NAAFE FORUM: ENSURING FISHERIES BENEFITS FOR ALL GENERATIONS DISCIPLINARY AND PERSONAL PERSPECTIVES ON “ THE FISHERIES

1. NAAFE FORUM: ENSURING FISHERIES BENEFITS FOR ALL GENERATIONSDISCIPLINARY AND PERSONAL PERSPECTIVES ON “THE FISHERIES PROBLEM” by James E. Wilen Department of Agricultural and Resource Economics University of California, Davis NAAFE Forum University of British Columbia, Vancouver May 2005

2. Introduction CAUSE PROBLEM SOLUTION

3. HOW DOES FISHERIES SCIENCE CHARACTERIZE THE POLICY PROBLEM? CAUSE PROBLEM • Greed • Short sightedness • Prospects of wealth • Over-harvesting • Habitat destruction • Multi-species interaction • By-catch • Fishing down the food chain SOLUTION • Tighter controls • Precautionary principle • Adaptive management • Ecosystem management • Networks of reserves

4. NOTABLE QUOTES • “…the shortsightedness and greed of humans underlie difficulties in management of resources.” • “…wealth or the prospect of wealth generates political and social power that is used to promote unlimited exploitation of resources.” • “…management authorities must design, justify (politically) and administer (enforce) a collection of restraints on fishing activity.”

5. HOW DOES ECONOMICS CHARACTERIZE THE FISHERIES POLICY PROBLEM? CAUSE PROBLEM • Insecure • property rights • Race to fish • - Over-capitalization • - Excessive by-catch • - Mixed species fishing • - Habitat destruction • - Political manipulation • - Mixed use conflict • - Perverse innovation SOLUTION • Fix property rights problem - ITQs, IFQs, etc. - Cooperatives, TURFs

6. FARMING AS WE KNOW IT

7. SMALL IS BEAUTIFUL

8. EARLY CANADIAN FARMING

9. WEALTH AND INNOVATION Innovation Competition Organization PROFITS RENTS Capitalization LAND VALUE • Stewardship • Sustainability • The long view WEALTH

10. IF FARMING WAS LIKE FISHING…

11. IF FARMING WAS LIKE FISHING… 3 0 2 1

12. THE RACE TO FARM

13. THE FARM PARABLE • Without secure access privileges to land: • Excessive capacity • Resource degradation • Low valued products • Regulation • Perverse innovation • Zero surplus • Zero land value

14. THE WORLD FISHERIES PROFIT/LOSS STATEMENT • Revenues $100B • Costs $132B • Maintenance $43B • Insurance $10B • Fuel $20B • Supplies $26B • Labor $33B • Net Loss $-32B • Contribution to wealth: 0

15. IRONICALLY… • In most fisheries, there is nowealth, nor are there prospectsfor generating wealth. • Reason: Without secure access privileges, fishermen devote all their competitive and innovation efforts to maximizing CATCH, rather than maximizing surplus VALUE. This drives costs up to revenues.

16. FIXING THE PROBLEM:ADDRESSING THE CAUSE • IQs, IFQs, ITQs • Iceland (all fisheries) • New Zealand (most fisheries) • Australia • Canada • U.S. (four fisheries) (some fisheries) • Results: race to fish replaced by race to create value • Slower fishing (value vs. volume) • High-valued end markets • More selective gear (less by-catch/discards) • Reduced habitat destruction

17. Profits Quota IMPACTS OF ITQS ON PROFIT Long-term cost savings Immediate market gains 0 time ITQs

18. Rent Share Lease price Ex-vessel price ratio SIGNIFICANT WEALTH CREATION EMBEDDED IN QUOTA VALUES • Example: Capitalization factor Post-ITQ revenue gains Pre-ITQ

19. Example: New Zealand Data from: James Sanchirico, “Sustainable Fisheries: the New Zealand Experience” presentation at the Fourth Annual International Sustainability Days Conference, Stanford University, October 13-16, 2004. See also Richard Newell, James Sanchirico and Suzi Kerr, “Fishing Quota Markets”, Journal of Environmental Economics and Management, 49 (3), 437-462, 2005.

20. 5~10 Pre-ITQ revenues QUOTA VALUE Total Quota Value 0 time ITQs

21. WEALTH CREATION WEALTH CREATION Constituency concerned with: • Reduced conflicts over • TACs • Pay for management • Cooperative science • Stewardship ethic • Sustainability • The long-view • Innovation that • increases value

22. Example: New Zealand Data from: James Sanchirico, “Sustainable Fisheries: the New Zealand Experience” presentation at the Fourth Annual International Sustainability Days Conference, Stanford University, October 13-16, 2004. See also Richard Newell, James Sanchirico and Suzi Kerr, “Fishing Quota Markets”, Journal of Environmental Economics and Management, 49 (3), 437-462, 2005.

23. HARVESTER CO-OPS • Examples: Bering Sea Pollock Co-op Pacific Whiting Co-op Chignik Salmon Co-op

24. EXAMPLE:BERING SEA POLLOCK CO-OP

25. Shima district, Mie Prefecture Tokyo TURFS(Territorial Use Right Fisheries) • Examples: • Japanese Fishery Management Organization • Chilean Management and Exploitation Areas

26. Profits 0 time HOW TO REBUILD STOCK AND/ OR IMPLEMENT RESERVES (1) • Without property rights Potential Actual Implementation

27. Profits 0 time HOW TO REBUILD STOCK AND/ OR IMPLEMENT RESERVES (2) • With property rights Implementation

28. Discussion (1) • Fisheries management, and fisheries scientists, tend to focus on the symptoms rather than the cause of overfishing. • The cause is not greed or the prospects of wealth.

29. Discussion (2) • Rather, it is that current institutions and management channel self-interest to maximize catch rather than value. • Consequence: no surplus value and no wealth in fisheries. • Irony: it is the absence of wealth or prospects for wealth that eliminates the stewardship ethic.

30. Discussion (3) • Solution: create secure access privileges – ITQs, harvester coops, or TURFs. Can be designed and implemented to address most objections. • Result: real wealth will be created almost instantly. Moreover, expected wealth gains will also immediately be capitalized into access privilege values.

31. Discussion (4) • My rule of thumb – 5~10 current revenues. • This wealth immediately generates a constituency interested in preserving and increasing the capitalized value. • Value-increasing competition and innovation only enhance the stewardship ethic.

32. THE END