Incentives matter (to fishermen and other living creatures)

by Russ Roberts on September 19, 2008

in Property Rights

The Economist reports on a new study from Science magazine by two economists and a marine biologist (Christopher Costello and Steven Gaines (the biologist) of the
University of California and John Lynham of the University of Hawaii) finding that fisheries managed with ITQs (Individual Transferable Quotas), creating property rights in fish, do better than those using just a season or other restrictions to avoid the tragedy of the commons:

Encouraging as the results are, ITQ fisheries are in the minority.
Most fisheries have an annual quota of what can be caught and other
restrictions, such as the length of the season or the type of nets. But
this can result in a “race to fish” the quota. Fishermen have an
incentive to work harder and travel farther, which can lead to
overfishing: a classic tragedy of the commons.

The use of ITQs changes this by dividing the quota up and giving
shares to fishermen as a long-term right. Fishermen therefore have an
interest in good management and conservation because both increase the
value of their fishery and of their share in it. And because shares can
be traded, fishermen who want to catch more can buy additional rights
rather than resorting to brutal fishing tactics.

The Alaskan halibut and king crab fisheries illustrate how ITQs can
change behaviour. Fishing in these waters had turned into a race so
intense that the season had shrunk to just two to three frantic days.
Overfishing was common. And when the catch was landed, prices plummeted
because the market was flooded. Serious injury and death became so
frequent in the king crab fishery that it turned into one of America’s
most dangerous professions (and spawned its own television series, “The
Deadliest Catch”).

After a decade of using ITQs in the halibut fishery, the average
fishing season now lasts for eight months. The number of
search-and-rescue missions that are launched is down by more than 70%
and deaths by 15%. And fish can be sold at the most lucrative time of
year—and fresh, so that they fetch a better price.

In a report on this fishery, Dan Flavey, a fisherman himself, says
some of his colleagues have even pushed for the quota to be reduced by
40%. “Most fishermen will now support cuts in quota because they feel
guaranteed that in the future, when the stocks recover, they would be
the ones to benefit,” he says.

Coming on Monday at EconTalk, Karol Boudreaux will talk about community-based wildlife management as a way of preserving wildlife.

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Harold Kyriazi October 9, 2008 at 7:13 pm

Any comment on how to handle the allocation of those ITQs? The Economist article says it can be messy: "Allocating catch shares is a difficult and often fraught process. In America it can take from five to 15 years, says Joe Sullivan, a partner in Mundt MacGregor, a law firm based in Seattle. The public, he says, sometimes resists the privatisation of a public resource and if government gets too involved in the details of the privatisation (rather than leaving it to the fishermen to work out), it can end up politically messy."

I recommend auctioning them off every year, and then distributing the proceeds as a Citizen's Dividend (like Alaska's Permanent Fund does with oil revenues). That way, the public gets a direct, per capita compensation for giving up their individual right to fish. And, it prevents a barrier to entry of new fishermen, who aren't grandfathered in to the system (as today's fishermen would be if they were the ones to decide how to divvy up the public resource).

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