Basic Fisheries Management Theory - Background - Fame workshop on New Developments in Rights-based Fisheries Management: Community Fishing Rights Esbjerg, August Ragnar Arnason

The Fisheries Management Regime (FMR) The institutional framework under which the fishing activity operates This may be set by (a)Social custom and tradition (b)The government (the fisheries authority) (c)The association of fishermen (d)Other means It may be explicit or implicit

FMR: Main components Fisheries management system, FMS Monitoring, control & surveillance, MCS Fisheries judicial system, FJS All links in the same chain Interdependent Each must be designed w.r.t. the others

The fisheries management system: Useful Definitions 1.Fisheries management tool A variable influencing the fishery that can be adjusted by the fisheries manager. (E.g. Area/time restrictions, mesh size,TACs) 2.Fisheries management measures A particular application of a fisheries management tool. (E.g. fishing is not allowed on sundays, TAC= mt) 3.Fisheries management system A particular collection of fisheries management tools.

Examples of fisheries management tools

Huge number of possible fisheries management systems (including no management) N = number of fisheries management systems n = number of fisheries management tools  n=10  N=1.024 n=20  N=

Fisheries Management Systems: Classification Direct Fisheries Management Biological Economic Indirect Fisheries Management Taxes Property Rights

FMS classification: Examples

Tools for studying the effects of different FMSs – Model – Profit function: Biomass dynamics: One biomass, x; I companies (some inactive)

Social maximization problem

Necessary conditions Behavioural rules

Private maximization problem

Necessary conditions Behavioural rules

Key Difference Assessment of shadow value of biomass In equilibrium: Private shadow value of biomass: Social shadow value of biomass: So, Identical companies (and the same biomass):

Tools for studying the effects of different FMSs – Numerical model – Sustainable fisheries model G(x)-y = y = Y(e,x) = e  x c = C(e) = c  e 2 Dynamic fisheries model

Tools for studying the effects of different FMSs OSY CSY MSY Value, $ Effort, e The Sustainable Fisheries Model The Dynamic Fisheries Model Biomass, x Effort, e e =0 x = 0.. Competitive Optimal

Biological Fisheries Management Purpose: Increase the biological yield of the resource Methods: Protect young fish, spawners and habitat Common measures –Area closures –Seasonal closures –Gear restrictions –Pollution restrictions

Impact Behavioural rules are unchanged But equation for shadow value modified: However, if free entry or large M,  (i)  0

Biological Fisheries Management: Effects Value, $ OSY CSY Effort, e The Sustainable Fisheries Model The Dynamic Fisheries Model Biomass, x Effort, e OSY CSY So, little or no long term gains Possible gains along adjustment path Note also the cost of management Loss Profits

Equilibrium Impact: Summary

Direct Economic Restrictions Purpose: Enhance the economic yield from the resource Method: Constrain fishing effort and capital Common measures: –Limited fishing effort (days at sea, fishing etc.) –Capital restrictions (vessel size, power, shape, type, equipment) –Investment restrictions –Gear restrictions (number, size, type) –Total allowable catch (TACs)

Impact Behavioural rules are unchanged But equation for shadow value modified: However, if free entry or large M,  (i)  0

Direct Economic Restrictions: Effects Value, $ OSY CSY Effort, e The Sustainable Fisheries Model The Dynamic Fisheries Model Biomass, x Effort, e OSY =CSY So, little or no long term gains Losses along adjustment path Note distortive effect Note also the cost of management Loss Profits

Note on TAC restrictions If binding  private shadow value of biomass  0.  race for fish is exacerbated Economically damaging

Equilibrium Impact: Summary

Taxation Purpose: Obtain economic rents Method: Induce industry to reduce effort (in a wide sense) by making it less profitable Variants: –Tax on the volume of landings –Tax on the value of landings –Tax on inputs [Not recommended because of substitution effects] Note: Apparently nowhere used as a fisheries management method

Impact (Tax on volume of landings) Behavoural rules modified by the rate of tax is optimal ! But Need a great deal of information Different taxes for different firms What happes to taxation income

Effects of Taxes (on landings) Value, $ OSY = CSY CSY Effort, e The Sustainable Fisheries Model The Dynamic Fisheries Model Biomass, x Effort, e So, Long term gains equal to taxation revenue Private losses along adjustment path Remember the cost of management Loss Profits Tax

Equilibrium Impact: Summary

Property Rights Purpose: Obtain economic rents Method: By introducing property rihgts reduce or eliminate the common property externality => private incentives coincide with public objectives Variants: –Licences –Sole ownership –Turfs –IQs/ITQs –Communal property rights

Theorem If perfect (full quality) property rights *  full economic efficiency *and no market asymmetry  If fisheries property rights are perfect  full efficiency Theorem The higher the quality of a property right *  the higher the economic efficiency *and no market asymmetry

Quality of Property Rights Really bundles of rights (attributes) The following are often quoted –Quality of Title (security) –Exclusivity –Permanence (durability) –Transferability

Property Rights Attributes: A Representation Transferability Security Permanence Exclusivity

Security Exclusivity Permanence Transferability Actual property right Perfect property right

Q-measures of property rights QQ

Perfect Property Rights Value, $ OSY CSY Effort, e The Sustainable Fisheries Model The Dynamic Fisheries Model Biomass, x Effort, e e =0 x = 0.. Competitive Optimal Property right value So, long term gains equal to property right value Private gains along adjustment path Remember the cost of management

Quality of some Fisheries Property Rights 1.Licences – weak (nearly worthless in the long run) 2.Sole ownership – strong, even perfect 3.TURFs – often strong, rarely perfect 4.IQs – medium quality 5.ITQs – possibly good quality, never perfect 6.Community rights – Weak individual property rights (but potential for improvement)

Communal self-management under property rights Setting: A group of people (N  1) with property rights => they have a degree of common interest.

Can they manage themselves well? N=1, easy N>1, more difficult => need to bargain, negotiate etc. Fundamentally a bargaining game Nature of problem: –Must agree on procedures (voting, majority etc.) –Must talk –Must reach a conclusion Some formal framework (legal) may help

Fisheries management systems: Summary Only indirect economic methods work The most promising are: –Property rights Sole ownership Turfs (where applicable) ITQs (where applicable) Communal rights –Taxes Taxes on landings Taxes on the value of landings

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ITQ-systems Shares in TAC (much superior to quantity quotas) Annual quota for firm i: q(i)=a(i)  TAC The q(i), being a property right, will be fished in the most efficient manner If the a(i) is a permanent asset the firm can plan and will adjust its capital structure to fit. Nota Bene: The ITQ is not a property right in what really counts; the fish stocks themselves. –Unlike e.g. a farm property right –No stock enhancement, genetic improvements, feeding, spawning assistance etc. will be undertaken by individual ITQ holders

ITQ markets and prices There will arise a market and a price for both q(i) and a(i). (Why?) These prices will faithfully reflect the marginal benefits of using (and holding) these quotas. (Why?) Price of q(i) will be approximately marginal variable profits of using these annual quotas. (Why?) Price of a(i) will approximately equal the expected present value of using the expected quotas for fishing. (Just as the value of any productive asset) It follows that the price of a(i) will provide a measure of the appropriateness of the TAC-policy.

Fisheries management under ITQs The fisheries authority just has to –Set the TAC –Enforce the property rights But setting the TAC correctly requires immense biological and economic information. (Basically everything about the fishery)

Minimum information management, MIMS Quota values, resource rents Total allowable catch, TAC

MIMS in the multispecies Context Total Quota, TAC Quota price Positive (i.e., fishery) Negative (i.e., stock enhancement) Unprofitable stock enhancement (subsidized releases) Profitable stock enhancement (ocean ranching) Unprofitable fishery (subsidized removal of predators/competitors) Profitable fishery (Commercial fishery)

Available theorems If each group member’s benefits increase with total benefits he will support the common good. That happens e.g. in limited companies (i.e. in principle)

Advantages of self-management Vested interest in good management => (a) Good decisions (b) Minimum cost management Have much of the best information The government does not have to be involved