Coastal Fisheries Policy and Planning Course, 28/01/08 – 8/02/08, Apia, Samoa
Topic 3
Fisheries Management
Part 1 Theory
Lecture Notes
By
Ragnar Arnason
Secretariat of the Pacific Community
Orientation
• Have completed:
Policy: What is it and how to formulate it
Legal framework: Constraints and obligations
Fundamental elements of fisheries economics
• Today (and for the rest of the course):
 Fisheries management and its application to the
South Pacific fisheries
• Begin by basic fisheries management theory
Lecture 1
Fisheries Management: Introduction
• 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
An appropriate FMR
• Without an appropriate
FMS, no long term
profits
• With an approirpirate
FMS realtively high
profits
$
Poor
management
Good
management
Effort
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
Methods for Fisheries Management:
Fisheries Management Systems
Biological
fisheries
management
Economic
fisheries
management
Direct
Indirect
Taxes
Property
rights
Equations
• Sustainable fisheries model
G(x)-y =   x    x 2  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
Lecture 2.A
Biological Fisheries Management
• Purpose: Increase the biological yield of the
resource
• Methods: Protect young fish, spawners and
habitat
• Common measures
– TAC
– Area closures
– Seasonal closures
– Gear restrictions
– Pollution restrictions
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
• Gains along adjustment path
• Note also the cost of management
Biomass, x
Lecture 2.B
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)
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
Lecture 3
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: Nowhere used as a fisheries management method
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
Lecture 4
Property Rights
• Purpose: Obtain economic rents
• Method: reduce or eliminate the common property
externality => private incentives coincide with public
objectives
• Variants:
–
–
–
–
–
Licences
Sole ownership
Turfs
IQs/ITQs
Communal property rights
Property Rights Regimes: Effects
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
Property Rights (cont.)
• The above theory applies to all property
rights regimes
–
–
–
–
Sole owner rights
Territorial use rights (TURFS)
Individual Quotas
Community rights
• However, the efficiency of the regime
depends on the quality of the rights
• The higher the quality of the property right
the more efficient the fishery
Quality of Property Rights
• Many important 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
Some ITQ property rights
Exclusivity
1
Norway
Security
1
1
Iceland
1
Transferability
New
Zealand
Permanence
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
Results of three ITQ systems
Estimated Quality of Quota Property Rights: Iceland, New Zealand and
Norway
Characteristics
Iceland
New Zealand
Norway
Security
Exclusivity
Permanence
Transferability
1.00
0.90
0.80
0.90
1.00
0.95
1.00
0.95
0.90
0.70
0.50
0.10
Q
0.86
0.96
0.44
Lecture 5
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 costs 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)
Lecture 6
Community fishing 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
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
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
Lecture 7
Monitoring, Control and Surveillance
• Data monitoring (monitoring and surveillance)
– Gather data on the fishery and fishery operations for the
purpose of management (landings, days at sea, fishing
costs etc.)
• Enforcement monitoring (monitoring and control)
– Detect violations of fishery rules
– Induce correct behaviour
– Reporting violations (citing)
Data gathering monitoring
1. Biological monitoring (for biological research,
stock assessment etc.)
–Examination of landed catch
–Records of fishing behaviour (location, timing, gear, log-books,
observers)
–Field trips on research vessels,
–Oceanographic research
–Climate research
–Modelling and prediction
• These activities are usually shared between the
marine research agency and the enforcement agency
2. Economic monitoring (economic research, costs
and prices)
–
–
–
–
–
–
–
Study of fishing company accounts,
prices,
technology
fleet developments
fishing effort by gear and vessel type
harvesting functions,
cost functions
• These activities are usually carried out by an
economic or fisheries economics research agency
• The economic monitoring is a very important
function.
• Without it:
(a) the TAC and other management measures cannot be set
optimally.
(b) Progress in fisheries management cannot be judged.
• Nevertheless, this function is often
underdeveloped compared to the biological
research function.
• Best carried out by a special office or institute
Note: With fisheries self-management centralized data
monitoring is no longer necessary
Enforcement monitoring
• Different fisheries management systems
employ different controls.
=> Different enforcement monitoring is needed
for different fishereis management systems
1. Biological fisheries management
TAC: monitoring of landings (at landing sites) and catch (at
sea)
Area restrictions: monitoring of fishing locations (at sea,
remote sensing, log books, black boxes)
Seasonal closures: monitoring of vessels in ports,
monitoring of vessels at sea (observation, remote, log
books), monitoring of landings (off season species in the
catch) etc.
Gear restrictions: monitoring of gear (at sea and on land)
Fish size restrictions: monitoring of landings and catch
2. Direct economic restrictions
Effort restrictions: monitor effort (days at sea, fishing
time, vessel size and power, gear size etc.)
Investment restrictions: monitor investments (vessel
registry, vessel inspection, shipyards, import level, equipment
certification)
Vessel size and power restrictions: (see investment
restrictions)
Gear restrictions: (see biological fisheries management)
Other restrictions: monitoring depends on the type of
restriction
3. Taxes
Taxes on the volume of landings: monitor landings
Taxes on the value of landings: monitor volume and
price of landings
Taxes on inputs: monitor the purchase and use of
inputs.
Tax on exports: Is it a good idea? May be in some
cases.
4. Property rights
Licences: monitor fleets, check for licences (mostly in
port)
Sole ownership: not much monitoring is needed. (The
owner will do it himself)
Turfs: usually not much monitoring is needed. (The
adjacent owners will do it themselves)
Individual quotas: monitor catches (as landings in ports or
(better) as harvests at sea or as volume in processing and trades;
impose periodic (daily) harvest reporting requirements)
Community or group rights: monitor adherence to
the rights (areas, quotas etc.)
Note very well!
• The effort to monitor the various
restrictions varies a great deal and,
consequently the cost as well.
• Taxes on landings and some property rights
systems (sole ownerships and turfs) are
probably the easiest to monitor
Lecture 8
The cost of MCS
• Very significant
• Available estimates suggests between 3-25% of
the gross value of landings (with a mean of some
8%).
• The most important cost items are:
(i) Biological research
(ii) Enforcement
• This high cost should affect:
– The optimal fisheries policy
– The choice of a fisheries management system
MCS costs
(especially enforcement)
MCS
costs
Ecomp
Effort
Impact of MCS costs on
the optimal fisheries policy
Costs with
MCS
Costs without
MCS
E* E**
Effort
Impact of MCS costs on the optimal
fisheries policy
-Very high management costsCosts with
MCS
Costs without
MCS
E* E**
Effort
Optimizing the MCS activity
• High costs => important to do MCS correctly
and efficiently
• The problem is to minimize MCS costs subject
to a desired level of MCS
• Note that there is a trade of between MCS
costs and management regime effectiveness
(The more MCS => the higher MCS costs => the more effective
the FMR)
The optimal MCS level
$
Marginal
cost
Marginal
benefits
MCS*
MCS activity
So to determine the optimal MCS we
need:
• An estimate of the MCS cost function
(marginal costs)
• An estimate of the benefits of MCS
(marginal benefits)
These may be difficult to obtain!
Monitoring and enforcement
technology
•
•
•
•
•
•
•
•
At land and on sea
Dockside monitoring
On-board observers
MCS vessels and airplanes
Remote sensing (satellite, radar, reporting)
Automatic recordings (black boxes)
The paper trail method
Optimal investment in MCS technology (cost-benefit
studies)
Who should pay?
• Governments are subject to various problems of
inefficiency including rent seeking:
Rent seeking matrix
Distribution of Benefits and Costs amongst the Population
Distribution Narrow
of benefits
Wide
Distribution of Costs
Narrow
Wide
I
II
III
IV
• Only box IV is likely to be reasonably efficient
• The principle for efficiency is that those
that benefit should pay!
Provision of Fisheries Management Services
Beneficiary is the fishing industry
Arrangements
1
2
3
4
Current arrangement
Cost Recovery
Contracting out
Self-Management
Provider
Payee
Government
Government
Private sector
Fishing Industry
Government
Fishing Industry
Government
Fishing Industry
• This seems to recommend self-management
Lecture 9
Fisheries Judicial System; FJS
• Purpose
(a) Process alleged violations
(b) Apply sanctions as appropriate
• A key component of the FMR
=> Important to devise the appropriate FJS
The simple theory of crime
• Basic Axiom:
Violations will occur
if their expected value
to the perpetrators
is positive
Benefits of Crime
Marginal
Total
Profits
Marginal
Profits
Violations
Violations
Costs of Crime
Marginal
Total
Expected
penalties
Marginal
expected
penalties
Violations
Violations
The greater the benefits and lower the
expected costs the more violations
$
Marginal
$
Violations
Violations
More details:
Expected value: i x(i)p(i),
x(i) = outcome i, p(i) = probability of outcome I
Expected value of a violation, V(z):
Let z be a violation
Let (z) be the (expected) profits from the violation
Let C(z) be the expected penalty for committing the violation
=> V(z)=(z)-C(z)
Expected costs of violations
Example of C(z)
C(z)= p1(discoveredz)p2(guiltydiscovered)p3(penaltyguilty)penalty
 p*penalty
Arithmetic of probabilities
P1
0,1
0,5
0,5
0,1
P2
0,5
0,5
0,1
0,1
P3
0,8
0,8
0,5
1
P*
0,040
0,200
0,025
0,010
=> So basically p* will not be large in most cases!!
V(z)=(z)-C(z)
•
•
C(z)=p*penalty
But p* is usually very low
=> penalty will have to be high to make V(z)
negative
To get few violations
• Low benefits of violations
(i.e. unrestrictive rules)
• High probability of a penalty for violations
(i.e. high p* this requires a high probability of detection
and therefore high MCS costs)
• High penalties
(This can substitute for high p*, i.e. high MCS costs)
The design of the FJS
(1) In accordance with the theory of crime
(2) Legal basis should make it sufficiently easy to
convict
–Clear, operative definiton of violations
–A clear stipulation of the burden of proof
(3) Effective processing of alleged violations
–Administrative fines, special courts
–Speedy processing.