Protecting the Environment Through the Ownership Society — Part II

Policy Reports | Energy and Natural Resources

No. 295
Wednesday, January 17, 2007
by H. Sterling Burnett, Ph.D.

Applying Ownership to Ocean Fisheries

Marine resource management is plagued by faulty institutions that create incentives for overexploitation. These incentives should be eliminated and replaced with incentives for conservation. This can be done by extending the Bush administration's concept of ownership to the ocean fisheries. But it will require three major policy changes:

  • Ending subsidies and tax breaks that encourage overinvestment in commercial fisheries.
  • Replacing the current command-and-control regulatory approach with a system of property rights.
  • Encouraging cooperating countries to adopt similar property-based policies.

Some of these steps have already been taken with respect to some fisheries, with successful results.

Step One: End Subsidies and Tax Breaks. The first and arguably easiest step is to end subsidies to fishermen to purchase boats and other equipment. In addition, the government should end price supports that artificially increase the market value of fish, stop providing rebates on fuel and equipment, and stop giving money to ports for the construction of docks and other harbor facilities. To avoid the shock to the industry of removing these supports suddenly, they could be gradually phased-out over, say, five years. But it is important to bear in mind that a large percentage of the current fishing community would not be in business at all if not for federal support, because they would not be able to make a profit on the dwindling fish stocks.

"Eliminating fishing industry subsidies would reduce overfishing."

Removing subsidies will help make fishing an economically healthier industry. It would eliminate the incentive of inefficient businesses to keep building boats and hiring deck hands, and give them an incentive to operate more efficiently or look for employment elsewhere. It would help already efficient fishermen by reducing the number of less efficient competitors and by allowing them to expand their operations.

Step Two: Create Property Rights. Even if subsidies are removed, the remaining fishermen will still have incentives to "race to fish" as long as they are competing for access to a resource they cannot own. Thus, the larger regulatory system must also be reformed. Applying the ownership ideal, the government should (to the degree possible) treat fish in the same way it treats livestock - as private property.

Under the property rights approach, resource users homestead, purchase or are assigned ownership rights to the specific resource. The rationale behind property rights in wildlife is that, unlike regulation, it creates incentives to conserve the wildlife for long-term exploitation and profit. As owners, fishermen will reap the benefits of wise use and bear the costs of overuse. Also, resources owned by individuals have protectors and defenders because owners have a self-interest in maximizing the value of their property.

Privatization of marine resources has worked where it has been tried. Indeed, even as government-operated fisheries continue to decline, privately-owned fisheries in the United States and other countries have prospered.

There is not a uniform system for applying property rights to all marine resources, but four approaches have been tried around the world so far. These would serve as a good starting point for managing many marine resources:

  • Allowing ownership of shore land that is covered with water at high tide as a way of managing clams, mussels and oysters.
  • Allowing ownership of parcels of the ocean floor, so that individuals can create artificial reefs.
  • Allowing individuals to "fence off" areas of the ocean as a way of managing migratory fish.
  • Creating tradable rights, such as individual transferable quotas (ITQs), that entitle fishermen to a certain portion of the catch. [See the sidebar "Individual Transferable Quotas."]

In each case, the goal is not to apply an inflexible, predetermined management technique to all types of resources, but to experiment with property rights and find techniques best suited to individual resources.

In the United States, property rights are used for four fisheries: Atlantic blue fin tuna, mid-Atlantic surf clam, Alaskan halibut and sablefish, and South Atlantic wreckfish. All four of the federal fisheries that have been privatized now have smaller fishing fleets, higher incomes for fishermen and larger, healthier fish stocks.82

"Individual rights to shares of the fish catch could be traded."

Since the early 1980s, 17 countries (including the United States) have introduced property rights for managing some of their fisheries, and in each case the condition of the fish stocks and the profits of the fishers have improved significantly. For example:

  • In Iceland's herring fisheries, the number of fishing vessels fell from 200 in 1980 to 30 by 1995; catches have fallen to sustainable levels, even as their value has risen dramatically.83
  • In 1986 New Zealand introduced property rights to manage 30 species of fish, including blue fin tuna, abalone and lobster, each of which has recovered from near collapse.84
  • In 1989, Australia's blue fin tuna fisheries were near collapse; but today, even though annual catches are 60 percent smaller, the incomes of fishermen have increased dramatically, the tuna fishery is now the most profitable in the Pacific85 and property rights are now used to manage 15 species.86

Evidence from these areas indicates that when fishermen no longer have a perverse incentive to deplete fish stocks, populations should rebound. Additionally, property rights holders will have the incentive to reduce the catch of sexually immature fish to ensure future populations. They will also reduce by-catch, meaning fish caught unintentionally, since catching and disposing of noncommercial fish wastes time and resources and can detrimentally affect the ecosystem. And, where possible, fishers will enhance the marine environment to increase fish stocks.

"Privatized fisheries are managed for sustainable profitability."

For fish species that have been successfully privatized in other countries, the United States should adopt similar methods in its own waters. For fish that have not been privatized elsewhere, the United States should experiment to find property rights systems that are suited to each species' habitat, migratory patterns and so forth. In every case, U.S. fisheries policy should be guided by experimentation and innovation.

Step Three: Expand Property Rights to Foreign Fisheries. The problems facing marine resources are not limited to American fisheries. Unlike herds of cattle or flocks of chickens, schools of fish move in and out of the jurisdictions of different countries. The population levels in various fisheries are interconnected. This means effectively managing fish with property rights in one locale will not always work unless other countries follow suit. Otherwise, some fish species will thrive in American waters, only to be overfished when they migrate into foreign fishing grounds.

For this system to work, subsidies to all fishers everywhere must be abolished and fish must have protectors and defenders wherever they may go. This can be accomplished through both bilateral agreements with individual countries or through multilateral international conventions. The prospects for international cooperation on this score are good. In terms of subsidies, there is already an international movement to reduce the $20 billion spent on subsidies worldwide.87

Owning the Oceans' Other Resources. Individuals are largely prohibited from acquiring rights to other ocean resources and acting to protect those rights. Under the current system, for example, if an individual submerges an oil rig and creates a coral reef, he cannot reap the economic benefits by charging visitors for snorkeling, scuba diving and fishing. He would also not be able to prevent human activities that are harmful to the reef or press claims against ocean liners and oil tankers that pollute the surrounding waters.

There are three steps the government could take that would allow people to develop rights in marine resources. First, as with fisheries, the government should end subsidies and other programs that encourage overfishing, overfarming and overdevelopment on the coasts. Second, the government should end attempts to regulate the use of oceans by private individuals, other than clear cases of causing physical harm. Third, with the executive and legislative branches of government uninvolved, the courts should have jurisdiction to hear cases involving disputes over the use of ocean resources.

These three steps would allow fishing, recreational and other private groups to establish property rights in marine resources that they could then defend against polluters and other unwelcome exploiters. In time, a variety of property rights regimes would arise unique to the conditions of the resources; that is, the system of rights for migratory species could be different from the rights that develop for stationary marine resources.

"Property owners are responsible for the use of their resources."

Property rights in the ocean can evolve where they pose significant advantages over the system of an open-commons - just as they did on land. As courts rule on disputes between rights claimants, boundaries to property rights will be developed and defined. Over time, multiple, legally consistent rulings will establish precedent, giving rights claimants certainty in their possessions.

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