Managing the FisheryWhy manage fisheries?How to manage fisheries?Some management alternativesSmall-scale fisheriesTax on CatchTax on EffortTransferable quotas on catchTransferable Quotas on EffortIndividual Transferable QuotasITQs and property rightsPotential problems with ITQsAlaskan HalibutCooperatives/CooperativasSlide 15Slide 16Resource “Concessions”Economics of Marine ReservesManaging the FisheryHow 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 successesSome 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TURFsNotice: Many of these are“property rights” solutionsSmall-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 destructiveTax on CatchEffort$TRTotal revenue [pH(E)] decreases withtax (t) on catch to (p-t)H(E)TCOA without taxEfficient fisheryOA with taxTax on catch: reduces open access equilibrium; right taxmoves effort level to efficient amount of effortTax on EffortEffort$TRTotal costs increase withtax (t) on effort to (c+t)ETC= cEOA without taxEfficient fisheryOA with taxTax on effort: reduces open access equilibrium; right taxmoves effort level to efficient amount of effortTransferable 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 EffortEffort$TRTCOA without taxIssue effortpermitsTransferable quotas on effort: reduces effort to efficient levelIndividual 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 accessPotential 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 stockAlaskan 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 fishCooperatives/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 externalitiesBaja CaliforniaBaja California-116.00 -115.60 -115.20 -114.80 -114.40 -114.00 -113.60 -113.2026.2026.4026.6026.8027.0027.2027.4027.6027.8028.0028.2028.4028.6028.8029.00 Pacific OceanFishing Areas - CooperativasPNAPNABPBPPURPURBTBTEMANEMANCSICSILRLRPROGPROGPAPAResource “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