Basic Fisheries Management Theory - Background -

1. Basic Fisheries Management Theory- Background - Ragnar Arnason Fame workshop on New Developments in Rights-based Fisheries Management: Community Fishing Rights Esbjerg, August 29-30

2. 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

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

4. The fisheries management system:Useful Definitions • Fisheries management tool • A variable influencing the fishery that can be adjusted by the fisheries manager.(E.g. Area/time restrictions, mesh size,TACs) • Fisheries management measures • A particular application of a fisheries management tool. (E.g. fishing is not allowed on sundays, TAC=100.000 mt) • Fisheries management system • A particular collection of fisheries management tools.

5. Examples of fisheries management tools

6. 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=1.048.576

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

8. FMS classification: Examples

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

10. Social maximization problem

11. Behavioural rules Necessary conditions

12. Private maximization problem

13. Behavioural rules Necessary conditions

14. Social shadow value of biomass: Private shadow value of biomass: So, Identical companies (and the same biomass): Key DifferenceAssessment of shadow value of biomass In equilibrium:

15. 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 e2 • Dynamic fisheries model

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

17. 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

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

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

20. Equilibrium Impact: Summary

21. 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)

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

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

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

25. Equilibrium Impact: Summary

26. 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

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

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

29. Equilibrium Impact: Summary

30. 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

31. 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

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

33. Property Rights Attributes:A Representation Exclusivity Security Permanence Transferability

34. Actual property right Perfect property right Exclusivity Security Permanence Transferability

35. Q-measures of property rights Q

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

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

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

39. 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

40. 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

41. END

42. 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

43. 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.

44. 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)

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

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

47. 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)

48. 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