Basic Fisheries Management Theory- Background -

Fame workshop on

New Developments in Rights-based Fisheries Management:Community Fishing Rights

Esbjerg, August 29-30

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

Fisheriesmanagement

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 toolA variable influencing the fishery that can be adjusted by the fisheries manager. (E.g. Area/time restrictions, mesh size,TACs) 

2. Fisheries management measuresA particular application of a fisheries management tool. (E.g. fishing is not allowed on sundays, TAC=100.000 mt)

 3. Fisheries management system

A particular collection of fisheries management tools.

Examples of fisheries management tools

1 Fishing gear restrictions 2 Fishing area restrictions 3 Fishing time restrictions (Certain dates excluded from fishing) 4 Fish size restrictions 5 Total harvest restrictions (Total allowable catch, TAC) 6 Individual harvest restrictions (Individual catch quotas) 7 Taxes and subsidies (The fishing activity subject to taxes or subsidies) 8 Fishery access restrictions (Fishing licences) 9 Fishing vessel restrictions (Restrictions on vessels' size, power, equipment etc.)

10 Fishing effort restrictions (Limited total fishing time) 11 Sole ownership (exclusive ownership over a fish stock or a part of it) 12 Territorial use rights in fisheries (TURFs) 13 Community fishing rights

Huge number of possible fisheries management systems

2nN (including no management)

N = number of fisheries management systemsn = number of fisheries management tools

n=10 N=1.024n=20 N=1.048.576

Fisheries Management Systems:Classification

DirectFisheries Management

Biological Economic

IndirectFisheries Management

Taxes PropertyRights

FMS classification: Examples

Direct biological fisheries

management

Direct economic fisheries

management

Taxes

Property rights

Gear restrictions Total allowable catch, TAC

Taxes/subsidies Access licences

Area restrictions Vessel restrictions Individual harvest quotas

Time restrictions

Effort restrictions Sole ownership

Minimum size restrictions

Territorial use rights

Community Fishing rights

Tools for studying the effects of different FMSs– Model –

( ( ), ; ), q i x i i Profit function:

1

( ) ( )I

i

x G x q i

Biomass dynamics:

One biomass, x;

I companies (some inactive)

Social maximization problem

0( ) 1

( ( ( ), ; )) ,I

rt

q i i

Max q i x i e dt

s.t. 1

( ) ( )I

i

x G x q i

,

x,q(i)0, i, x(0) given.

Necessary conditions

( )q i , all active firms.

1

Nix x

i

r G

.

( ) (0, ; ))q j x N j , all j1.

Behavioural rules

Private maximization problem

0() ( (), ; ) rt

qiMax qi xi e dt

s.t. 1

( ) ()I

i

x Gx qi

,

x,q(i)0, x(0) given.

( ) ( )q i i , all active firms.

( ) ( ) ( )ix xi r i i G .

( ) (0, ; )) 0q j x M j , all j1.

Necessary conditions

Behavioural rules

Key DifferenceAssessment of shadow value of biomass

In equilibrium:

Private shadow value of biomass: ( )ix

x

ir G

Social shadow value of biomass: 1

Nix

i

xr G

So,

1

( ) ( )ix

Nix

i

i i

Identical companies (and the same biomass): N

Tools for studying the effects of different FMSs – Numerical model –

• Sustainable fisheries modelG(x)-y =y = Y(e,x) = ex

c = C(e) = c e2

• Dynamic fisheries model

2x x y

2

( )x x x ye p y c ey a e x

Tools for studying the effects of different FMSs

OSY CSYMSY

Value, $

Effort, e

The Sustainable Fisheries Model The Dynamic Fisheries Model

Biomass, x

Effort, ee=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

( )( , )

ix

x

ir G x

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

Fishing effort + Yield (harvest) +

Biomass + Fisheries rents 0

Management costs +

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

( ( ), , ; )( )

( )

ix

x

q i x ii

r G x

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

Fishing effort - Yield (harvest) ?

Biomass + Risk of stock collapse -

Fisheries rents 0 Management costs +

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

( ) ( ) ( )q i i i

(0, ; )) ( )q x M j i

( ) ( )i i 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

Fishing effort - Yield (harvest) ?

Biomass + Risk of stock collapse -

Fisheries rents + Management costs +

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

TheoremIf perfect (full quality) property rights*

full economic efficiency *and no market asymmetry

If fisheries property rights are perfect full efficiency

TheoremThe 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

TransferabilityTransferability

SecuritySecurity PermanencePermanence

ExclusivityExclusivity

Security

Exclusivity

Permanence

Transferability

Actual property rightPerfect property right

Q-measures of property rights

1 2,

1 1

( ) ( ),ji

N Maa

i j ji j N

x w w x

Q SE

P(w1

+ w2T

)

Q

, , , , w1, w2>0 and w1 + w2 =1

Perfect Property Rights

Value, $

OSY CSY Effort, e

The Sustainable Fisheries Model The Dynamic Fisheries Model

Biomass, x

Effort, ee=0

x= 0

.

.

Competitive

Optimal

Property rightvalue

• 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 perfect3. TURFs – often strong, rarely perfect4. IQs – medium quality5. ITQs – possibly good quality, never perfect6. Community rights – Weak individual

property rights (but potential for improvement)

Communal self-management under property rights

Setting: A group of people (N1) 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

ENDEND

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, TACQuota price

Positive

Positive(i.e., fishery)

Negative

Negative(i.e., stock enhancement)

Unprofitable stockenhancement

(subsidized releases)

Profitable stockenhancement

(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