources will be shared
  between, and among, states, e.g. hake shared by
  Namibia, South Africa and Angola
• classes of shared stocks
• transboundary -stocks cross EEZ of one coastal
  state into EEZ of another
• straddling -stocks cross EEZ boundary into high
  seas, where they are subject to exploitation by
  distant water fishing states (DWFS).

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Basic Economics of Shared Fish Stock Management

• There will be a strategic interaction
  between/among states sharing a fishery resource.
• e.g. states A and B share a fish stock. As
  harvesting activities will have an impact on Bs
  harvesting opportunities, and vice-versa.
• A and B will, if rational, take this interaction
  into account in their resource management
  planning
• Economics of shared stock management - a blend
  of standard fisheries economics and theory of
  strategic interaction, better known as theory of
  games

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Theory of Games and Shared Fish Stock Management

• Theory of games divided into two broad categories
• (i) theory of competitive (non-cooperative)
  games and (ii) theory of cooperative games
• Two questions
• 1. what are the consequences of non-cooperative
  management of shared stocks?
• 2. what are the basic requirements for a stable
  cooperative management regime?
• we draw upon (i) to obtain answer to 1 and (ii)
  to obtain answer to 2.

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Non-Cooperative Management of Shared Fish Stocks

• Theory of competitive games tells us that, under
  non-cooperative management, there is a serous
  risk that states sharing a resource will be
  driven to adopting exploitation strategies each
  recognizes as destructive - The Prisoners
  Dilemma
• examples from North America and Australia/New
  Zealand
• Other than in exceptional circumstances,
  cooperation does matter!

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Cooperative Management of Shared Fish Stocks

• Key question what is being shared, the harvests,
  or the economic benefits from the fishery? They
  are not necessarily identical
• First, what is NOT required for a stable
  cooperative management arrangement - that states
  sharing resource have identical management goals
  -compromises can be established

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Requirements for Stable Cooperative Arrangement

• 1. every partner in the cooperative management
  arrangement must be assured of receiving more
  than it would under non-cooperation - obvious
  requirement, but often ignored in practice
• often requires flexibility in bargaining, and
  doing more than just sharing harvests
• economists stress on sharing the economic
  benefits from the fishery, not simply the harvest
• a famous North American example

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More on Requirements for Stable Arrangement

• 2. resiliency through time -less obvious
• every cooperative management arrangement can
  expect to be subject to unpredictable shocks over
  time -e.g. shifts in distribution of stock, due
  to climate change, or other factors
• if the cooperative arrangement lacks resilience,
  good chance that it will not survive the shocks
  -this carries with it the risk of reversion to
  destructive non-cooperation
• examples from North America, and North Atlantic

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Some Conclusions

• Economists view fishery resources as valuable
  assets that should be capable of yielding
  economic returns to society,now, and far off into
  the future
• economics of fisheries management seen as a
  problem of asset management through time
• Modern fisheries economics is not divorced from
  marine biology -to the contrary! The link is so
  strong that we now talk in terms of Bioeconomics

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Some Further Conclusions

• The basic management problem is to create a
  system of incentives
• (a) among fishermen within a state, and
• (b) among states sharing a resource
• that will cause them to be willing to invest in
  the resource (natural capital), in the face of
  uncertainty
• perverse incentives lead invariably to resource
  overexploitation