TCS Daily

An Offshore Investment in Property Rights and Science Pays Off in Stocks

By Michael De Alessi - June 15, 2001 12:00 AM

Mismanaged, depleted, and what Garret Hardin termed "The Tragedy of the Commons" describes the history of fisheries in the United States well. Off the coast of New England, the once-rich Georges Bank fishery is perhaps the most dramatic testimony of this collapse - but it hardly stands alone. Around the country, fish populations are in decline. Recent headlines have decried mounting pressure on the California squid fishery (the biggest in the state) and the potential failure of the Chesapeake Bay blue crab fishery.

Science can play an important role in their recovery. But self-destructive incentives must be alleviated before fishermen can seek creative and practical solutions to the problems they face. To reconcile competing commercial, recreational, and environmental concerns, and to prevent further degradation of the marine environment, some form of devolution and ownership is essential - whatever form it takes.

Traditional restrictions on fishing are no match for human ingenuity. Limit the number of fishing days, for example, and fishing effort will simply intensify during the permitted time period. In the Alaskan halibut fishery of the 1980s, the number of fishing days went from 160 to 2 with no decline in harvests.

Without any sense of ownership, fishermen have no choice but to harvest as much and as quickly as they can - before someone else does. Fishermen have no desire to destroy their own source of livelihood, but as long as the rules of the game reward over-harvesting, fish stocks will continue to decline. Government boat buybacks and bailouts such as former President Clinton's declaration of the New England groundfish fishery as a disaster area only exacerbate the problem.

In contrast, where fishermen own marine resources, they have incentives to maintain the long-term health of the fishery, will strive for sustainable harvests and make investments to protect or even enhance the environment. One well-documented study that compared public oyster beds in Maryland to privately leased ones in Virginia found that the leased beds were better managed and far more productive than their public counterparts.

While actual ownership of resources in the oceans is the ideal solution, privatizing access rights has also proven effective. Take New Zealand. There, harvesting rights are well-defined, fishermen have reduced harvests voluntarily, invested heavily in scientific research, and in the case of the scallop fishery, invested in an ambitious reseeding and enhancement program.

The science of estimating the size of fish populations, let alone their natural mortality and reproductive success in a given year, is rife with uncertainty. So in New Zealand, this scientific uncertainty is simply factored into a risk-averse harvesting strategy. And it's set up by management companies whose shareholders are the quota owners. There is also a real feedback loop so that any change in uncertainty underlines exactly where more research is needed.

In the United States, where management decisions are often tied with local political concerns, uncertainty leads to finger-pointing among politicians, fishermen and environmental activists. At times, the doubts become cause for depletion and federal bailouts. In fact, fisheries science in the U.S. is often quite good. It's just ignored.

Harvesting rights in New Zealand are known as Individual Transferable Quotas (ITQs). and convey a right to an individual to harvest a certain percentage of a total catch set by fishery managers and scientists. ITQs have been used successfully in New Zealand, Australia, Iceland and even Canada. But in the United States they have met with fierce opposition.

Called IFQs here (Individual Fishing Quotas), they exist in only three fisheries - the Alaskan halibut and sablefish, the Mid-Atlantic surf clam and ocean quahog, and the South Atlantic wreckfish. Since transferable quotas were created in the Alaskan halibut fishery in1992, the race for fish has ended and the fishery is safer and healthier.

Yet, beginning in 1996, Congress barred fishery managers from using IFQs. This law has now expired, and both the House and Senate are holding a series of hearings to work toward reauthorization of the Magnuson-Stevens Fishery Conservation and Management Act, the nation's overarching fisheries legislation.

Opposition to IFQs seems to stem primarily from fears over how they would be allocated, but is couched in more populist terms such as the claim that today's fishermen will soon find themselves working as 'sharecroppers' - presumably to whomever bought the shares they chose to sell.

These arguments worked well for Alaskans Don Young and Ted Stevens, who didn't want to see rights to fish off Alaska go to Washington state fishermen. But since then a National Research Council report has recommended that the moratorium be dropped. Thus, a Senate subcommittee is considering legislation introduced by Olympia Snowe (R-ME) and John McCain (R-AZ) that would allow for the creation of IFQs, but would prohibit any sale, transfer or lease of the quotas.

While this may sound counterproductive, it is really an unimportant detail. The most crucial element of any improvement in fisheries management is to devolve some control of the fishery to the fishermen themselves. Semantics such as ITQs or IFQs and even transferability will not matter. If the fishermen themselves later decide that transferability is a good thing, they will find a way to make it happen, just as they figured out how to catch a year's worth of halibut in 48 hours.

For example, one of the biggest proponents of transferable quotas in 1996 were North Atlantic pollock fishermen. They have since found their way around the problem by getting Congress to allow them to form a cooperative that enables them to contract with each other to portion out the catch in a manner similar to oil field unitization. No transferable quotas, no problem.

Rights developed in common have also successfully protected resources in traditional communities like those of Maine lobstermen who have protected lobster grounds by informally marking out territories and limiting fishing access to a well-defined group. Studies have shown that conservation is markedly improved within these waters. They could improve elsewhere if U.S. policymakers saw the bottom-line benefit that private resources rights bring to both fishermen and the marine environment.


TCS Daily Archives