Ragnar Arnason
Basic Fisheries Management Theory
- Background Fame workshop on
New Developments in Rights-based Fisheries Management:
Community Fishing Rights
Esbjerg, August 29-30
The Fisheries Management
Regime (FMR)
• The institutional framework under which
the fishing activity operates
• This may be set by
(a)
(b)
(c)
(d)
Social custom and tradition
The government (the fisheries authority)
The association of fishermen
Other means
• It may be explicit or implicit
FMR: Main components
Fisheries
management
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 tool
A variable influencing the fishery that can be adjusted by the
fisheries manager. (E.g. Area/time restrictions, mesh size,TACs)
2. Fisheries management measures
A 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
N  2n
(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
Fisheries Management Systems:
Classification
Direct
Fisheries Management
Biological
Economic
Indirect
Fisheries Management
Taxes
Property
Rights
FMS classification: Examples
Direct biological
fisheries
management
Direct economic
fisheries
management
Gear restrictions
Area restrictions
Total allowable
catch, TAC
Vessel restrictions
Time restrictions
Effort restrictions
Minimum size
restrictions
Taxes
Property rights
Taxes/subsidies
Access licences
Individual harvest
quotas
Sole ownership
Territorial use rights
Community
Fishing rights
Tools for studying the effects of different FMSs
– Model –
One biomass, x;
I companies (some inactive)
Profit function:  (q(i ), x; i ), i
I
Biomass dynamics: x  G ( x)   q(i )
i 1
Social maximization problem
Max
q (i )


0
I
( (q(i), x; i))  ert dt,
i 1
I
s.t. x  G( x)   q(i) ,
i 1
x,q(i)0, i,
x(0) given.
Necessary conditions
 q (i )   , all active firms.
N
Behavioural
rules
  r      ix    Gx .
i 1
 q ( j ) (0, x; N  j ))   , all j1.
Private maximization problem
Max
q (i )


0
 ( q (i ), x; i )  e  rt dt
I
s.t. x  G ( x)   q (i ) ,
i 1
x,q(i)0,
x(0) given.
Necessary conditions
 q (i )   (i ) , all active firms.
Behavioural
rules
 (i )  r   (i )   ix   (i )  Gx .
 q ( j ) (0, x; M  j ))  0 , all j1.
Key Difference
Assessment of shadow value of biomass
In equilibrium:
N
Social shadow value of biomass:


i 1
i
x
r  Gx
 ix
Private shadow value of biomass:  (i) 
r  Gx
So,  (i) 
 ix
N
i

 x
    (i)  
i 1
Identical companies (and the same biomass):    N
Tools for studying the effects of different FMSs
– Numerical model –
• Sustainable fisheries model
2
G(x)-y =   x    x  y
y = Y(e,x) = ex
c = C(e) = c e2
• Dynamic fisheries model
x    x    x2  y
e    ( p  y  c  e)
y  a e x
Tools for studying the effects of different
FMSs
The Sustainable Fisheries Model
The Dynamic Fisheries Model
.
e=0
Value, $
Effort, e
Competitive
Optimal
.
x= 0
OSY MSY
CSY
Effort, e
Biomass, x
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:
 ix
 (i) 
r  Gx ( x,  )
• However, if free entry or large M, (i) 0
Biological Fisheries Management:
Effects
The Sustainable Fisheries Model
The Dynamic Fisheries Model
Loss
Profits
Effort, e
Value, $
OSY OSY
CSY CSY
Effort, e
• So, little or no long term gains
• Possible gains along adjustment path
• Note also the cost of management
Biomass, x
Equilibrium Impact: Summary
Fishing effort
Yield (harvest)
Biomass
Fisheries rents
Management costs
+
+
+
0
+
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:
 ix (q(i ), x,  ; i )
 (i) 
r  Gx ( x)
• However, if free entry or large M, (i) 0
Direct Economic Restrictions:
Effects
The Sustainable Fisheries Model
The Dynamic Fisheries Model
Loss
Profits
Effort, e
Value, $
OSY
OSY
=CSY
CSY
Effort, e
• So, little or no long term gains
• Losses along adjustment path
• Note distortive effect
• Note also the cost of management
Biomass, x
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
Management costs
?
+
0
+
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 )
 q (0, 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)
The Sustainable Fisheries Model
The Dynamic Fisheries Model
Loss
Profits
Effort, e
Value, $
Tax
OSY
= CSY
CSY
Effort, e
• So, Long term gains equal to taxation revenue
• Private losses along adjustment path
• Remember the cost of management
Biomass, x
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
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
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
Exclusivity
Security
Transferability
Actual property right
Perfect property right
Exclusivity
Security
Permanence
Transferability
Q-measures of property rights
N
Q
( x )  ( w1 
i 1

ai
i


M

j  N 1
w2, j  x j j ),
a

Q  S E P (w1+ w2T )
, , , , w1, w2>0 and w1 + w2 =1
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
• So, long term gains equal to property right value
• Private gains along adjustment path
• Remember the cost of management
Biomass, x
Quality of some
Fisheries Property Rights
1.
2.
3.
4.
5.
6.
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)
Communal self-management
under property rights
Setting: A group of people (N1) 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
END
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
Quota price
Total Quota, TAC
Positive
Negative
(i.e., stock enhancement)
Negative
Unprofitable stock
enhancement
(subsidized releases)
Positive
Profitable stock
enhancement
(ocean ranching)
(i.e., fishery)
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