September 8, 1997
Tri-State Rock Lobster Industry Conference
I first heard about this conference from a fellow named Stuart Beaton. Stuart lives on Canada’s east coast. He fishes for lobster and for snow crab. He’s been involved in efforts to restructure some of Canada’s fisheries. When he phoned to tell me about this conference, we talked about some of the problems facing fisheries around the world. I thought his comments showed great wisdom. “You know,” he said at one point in our conversation, “the real issue is control: If fisheries are to survive, governments will have to surrender control over them.”
I couldn’t have said it better. Lots of issues are important. Who should fish? How much should they take? With what gear? When? Where? But nothing is more important than the issue of control. Who has what rights? Who makes the critical decisions? What incentives drive those decisions? And what tools do people have to implement their decisions?
In many fisheries around the world, including most in Canada, governments are in control. And for the most part, they’re doing a rotten job. It’s not that individual bureaucrats – or their political masters – mean ill. And it’s not that they’re incompetent. On the contrary, most are fine, hard-working, well-meaning people. But political pressures and bureaucratic structures being what they are, government managers simply don’t have the incentives to make the best long-term decisions. And they don’t have the tools.
Unfortunately, when governments are in control, fishers don’t have the right incentives or tools either. No one does.
I’m going to talk this morning about how putting more control into the hands of fishers would change that. I’ll talk about how establishing secure property rights creates the incentives that fishers need to manage their stocks sustainably. I’ll also talk about the ways in which property rights provide fishers with powerful tools to protect stocks and habitats.
I’ll talk about what doesn’t work, what does work, and why. Most of my examples will come from Canada or Europe, since those are the fisheries that I know best. I’m sure that many of them will sound familiar to you – that you’ll recognize the problems as being very similar to some that you face in your own fisheries. After my talk, I’d love to hear from you about some of these parallels. Then I can use your stories in my next talk!
Let me begin now with the question of incentives. What kinds of incentives exist under different property rights regimes? What kinds of systems can we put in place that give decision makers convincing reasons to protect fish and their habitats? How can we harness people’s self-interest so that they act in ways that sustain rather than destroy fisheries?
It’s pretty clear to me that in a system where governments make the decisions – or essentially, where governments hold the rights – no one has strong incentives to set sustainable harvest levels. In such a system, overfishing is in the interest of both governments and fishers.
Now why is this? Well, there’re a number of reasons. Let’s talk about governments first, and then fishers.
First, with governments, there’s the problem of time horizons. Politicians suffer from what you might call “short-termism.” Their interests tend to stretch just as far as the next election. They’ll do what it takes to get reelected in a year or two or three. In other words, they’ll choose actions with short-term political pay-offs … even if they might have disastrous long-term consequences.
Next, there’s the problem of agency. Normally, people act as agents for others. In most businesses, decision makers are the agents of the shareholders. They’re required to act in the shareholders’ interest. But whose agents are politicians and bureaucrats? Whom do they represent? What are their interests? And what happens when different interests collide? What happens when commercial, recreational, and aboriginal fishers – or fishers and conservationists – clash? One Canadian bureaucrat complains that his department is like a ping pong ball. It gets bounced between over a dozen user groups, all of them are competing and pointing their fingers at the others.
The result is often compromise that really doesn’t serve anyone’s interests. Another common result is paralysis. It’s in governments’ self interest to delay in the face of conflict or uncertainty. In one critic’s words, bureaucrats “are rewarded not for effective action, but for making every problem disappear into an endless tangle of task force meetings and reviews.”
Another problem with government management is that of capture. Politicians and the bureaucrats they control are susceptible to capture by special interests. In other words, they’re susceptible to political pressures. In Canada, the pressure to create jobs is the greatest political pressure of all. Not necessarily long-term, sustainable jobs. Short-term, highly visible jobs that the government gets credit for will do just fine.
Of course, the fact that governments can be captured by special interests creates a whole new set of problems. Interest groups start investing money in winning the political competition. Lobbying increases the costs of doing business. And it’s a terrible waste of resources, since it doesn’t actually produce anything. Several years ago, two New Zealanders wrote in a paper about the abalone fishery that: “The spectre of too many fishermen chasing too few fish has been removed by the ITQ system only to be replaced by special interest groups fishing politically on land for a share of the resource. The spectre now is of government carving and recarving a pie whose worth is diminishing steadily in proportion to the time and effort spent squabbling over who is to get what.”
Perhaps most important, when governments control fisheries, there is the problem of accountability: rewards and punishments. Government decision makers aren’t held accountable for making particular decisions. They don’t reap financial benefits from making good decisions. And they don’t pay the costs of making bad decisions. Think of all the factors that discipline decision makers in the private sector: stock devaluations, loss of business to competitors, the threat of law suits, increased insurance premiums … Politicians and bureaucrats are immune to almost all of those market forces. For them there are no rewards. No punishments. No incentives, in short.
So those are some of the problems inherent in government management. Politicians and bureaucrats have short-term perspectives. They’re asked to represent interests that are at odds with one another. They’re subject to capture by special interests. And they’re not held accountable for the decisions they make. When people with such perverse incentives are running a fishery, the results can be disastrous.
Canada’s east coast fishery has provided a textbook case of the mismanagement of a fishery for political gain. For centuries, a rich fishery – dominated by cod, haddock, and other groundfish – sustained Canada’s east coast. For the first half of this century, cod landings fluctuated around 500,000 metric tonnes. Landings then increased dramatically, thanks to both foreign fishing and the increased capacity of our own fleet.
In the 1970s, the federal government stepped up its involvement in the management of this fishery. It promoted what it called an “expansionist development philosophy” centred on creating jobs. The government based catch limits not on what the fish stocks could bear but on the economic needs of fishing communities. It supported fishers, boat owners, and processors with construction and insurance subsidies, tax breaks, loan guarantees, and Unemployment Insurance benefits.
By the 1980s, scientists warned that the stocks couldn’t support this institutionalized overfishing. But the government paid them no heed. An internal government report that was released just a few weeks ago admitted that scientific information was “gruesomely mangled and corrupted to meet political ends.” The report accused fisheries managers of “scientific deception, misinformation, and obfuscation.” It went on to say: “It has become far too convenient for resource managers and others to publicly state that their decisions were based on scientific advice when this is clearly not the case. It appears that science is too much integrated into the politics of the department.”
Other recent reports have revealed that the government routinely gagged scientists who warned that overfishing threatened cod stocks. An article in the May issue of the Canadian Journal of Fisheries and Aquatic Sciences accused the government of repressing politically inconvenient scientific findings and reprimanding scientists who didn’t toe the official line.
And what was the result of all of this? A collapse of the cod stocks. A moratorium, since 1992, on fishing for cod and many other groundfish. 40,000 fishers and processors thrown out of work. A social, economic, and ecological disaster.
What I want to know is: Who was held accountable for this? Who got fired, or demoted, or even reprimanded? No one! That’s who. It’s disgraceful.
Even more disgraceful is that we didn’t learn our lesson from the cod catastrophe. Earlier this year, just before a federal election was called, the government announced that it would be reopening the cod fishery. The fisheries minister said “it felt like Christmas” on announcing the reopening. That’s how elections are in Canada. The government plays Santa Claus, giving out goodies to the electorate.
Well you know, an election is not Christmas and the government was in no position to start giving away the cod. Even the fisheries department admitted that there were “considerable uncertainties” about the stocks. Independent scientists were far blunter, warning that stocks are still dangerously low – perhaps as low as one or two per cent of their former levels. Some stocks, they warned, are still declining. Reopening the fishery, they said, was a “risky and irresponsible” “pre-election ploy.”
Politics drives fisheries on Canada’s west coast too. Out west, salmon are the most important fish. In recent decades, governments have overseen the decimation of salmon stocks. Three out of the last four years have seen dismal runs – the worst in memory. It’s not hard to see why. The government, under irresistible pressures to provide jobs, has encouraged overfishing. It has subsidized a fleet far too large for the stocks. And it has permitted catch levels that are far too high.
Back in the 1980s, the government admitted that, in setting catches, it didn’t always follow the advice of scientists. In its words, “escapement targets have often been compromised on the basis of compelling social considerations.” Scientists continue to complain that the government ignores their recommendations. As one biologist recently charged, the allocation system “is dominated more by threat of civil disobedience than by reasoned analysis.” As is evidenced by the declining stocks, such a political approach can be dangerous indeed.
Clearly, perverse incentives have led politicians and bureaucrats to permit overfishing. But it’s not just overfishing that’s resulted from government control over Canada’s fisheries. Habitat destruction is another – and equally serious – consequence.
For the same reasons that governments permit overfishing, they permit the destruction of fish habitat. They simply have strong political and financial incentives to do so.
This is a big issue on Canada’s west coast, where damage to habitat threatens salmon stocks. In recent decades, countless activities have degraded salmon habitat. Logging and the construction of logging roads have caused landslides that have smothered stream beds. Hydro dams have also degraded habitat, by changing water flows and temperatures. Of course they’ve also blocked access to habitat. Wastes from pulp mills and sewage systems have reduced oxygen in waters and harmed fish.
Unchecked pollution has harmed fish and habitat on the east coast, too. There, human sewage is one of the worst culprits. It hits shell-fishers the hardest. Thanks to contamination, almost 2,000 square kilometres – that’s over a third of the region’s shellfish growing areas – are regularly closed to harvesting. Sewage pollution is solely responsible for 20 per cent of the closures. It contributes to another 50 per cent.
The source of the problem is obvious. A number of cities provide no sewage treatment. Others treat wastes from only a fraction of their populations. So, why don’t provincial governments do something?
Unfortunately, direct financial conflicts of interest prevent governments from getting tough with sewage polluters. Enforcing regulations against sewage pollution would be very expensive for provincial governments. That’s because, more often than not, they’re the ones who have to finance plant upgrades. That goes a long way in explaining why they so rarely convict sewage treatment plants that harm fish or destroy habitat.
Governments have also demonstrated over the years that they’re disinclined to curb private sources of pollution, such as logging companies and pulp mills. Powerful polluters have long had the ear of regulators. Governments often benefit politically from polluters’ promises of development and jobs. Activities that destroy fish habitat offer visible, short-term gains that will help ensure governments’ reelection. And so they license – even subsidize – polluters. And they refuse to implement, or to enforce, strict regulations. In 1989 one bureaucrat complained that the fisheries department allowed “friendly” corporations immunity from prosecution. He warned that a continuation of this policy would result in a wholesale loss of fish habitat. And it has.
Governments, then, have a variety of incentives that lead them to encourage both overfishing and habitat destruction. But what about fishers? Are their incentives any different? Unfortunately, when fishers don’t have strong property rights, their incentives also work against conservation. When governments hold the rights, fishers have every reason to overfish.
We call this the tragedy of the commons. That phrase is usually used to describe an open access fishery. But it also applies to any situation in which fishers don’t have exclusive, long-term rights to their fish. Without such rights, fishers have incentives to catch as much as they can. No fisher has any reason to conserve. That’s because if he leaves a fish uncaught, there’s no guarantee that it’ll be around to spawn … or to catch next year. More likely, it’ll end up in his competitor’s hands.
So the fisher thinks, if he doesn’t get it, the other guy will. Of course, the other guy is thinking the same thing. It’s a vicious circle. And it’s one that leads even the most honourable fishers to race for fish and to catch more than they should.
In the last few months, we’ve seen this tragedy playing itself out on Canada’s west coast. Salmon fishers from Canada and the U.S. can’t agree on who has the right to catch how many fish. The fish often spawn in the rivers of one country, and then swim out into the waters of the other country. The treaty that governs catch allocations has expired.
The long and the short of it is that this year fishers in both countries have far exceeded safe catch limits … and they’ve done so precisely because they fear that if they don’t catch the fish their rivals will. First, in July, the Alaskans caught four times more sockeye salmon than usual. They intercepted 300,000 sockeye that the Canadians thought belonged to them.
This really ticked off the Canadians. So in response, in August, they implemented an aggressive “Canada First” fishing strategy. The idea was for Canadians to intercept as many fish as possible while they were in Canadian waters, leaving as few as possible for U.S. boats to catch. They took several million sockeye. Mind you: This wasn’t just the fishers’ idea. It was all done with government approval. Of course the government denied that the strategy was “aggressive”: It was simply, in its words, “vigourous.”
Well, I’d say that “stupid” is a better word. Both countries are cutting off their noses to spite their faces. Scientists and environmentalists are warning that this year’s fishing could be disastrous. One biologist calls it a “scorched earth policy.” One problem is that fewer sockeye than expected are reaching their spawning grounds. A more serious problem is that sockeye salmon swim with coho salmon. And the coho are endangered. This year’s reckless overfishing could destroy 300,000 coho, bringing them closer to extinction.
I’ve been talking about incentives – the perverse incentives of both governments and fishers that lead the destruction of fisheries. Now let me turn to the issue of tools. Even if governments or fishers had the incentives to manage fisheries sustainably, would they have the tools? Even if they wanted to conserve stocks, or improve habitat, could they? The answer, under a regime of government control, is no.
Governments don’t have the tools to manage fisheries sustainably. One of the most serious problems is that remote governments don’t have much knowledge of local stocks, fish behaviours, habitats, or environmental conditions. Good management decisions often have to be based on very detailed information – information specific to a particular time and place. Central planners can’t possibly have this kind of information. Their information will be at best incomplete and at worst inappropriate for a specific circumstance.
Government knowledge is wanting in another area as well: Governments can’t really know how valuable resources are to various interests. They have no way of measuring the needs of competing resource users. And they can’t measure the impacts of their decisions on various parties.
Even if governments had better knowledge, there would be another problem. Most government managers lack the ability to act quickly. Approval processes for many decisions are painfully slow. It takes governments a long time to adjust to change. But time is a luxury that a good fisheries manager can’t always afford. The resource is rarely in equilibrium. It can be quite volatile. Managing it well requires an ability to respond to that volatility.
So governments don’t have the tools the manage fisheries properly. They don’t have good enough information, either about fish or fishers. And they can’t act quickly on the information that they do have.
What about the fishers? Do they have better tools? In contrast to governments, fishers certainly have detailed, time-and-place-specific information. They know exactly how valuable certain resources are to them. And they can act quickly. But fishers have a whole different set of problems. They don’t lack managerial tools. Instead, they lack legal tools. Without strong property rights, fishers are virtually powerless, legally, to protect fish and habitats from pollution or other harm.
Fishers can rarely launch common law court actions against polluters. In this, they’re unlike many other victims of pollution. The common law – the law that England handed down to her colonies, including both Canada and Australia – includes powerful protections for property owners who’ve been harmed by pollution. Pollution may constitute a trespass on someone’s land. Or it may constitute a nuisance. If so, the victim can take the polluter to court. He may get an injunction against the pollution. And he may get compensation. But it’s much harder for fishers. That’s because they don’t have clear rights to fish or fish habitat. If a polluter damages fish habitat, or harms fish, so what? Whose property has it harmed? Whose rights has it violated? On what grounds could a fisher sue?
Courts have established that fishers normally have no grounds to sue polluters. Back in 1927, on Canada’s east coast, a cod merchant named McRae sued a whaling company. The company had built an oil and guano factory nearby. McRae complained that the factory committed three separate nuisances. First, the smoke from it drifted over his property and contaminated his drinking water pond. Second, its sickening odours prevented him from enjoying his property. And third, the grease, oil, fat, and pieces of whale carcasses that floated on the water made it impossible for him to carry on his fishing business.
The judge hearing the case noted that McRae was complaining of two distinct kinds of nuisance: private and public. If a nuisance interferes with a private right, an individual may take action against it. The factory’s air pollution and its odours fell into the category of private nuisance. The judge agreed that they violated McRae’s property rights. He issued an injunction against them.
The water pollution, however, was a different matter. The judge explained that the pollution didn’t interfere with a private right. It interfered with fishing, a right common to all the public. If a public right is violated, it’s the Attorney General – acting on behalf of the public – that must sue. In order for an individual to have a public nuisance claim, he must demonstrate that he has suffered “special” damages: His damages must be different in both kind and degree from others. The judge determined that the damage McRae suffered was no different from that suffered by other fishers. McRae therefore had no cause of action. And so the judge refused to ban the water pollution.
A provincial court issued a similar ruling in 1934. In that case, a smelt fisher named Fillion claimed damages from a paper mill. He complained that the mill’s effluents fouled and tore his nets, and prevented nearby waters from freezing properly. This, he said, had spoiled his fishing two years in a row. The court, however, noted that Fillion had no title to the fishery. Yes, he had a fishing licence. But the licence didn’t assign any particular territory to him. It didn’t confer on him any exclusive property right. Fillion had suffered the same interference as other fishers. The court dismissed his claim.
In 1970, commercial fishers out east lost another case for the same reason. Several fishers sued a phosphorus company. They accused it of discharging poisons into Placentia Bay. Its wastes, they said, polluted the water, poisoned the fish, and destroyed their commercial value. In response, the company argued that the fishers had no legal cause of action – that they had no grounds to sue for private nuisance. The court agreed. The fishers held rights in common with other citizens. The company didn’t violate their rights to any greater degree than it violated those of others. The pollution was therefore a nuisance committed against the public. Consequently, the fishers couldn’t bring a private action. The pollution would continue.
In the last half hour, I’ve been describing a system of perverse incentives and inadequate tools. I’ve tried to explain how under a regime of government control, no one has the incentives to sustain fisheries. Governments and fishers alike promote overfishing. Governments also permit habitat destruction. And while fishers might like to preserve habitat, they don’t have the legal tools to do so. It is a system doomed to fail.
But I didn’t come all the way down here just to talk about what doesn’t work. What really interests me is what does work. And what does work is a regime where fishers hold strong property rights.
Since I’ve just been talking about legal tools, let me stay on that subject for a few minutes. Armed with strong property rights, fishers have both the legal authority and the legal tools to protect their resources from pollution. They no longer need to rely on governments to protect their interests: They can take matters into their own hands and sue those who violate their rights.
There have been hundreds of such cases. They’re most common in England. And they generally pertain to inland – rather than ocean – fisheries. That’s simply a reflection of the fact that in England, virtually all inland fisheries are privately owned.
English fisheries owners can use the common law to sue polluters who harm their fish or habitat. Many who own – or lease – threatened fisheries have been helped by an organization called the Anglers’ Co-operative Association, or the ACA. The ACA finances court cases. It helps fisheries owners obtain injunctions to clean up rivers. And it helps them get compensation for losses. It has brought some 2,000 actions in the last 50 years; it has lost only two.
In its early years, the ACA won cases against a paper mill, steel and iron companies, a chemical company, a power station, polluting farmers, and numerous local governments that fouled rivers with sewage. In the 1990s, its targets have included a sewage treatment plant, a company wanting to withdraw water from a stream, and the owner of a fish farm who allowed rainbow trout to escape into a river inhabited by brown trout. The ACA has fought pollution occurring far away from the owners’ fishing areas. Pollution in an estuary may prevent salmon from migrating upstream to spawn. Courts have ruled that such pollution creates a material obstruction to the free passage of fish, and thus violates the rights of fisheries owners.
Because the ownership of ocean fisheries is far rarer than the ownership of inland fisheries, I don’t have as many examples of ocean fishers going to court to protect their assets. It does happen though. For example, in the northwest United States, in the state of Washington, ocean front property extends to the low tide mark. (That’s in contrast to most jurisdictions, where ownership stops at the high tide line.) There, the owners of oyster beds vigorously protect water quality. In fact, oystermen who own tidelands are widely credited for the health of many of Washington’s watersheds.
Similarly, in Japan, where the members of fishing cooperatives hold exclusive rights to inshore fisheries, fishers can block private coastal developments that will harm them. Before interfering with fishing rights, a developer must negotiate an acceptable settlement. If it fails to do so, it can’t proceed. Fisheries owners have blocked a number of coastal developments, including a nuclear power station, a waste treatment plant, a cement factory, and a petroleum refinery. They’ve also obtained compensation for damages from polluting industries.
Lest you imagine an unmanageable tangle of litigation resulting from the assignment of property rights, let me mention here that I don’t think it’ll happen. Strong property rights have a preventative effect. Britain’s ACA has found that the credible threat of a lawsuit serves as a real deterrent to polluters. When approached by the ACA, a number of corporations and local governments have decided against building facilities that would pollute or obstruct rivers. And polluters have frequently corrected existing problems in order to avoid lawsuits.
I should also mention that even armed with the strongest rights, fishers won’t always choose to prevent harmful developments or to eliminate pollution. Sometimes it’ll be cheaper for an industry to compensate its victims than to clean up its act. But as long as fishers have the power to shut down polluters, they can make meaningful choices between defending their property and accepting compensation. They’re in a strong bargaining position. They may insist that the pollution stop. Alternatively, they and the polluter might reach a compromise. The polluter might install abatement equipment or change its operations. Or the polluter might make it worth the fishers’ while to leave the business. The important thing is that the resulting bargains would be arrived at freely and fairly. They would reflect the values and the circumstances of all directly involved parties.
Property rights don’t only confer legal powers on their holders. Strong property rights also give their holders powerful incentives to protect fish and their habitat. Under the current regime, fishers do have some such incentives. Their livelihood and way of life depend on healthy fisheries. But their investments in fisheries are limited – and sensibly so – by the extent to which they’ll reap the rewards. Fishers are simply not going to assume the costs of enhancing stocks or habitats if they aren’t sure that they’ll enjoy the benefits.
The stronger the fishers’ rights, the more likely they are to profit from investments in monitoring, in habitat protection, and in restoration. Property rights internalize the benefits of such investments. As the stocks grow, and catches become easier or larger, the value of the rights increases. If the right is in the form of a quota, the market value of the quota increases. If the right is to a stretch of river, it’s the real estate that has an ever-increasing value. Either way, the rights holders have strong economic incentives to preserve and enhance their assets.
We see this happening in privately owned fisheries around the world. Rights holders invest considerable money and effort in both stock and habitat enhancement. Iceland’s Ranga River is a case in point. In 1941, a volcanic eruption killed most of the river’s fish. And it smothered the river bed with sand. For decades, there was almost no fishing on the river. In 1984, fishers caught only 10 salmon in the river. In 1985, 17. Then an entrepreneurial fishing guide acquired a lease on the entire river. He started stocking the river with as many as 100,000 smolts every year. He worked with local landowners to improve the river. His efforts paid off. The Ranga is now one of the most productive rivers in Iceland. In 1995, anglers caught over 1,500 fish in the river. And they paid handsomely to do so: The cost of fishing and lodging on the Ranga can be as high as $800 a day.
Fishing rights drive enhancement programs in Scotland too. There, the owners of fishery rights form district boards that protect and develop their stocks. They operate hatcheries and improve rivers. And it’s not just inland sport fishers that do this. Those who own commercial netting rights on the coast help finance enhancement projects. They understand that their economic future is tied to their fisheries’ health.
Likewise, in the United States, the owners of private oyster beds establish and seed habitat. And they delay harvests until late in the season. They can afford to do so, since they know that they’ll eventually reap the rewards. In contrast, those working common beds race to harvest oysters before their competition gets them. It’s no surprise that private oyster beds are better managed and more productive than their public counterparts.
Other examples abound. In Japan, community cooperatives create fish habitat by building artificial reefs. The promise that both the reefs and the fish around them will become their property justifies the investment. In Alaska, cooperatives representing the holders of salmon rights undertake stock enhancement projects. In New Zealand, quota holders in the Chatham Islands abalone fishery have experimented with cooperative seeding programs. In Canada, those holding quotas to halibut and black cod invest in fisheries research, monitoring, and other long-term management activities.
So yes, strong property rights give fishers the incentives to enhance stocks and habitats. But perhaps most important of all, strong property rights give fishers incentives to limit their fishing effort.
Let me digress with a little story. My husband and I know a woman named Helen Dickson. She’s a sensible woman – a farmer’s wife – and a mighty good cook. Last year, Helen gave us a jar of homemade jam. It was marvellous. I slathered it on my toast every morning, as did my husband. We polished off that jam in no time at all.
When Helen commented on how quickly we’d raced though our jam, I explained to her that both my husband and I powerful incentives to do so. I would have liked to have used the jam sparingly – to have saved it for special occasions. But I knew that if I didn’t eat it, my husband would.
Now Helen might not know the term “the tragedy of the commons” but she sure recognized one when she saw one. And she knew exactly what to do about it. She established property rights in jam. The next time she gave us jam, she gave us two jars: one exclusively for me and one exclusively for my husband. And believe me, that jam lasted a long time. I could conserve it, knowing that I alone would reap the benefits of my self control.
I tell you this story because I think it illustrates how simple and obvious the property rights solution is. It’s just common sense that ownership promotes stewardship. It doesn’t matter if we’re talking about jam or fish. The principle is the same. If you know that you’ll reap the benefits of conservation, you have every incentive to conserve.
This is actually more true of fisheries than it is of jam, since jam’s a finite resource. Fish stocks, if managed properly, can sustain themselves indefinitely. And as one economist said, “you don’t have to be an economist to know that it doesn’t pay to kill the goose that lays the golden egg.” Fishers know this. When they have secure rights to future stocks, overfishing is not in their self interest. They have powerful incentives to maximize their stock’s value, not just today, but in the future. I can’t say this too often: They have a financial interest in conserving their stocks, in using them efficiently, and in investing in them. It is they who will reap the rewards. In other words, they will profit from preservation. And they understand this.
If we look at private fisheries around the world, we see that rights holders frequently limit fishing for the long-term benefit of their fisheries. Some of the most obvious examples are to be found in privately held inland sport fisheries in eastern Canada, England, Scotland, and Iceland.
In Iceland, all rivers are privately held by bordering landowners – usually farmers. Through fishing associations, owners control the number of people fishing on a river. The association for the Nordura River permits only 12 rods a day on all of its 250 salmon pools combined. That kind of management has helped create some of the world’s most prolific salmon rivers.
Iceland’s fisheries owners have strong economic incentives to limit pressures on their stocks. The owners of productive rivers can get rich off fish. They often lease their rights to angling clubs, or outfitters, or individual fishers. A farmer can earn more than $100,000 a year from a fishing club. But of course, that’s only true if there are fish in his river. Talk about incentives!
Iceland’s commercial fishers – whose property rights take the form of ITQs – also limit fishing pressures. I was fascinated to learn that on occasion, they have actually lobbied for lower catches than those proposed by the government! Early last year, in response to indications of healthier cod stocks, Iceland’s prime minister suggested increasing the cod catch. But the association representing boat owners rejected his proposal. It proposed increasing the catch only in the following year, and then only if stocks remained healthy.
Stronger property rights have also changed Canadian fishers’ behaviour for the better. Before vessel quotas were introduced in 1991, our west coast halibut fishery suffered from over-harvesting. Annual catches consistently exceeded the limits set by government. Fishers raced to catch as much as they could, endangering themselves, losing gear, and wasting fish. Not until they obtained more secure rights could fishers afford to slow down. Rights brought with them a dramatic transformation. Catches now remain under the annual limits and waste has been reduced by 50 per cent.
Property rights, then, both enable and encourage fishermen to conserve stocks and preserve their habitat. It’s quite clear to me that in order to save fisheries, we need strong property rights. The form they should take in specific fisheries is less obvious to me. Rather than recommending a specific form, I’d like to suggest a few principles.
Several features characterize strong property rights regimes. The strongest rights are exclusive: Their holders can prevent others from using the resource. Rights, of course, are only as exclusive as they are enforceable. So enforceability is essential. The strongest rights are also transferable: This enables efficient managers to buy out bad managers, ensuring that rights end up in the hands of those who can make the best use of them. And property rights must be perpetual: Permanent rights encourage management decisions that ensure long-term productivity rather than short-term gain.
Furthermore, under the strongest property rights regimes, decision making is fully devolved. Whenever possible, decisions about fisheries should be in the hands of fishers themselves. As I said earlier, fishers are often better informed than remote governments. They have detailed knowledge of the ecosystems they work in. And of course, if they have exclusive, transferable, perpetual rights to the resource, it is they who will benefit or suffer from any decisions made. So they have incentives to decide wisely.
One of the essential characteristics of a strong property right is that it can’t be expropriated without compensation. Roger mentioned to me that this is a big issue here – especially in the context of expropriation for marine reserves – so I’d like to spend a few minutes on it.
A property right that can be expropriated without compensation is hardly a property right at all. It’s not secure. It’s not perpetual. And it doesn’t leave decisions in its holder’s hands. Because of this, it creates all the wrong incentives. What reason does a fisher have to conserve stocks if he might not have the right to fish them in the future? None whatsoever. We’re right back to the tragedy of the commons.
Because of the uncertainty it creates, expropriation often has perverse results. We see this with traditional expropriation and we also see it with regulatory takings – regulations that have the effect of expropriating the productive value of property even if they don’t take the property itself.
One glaring example of a regulatory taking that creates perverse incentives is the U.S. Endangered Species Act. In the southeastern United States, mature pine trees attract an endangered species: the red cockaded woodpecker. The law forbids forest owners to cut their trees if these woodpeckers use them for habitat. In effect, it expropriates the productive use of a forest if an endangered species is found in it. How have landowners reacted to this law? They’ve made dammed sure that their pine trees don’t reach maturity, that’s how. They’re cutting their trees prematurely to ensure that birds don’t nest in them. It doesn’t matter that the trees aren’t ready to harvest, and that they won’t fetch a decent price. The owners figure that it’s better to get something now than to risk getting nothing later.
So expropriation without compensation sends the wrong signals to owners. It also sends the wrong signals to governments. Governments who expropriate don’t have to take the costs of their decisions into account. They can quite arbitrarily do something that’s inefficient or costly. But to them it looks free, since they aren’t paying the costs.
The solution to this problem is to make governments pay the full costs. I think that the best way to do this is to require them to buy out property owners. Notice that I didn’t say compensate. I said buy out. I think that, whenever possible, governments should acquire property just like the rest of us do: in voluntary transactions.
Relying on voluntary agreements for conservation is still pretty rare in Canada. But there’s increasing interest in doing so. An organization called the Nature Conservancy has set up over 500 nature preserves on land that it’s purchased. Another organization – Ducks Unlimited – has protected over 17 million acres of waterfowl habitat by leasing and purchasing land.
In Europe, voluntary transactions aren’t just used to preserve land: They’re also used to preserve fish. Take Iceland, for example. There, in 1989, an angling club was concerned that a commercial netting operation was jeopardizing fish stocks. It wanted it shut down. But it didn’t go to the government to expropriate the commercial fishers. Instead, it simply bought them out. It purchased permanent rights to the netting operation.
On a grander scale, the North Atlantic Salmon Fund has raised $4 million in Europe and North America to purchase the rights of ocean fishers off Greenland and the Faroe Islands. These fishers catch salmon that would otherwise return to rivers to spawn. The fund purchased the Faroe Island’s 1991 salmon quota for about $800,000. It has renewed the agreement every year since. In 1993 and ’94 the fund purchased Greenland’s salmon quota for about $400,000. It holds purchase options on future quotas for both countries, and intends to exercise them.
Such voluntary transactions ensure that all costs are taken into account. And they ensure that all parties are left better off than they were before. Otherwise, they wouldn’t enter into an agreement. It’s a win-win situation. The fishers win. And the stocks win.
To sum up: We should all be working to develop systems of exclusive, transferable, and permanent property rights in fish – systems of self-managed ownership. Self-managed ownership removes decisions about catches and habitat from the political arena. Rights holders, or the associations representing them, set catch limits, monitor fishing activity, enforce regulations, and exclude interlopers. Armed with defendable property rights, owners protect habitat from pollution or other degradation. And under such a system, those who wish to acquire rights don’t waste resources lobbying government. They simply purchase rights from others in market transactions – transactions that leave buyer and seller better off.
Ownership can take many forms. Individuals, communities, associations, or firms can own specific stocks. They can own fishing areas, or fish habitat. Judging from experience around the world, an endless number of configurations are possible. There’s no good reason not to experiment with several. As long as they confer secure rights, and as long as they get governments out of the business of managing fisheries, they should have an excellent chance of success.