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About the Commentary

Series Editor: Joshua Linn
Managing Editor: Felicia Day
Assistant Editors: John Anderson and Adrienne Foerster

Welcome to the RFF Policy Commentary, which is meant to provide an easy way to learn about important policy issues related to environmental, natural resource, energy, urban, and public health problems.

Views expressed are those of the author. RFF does not take institutional positions on legislative or policy questions.

To receive the RFF Policy Commentary by email, or to submit comments and feedback, contact comments@rff.org.

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June 29, 2009
Series Editor: Ian Parry
Managing Editor: Felicia Day
Assistant Editors: John Anderson and Adrienne Foerster

Welcome to the RFF Weekly Policy Commentary, which is meant to provide an easy way to learn about important policy issues related to environmental, natural resource, energy, urban, and public health problems.

Implementing cooperative arrangements in fisheries worldwide offers the promise of improved ecological and economic outcomes. This week, Robert Deacon discusses how a policy of assigning fishery harvest rights to groups rather than individuals can achieve gains from coordination that other rights-based management regimes fail to capture. Moreover, if individual fishers are given the opportunity to either opt into the group or to stay with the traditional regime, the oft-observed incentive to resist change can be overcome. Deacon draws evidence from a salmon cooperative that operated in Chignik, Alaska during 2002 to 2004.

During the summer commentaries will be posted once every two weeks.

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Achieving Efficient Coordination and Acceptance in Fishery Reform
By Robert T. Deacon

Fishing Boat

A highly publicized article in Science in 2008 made a remarkable projection: that the global collapse of all groups of marine organisms now commercially fished would occur by the year 2048. Indeed, growing evidence indicates the decline of commercially important fish stocks and stocks of large marine predators in particular. Although pollution, climate change, and habitat damage no doubt play a part, poor governance is widely believed to be the root cause. The authors recommended implementation of fishery closures, restrictions on catch, effort, and gear, as well as creation of marine reserves to stave off potential catastrophe. But, such prescriptions, with the possible exception of the last, have long been mainstays of traditional fisheries management, leaving little cause for optimism that the gloomy forecast can be avoided.

Traditional management applies constraints to fishery-wide outcomes—by limiting the total catch, season of fishing, number of fishing permits issued, or kind of gear used. Under such rules the harvests of an individual firm depend on its ability to catch fish before rivals do, naturally leading to a race to fish. This has led to over-investment in fishing vessels, short fishing seasons, high processing costs, and low product quality. Many believe it has led to poor ecological outcomes as well.

Fortunately, evidence exists that regulation based on property rights or "limited access privileges" can produce far better outcomes—both economic and ecological. These systems grant fishers secure property rights to specific harvest quantities, providing stewardship incentives absent from the traditional race to fish. In New Zealand, Iceland, and Canada, the introduction of such regimes has motivated commercial fishermen to seek lower catch targets to allow stock rebuilding, promote improved enforcement of catch limits, support stricter size limits, and invest directly in replenishing stocks. Moreover, reanalysis of the data that indicated global collapse by 2048 found that trends in fisheries managed with catch rights show a strikingly different pattern—following the institution of rights-based management, previous downward trends were either halted or reversed.

So, mission accomplished, right? Wrong. Almost 99 percent of the world’s commercial fisheries and roughly 85 percent of the worldwide catch are either unmanaged or managed in the inefficient and ecologically detrimental traditional way. Deciding how to assign catch rights is a contentious issue, and fishers who are well-suited to competing under existing regimes may fear being disadvantaged by a transition. Compounding the problem, inefficient regulation often spurs excessive investment in vessels and processing plants and owners of such capital naturally resist any change that would impair its value. Finding a management regime that eliminates incentives to block change is therefore of paramount importance.

One interesting option—tried during 2002 to 2004 in the Chignik, Alaska sockeye salmon fishery—assigned a portion of the aggregate catch to a group of fishers, formed voluntarily, to manage as the group saw fit. Those that chose not to join fished under preexisting rules. In Chignik, the group formed as a cooperative with members sharing profits equally, but this structure is not essential. It was essential, though, that the fishery manager could partition access to the resource and limit interference by designating different fishing seasons for the two groups.

This system offers two key potential advantages. First, a careful division of the catch between voluntary and independent sectors can yield an outcome that makes both groups better off, defusing the incentive to block a transition. Second, if the group assigned rights is empowered by contract to coordinate its members' actions, as was the case in Chignik, substantial efficiency gains are possible. Ordinary firms accomplish this every day, by carefully assigning tasks to workers and capital equipment in order to reduce costs and improve product quality. At best, this is difficult to achieve when all rights are held by independent individuals.

 

 Robert T. Deacon
Robert T. Deacon is a professor of economics and environmental science and management at the University of California, Santa Barbara and an RFF University Fellow. His research interests involve natural resource economics, environmental economics, and political economy. Deacon’s recent work has examined the use of property rights systems for fisheries management and marine habitat protection as well as the effects of different political systems on the use of natural resources, environmental quality, and the provision of public goods.

An examination of data from Chignik and other nearby fisheries indicates that allowing the cooperative (co-op) to form and exploit a dedicated catch share led to dramatic changes. By concentrated fishing activity among the most skilled co-op members, roughly one-third of those who joined, it was able to reduce costs. These individuals were paid an agreed-upon wage and nonfishing members were free to pursue other opportunities. All members shared profits equally, after deducting payments to fishers. This radical consolidation was possible because, as in most commercial fisheries, fishing capacity in Chignik far exceeded that required to harvest a sustainable yield. The co-op's consolidation also slowed the rate of fishing, reducing the capital needed for processing and allowing for more careful handling of the catch, resulting in higher quality fish that could command a higher price.

The co-op reaped additional gains because of its ability to coordinate fishing actions across space and time and provide shared inputs. For example, by purposely choosing to fish near the ultimate destination, Chignik River, it minimized costly transportation. Co-op fishers also shared knowledge about the location of fish concentrations—information typically concealed under independent fishing—allowing the group to economize on search costs. Additionally, the co-op installed stationary nets along the migration route that funnel the fish toward waiting purse seiners, sharply lowering its harvest costs.

Evidence suggests that the co-op's fishing methods substantially increased profitability. A comparison of permit prices in Chignik and other nearby fisheries indicates that values in Chignik rose while the co-op operated. Depending upon how long participants expected a co-op to operate, increases in annual profits could range from 27 percent to 100 percent.

The co-op's success was not without controversy though, and some independent fishers believed they were disadvantaged, particularly by the formula used to divide the catch between sectors. Two of these independents filed suit against the state management agency, arguing that it had exceeded its authority. The Alaska Supreme Court acknowledged the efficiencies the co-op realized, but nevertheless ruled that the policy was inconsistent with existing statutes.

An important lesson presents itself in this unfortunate outcome. The Chignik management approach apparently had the potential to make all participants better off. The key to realizing this potential, however, was a very careful division of the allowed catch between sectors, to avoid imposing losses on some individuals. As the co-op gained popularity and membership rose, the catch allocation rule became far less attractive to independents, so their opposition is not surprising. Unfortunately, the substantial promise that coordinated fishing holds for enhancing efficiency remains unrealized to this day in Chignik because those disadvantaged individuals managed to block its implementation. Fisheries seeking to benefit from cooperative management systems would be wise to include, as a criterion for designing policy change, features that enable "reform without losers," with the goal of moving successfully toward enhanced efficiency and surviving the political process.

Further Reading:

Costello, Christopher, Steven D. Gaines and John Lyhnam. 2008. Can Catch Shares Prevent Fisheries Collapse? Science 321(September 19): 1678–1681.

Deacon, Robert T., Dominic P. Parker, and Christopher Costello. 2008a. Improving Efficiency by Assigning Harvest Rights to Fishery Cooperatives: Evidence from the Chignik Salmon Co-op. Arizona Law Review 50(Summer 2008): 479–510.

Deacon, Robert T. 2009. Creating Marine Assets: Property Rights in Ocean Fisheries. PERC Policy Series No. 43. Bozeman, MT: Property and Environment Research Center.

Hilborn, Ray, et al. 2003. State of the World's Fisheries. Annual Review of Environment and Resources Vol. 28: 359–399

Lau, Lawrence J., Yingyi Qian, and Gerard Roland. 2000. Reform without Losers: An Interpretation of China’s Dual-Track Approach to Transition. Journal of Political Economy 108(1): 120–141.

Wilen, James E. 2005. Property Rights and the Texture of Rents in Fisheries, in Evolving Property Rights in Marine Fisheries, Donald R. Leal, ed. Oxford: Rowman & Littlefield Publishers, Inc.

Worm, Boris, et al. 2006. Impacts of Biodiversity Loss on Ocean Ecosystem Services. Science 314(November 3): 787–790.

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Views expressed are those of the author.
RFF does not take institutional positions on legislative or policy questions.

To receive the Weekly Policy Commentary by email, or to submit comments and feedback, contact comments@rff.org.

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