June 21, 2000
Prepared for Property Rights, Economics & Environment: Marine Resources
An International Conference Organised by the Centre d’Analyse Economique and the International Centre for Research on Environmental Issues
Aix-en-Provence, France, June 21-23, 2000
Canada’s fisheries are in trouble.
On the west coast, the Pacific salmon are disappearing. Last year, stocks were at their lowest levels in 99 years. In some rivers, returning stocks were less than one percent of their former levels. The largest sockeye run – that up the Fraser River – was closed to commercial fishing. There just weren’t enough fish.
On Canada’s east coast, the Atlantic salmon are in trouble. The number of wild salmon returning to North American rivers has dropped by over 75 percent since 1980. Conservation groups warn that the Atlantic salmon could be facing extinction.
We’ve already lost our cod fishery. That fishery was once one of the greatest in the world. In the 1980s, stocks began to collapse. The government closed the fishery in 1992. Only limited fishing has occurred since then. But the stocks have not recovered: Some are just three percent of what they were twenty years ago.
When the cod fishery collapsed, many fishermen turned to snow crab. They had a few great years. But now, crab stocks are falling. They are down by as much as 50 percent. Scientists warn that the resource could run out in three years.
What on earth is happening? What are we doing wrong? And why?
The reasons vary with each fishery. There are some natural causes. But far more important are the human causes. The worst of these is overfishing. And that is a property rights problem. Overfishing occurs when governments – rather than fishermen – hold the property rights to a fishery.
I know that many of you work in government. And I know that you are knowledgeable, hard-working, and honourable people. But I also know that governments cannot manage fisheries sustainably. Governments don’t have the incentives or the tools to make the best long-term decisions.
Why is this? There are a number of reasons.
First, there’s the problem of time horizons. Politicians have short perspectives. They tend to see just as far as the next election. They will do what it takes to get reelected in a year or two. Canada’s fisheries managers frequently choose actions with short-term political pay-offs . . . and disastrous long-term consequences.
Next, there’s the problem of agency. In most businesses, managers act as the agents of shareholders. They act in their shareholders’ interests. But whose agents are politicians and bureaucrats? What interests do they represent? The problem is that they represent different interests that clash with one another. In Canada, the interests of commercial fishermen, recreational fishermen, aboriginal fishermen, and environmentalists conflict.
The result is often compromise that doesn’t serve anyone’s interests. Another common result is paralysis. Governments delay in the face of conflict. As one fisheries biologist explained, 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 pressure. In Canada, the pressure to create jobs is the greatest political pressure of all.
Perhaps most important, when governments control fisheries, there is the problem of accountability: rewards and punishments. Government managers aren’t held accountable for the decisions they make. They don’t reap financial benefits from making good decisions. And they don’t pay the costs of making bad decisions. They don’t have financial incentives to make the best long-term decisions.
There is another set of problems as well. These problems relate to tools. Governments don’t have the tools to manage fisheries sustainably.
One of the most serious problems is that remote governments have little 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. The information available to central planners is 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 little information about the values and the circumstances of different parties. 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 afford. The resource can be quite volatile. Managers must be able to respond to that volatility.
So that’s the theory: Governments lack the incentives and the tools to manage fisheries sustainably. But enough theory. How do these problems manifest themselves in real life? Let’s look at Canada’s cod fishery. That fishery provides a textbook case of the mismanagement of a fishery for short-term political gain.
In the 1970s, Canada’s official fisheries management objective was to maximize employment. The government promised to do so even at the expense of fish. It promised to base catch levels on “economic and social requirements . . . rather than on the biological-yield capability of a fish stock.” In the past, it explained, “fishing [had] been regulated in the interest of the fish. In the future, it [would] be regulated in the interest of the people who depend on the fishing industry.”
In order to create jobs, successive governments offered fishermen, boat owners, and fish processors subsidies, tax breaks, and low-interest loans. And they made Unemployment Insurance much more generous. In the 1980s, fish plant workers could work for 10 weeks and then collect Unemployment Insurance benefits for the next 42 weeks. So rather than having one person do one job for one year, five people – all supported by the government – could share that job.
In these ways, the government lured people into the industry. These people became dependent on the fishery. Not surprisingly, they pressured politicians to keep catch levels high. Overfishing became institutionalized.
By the early 1980s, there were signs that too many fishermen were chasing too few fish. Inshore fishermen reported falling catches and smaller fish. But the bureaucracy could not process information from thousands of small-boat fishermen, all using different gear in different ways. It couldn’t quantify or computerize it. In the words of one bureaucrat, “you just don’t want to deal with that kind of messy information.”
By 1986, several studies warned that the government’s stock assessments were far too optimistic and that catch levels were far too high. But the government paid no heed. It actually raised catch limits. Finally, in 1988, it began to lower them. But it did so very slowly, over four years. Too slowly. By 1992, the cod had all but disappeared.
A fisheries minister from those years explains that he knew he was “walking a very thin line between scientific advice and economic reality.” But, he says, he was trying to keep a fish plant in his constituency open. He had his eye on the voters rather than on the fish. And he admits this. He says that there is a “tendency among politicians to put the interests of fishermen – who were voters – ahead of cod, who weren’t.”
The terrible irony is that in destroying the cod fishery, the government put 40,000 fishermen and processors out of work. It created a long-term ecological, economic, and social disaster.
And of course, no one was held accountable for the disaster. No one was fired or demoted. The fisheries minister would have none of it. “I don’t want to spend my time on a witch hunt,” he said. His parliamentary secretary backed him up. “How could you fire somebody?,” he asked. “It’s pretty hard to pinpoint one individual, or one department, or one government as being responsible for the crisis in the fishery.”
Imagine how outrageous that remark would appear in the private sector! Imagine a manager destroying a multi-billion dollar asset and keeping his job.
In fact, rather than holding anyone accountable, the government tried to deny responsibility for the collapse. It lied about its scientific advice. This came out in an internal government report on the issue. Let me read a few short passages: “Scientific information surrounding the northern cod moratorium . . . was gruesomely mangled and corrupted to meet political ends.” That’s a quote! And there’s more: “It has become far too convenient for resource managers . . . to publicly state that their decisions were based on scientific advice when this is clearly not the case.”
Tragically, the government still hasn’t learned its lesson. In 1997, just before calling an election, it announced that it would reopen part of the cod fishery. Scientists warned that doing so was a “risky and irresponsible” “pre-election ploy.” Although the warnings grew more urgent, more openings followed. Last year, an aide to the fisheries minister explained, “We’re not managing fish to leave it in the water.”
And so, this year’s news is hardly surprising. The federal fisheries council admitted in January that stocks are not rebuilding. Just last month, it used words like “very scary” and “unbelievable” to describe the latest data. Regardless, driven by an inexorable desire to put fishermen to work, it recommended that some fishing continue.
That’s the story of Canada’s cod fishery. Politicians subsidized the expansion of the fishery despite warnings of overcapacity. They permitted catch levels far higher than those recommended by their own scientists. They closed the destroyed fishery, only to reopen it prematurely. And they did so in order to win votes.
This motivation has governed fisheries managers for decades. Back in 1980, a fisheries bureaucrat published a paper on the history of fisheries management. He spelled out four kinds of questions that can be asked of a fishery: the biological question (how many fish?); the economic question (how many dollars?); the social question (how many jobs?); and the political question (how many votes?).
That’s enough about why governments cannot manage fisheries. Let me turn to an equally important issue: Can fishermen do a better job? Haven’t they been begging for more subsidies? Haven’t they been screaming for higher catch limits? Of course they have. But that’s because they don’t have property rights.
It’s the tragedy of the commons. Without exclusive, long-term rights to fish, a fisherman will catch as much as he can. If he leaves a fish un-caught to promote conservation, he has no guarantee that it will survive to spawn . . . or to be caught the next year. More likely, it will end up in his competitors’ nets. So yes, his incentives are just as perverse as those of government.
But property rights change those incentives. They give fishermen reasons to limit their fishing effort. Stocks, if managed properly, can sustain themselves indefinitely. When fishermen hold secure, long-term rights to stocks, they have powerful incentives to maximize their value, not just today, but in the future. They have a financial interest in conserving their stocks, in using them efficiently, in monitoring them, in enhancing them. Property rights internalize the benefits of good management. As the stocks grow, and catches become easier or larger, the value of the rights increases.
It’s quite clear to me that in order to save our fisheries, we need strong property rights. What should those rights look like?
First, 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. And rights must be perpetual: Permanent rights encourage management decisions that ensure long-term productivity rather than short-term gain.
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. Transferable rights allow those who value them most to acquire them through voluntary transactions. Such transactions ensure that all parties are left better off than they were before. Otherwise, they won’t enter into an agreement.
Lastly, under the strongest property rights regimes, decision making is fully devolved. Whenever possible, decisions about fisheries should be in the hands of fishermen themselves. Fishermen are often better informed than remote governments. They have detailed knowledge of the ecosystems they work in. And of course, fishermen don’t care about creating jobs or winning votes. Their interest is in the fish, and in their own prosperity. In short, it is they who have both the tools and the incentives to decide wisely.
What I’m arguing for, then, are systems of self-managed ownership. Such systems remove decisions about catches from the political arena. Rights holders, or the associations representing them, set catch limits, monitor fishing activity, enforce regulations, exclude interlopers, and enhance habitat.
Ownership can take many forms. Individuals, communities, associations, or firms can own specific stocks. They can own shares of stocks. They can own fishing areas, or fish habitat. An endless number of configurations are possible. 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.