2 ITQ or Not? IDK?

21 10 2012

This is the story of the fisheries of the world.

The oceans are open access and the fish of the seas are a common pool resource. This means that nobody owns the fish and anybody is allowed to harvest them. Unlike a farm where there is incentive to maintain the land sustainably, the oceans are subject to the Tragedy of the Commons. In the case of fishing, new fishermen will keep entering the fishery if there is any profit to be had. Since the fishers have no guaranteed right to fish, they will increase the efficiency and intensity of their efforts to obtain as many fish as possible.

Essentially this is a fishing derby. Watch the kids go nuts over the candy in the link below.  The breaking of the pinata is analogous to the opening day of the season, the candy are the fish, and the kids are the fishermen. This whole system is inefficient and dangerous. My URI resource economics class did the same with an m&m fishing simulation!

(If you are really interested in game theory, check out prisoner’s dilemma)
To combat this race to fish, Iceland has instituted an Individual Transferable Quota (ITQ) system. The fishers are guaranteed a percentage of the national Total Allowable Catch (TAC) and the actual quota varies annually. These catch shares are permanent, transferable, and given free of charge. Regarded by both economists and politicians as a fair system that will ignite economic growth, the ITQ system in Iceland is considered a model system for fisheries management. A crucial element of ITQ systems is how to allocate the shares and what rights come with them. The initial allocation of quotas in Iceland was originally decided by fishing activity in 1981-1983, with exception to a vessel had not been operating normally during the three year period due to major repairs or to having entered the fleet after 1981. The problem with this system is that fishermen received a valuable right at no cost, therefore new entry is difficult and few have profited.

The ownership of fish through quotas gives its owners vested interest in the future of the fishery and, consequently, its healthy biological state. The value a quota as a secure property right may be inferred from the fact that banks regularly accept it as a collateral. The catch shares are simply assets whose market value hinges critically on the future of the fishery and are dependent on stock size. Therefore, the owners become like farmers or other investors in natural resources and it is to their own advantage to maximize the value of their asset. This is why Iceland’s fish stocks have evaded collapse in recent years.

Fishing boats in Ísafjörður Harbor. In recent years, the quotas have been centralized and although the fishing effort has downsized, the fleet consists of fewer but bigger boats.

On the other hand, the quotas have been bought up by large companies or cooperatives. This has concentrated the quotas and has the potential to  move the fisheries to a few central locations, threatening the survival of small towns like Ísafjörður. In Iceland, 65% of the population is not in favor of the ITQ system. Although it is an unpopular system, it has created economic growth, jobs, and stabilized the fisheries.

In the United States we have a large military, in Iceland they have none. The only government boats are for maritime safety and fisheries inspection. Enforcement and compliance are key to the success of Iceland’s ITQ system.

What about the United States? We used to be dominated by gear restrictions, TACs and season lengths –  which led to the deadliest catch scenario in Alaska for example. Now we have Regional Councils which are supposed to provide participatory governance by knowledgeable stakeholders in fishery management. The eight Regional Councils independently develop management plans for marine fisheries in their individual regions. Plans and specific management measures (such as fishing seasons, quotas, and closed areas) are developed based on sound scientific advice. There are some fisheries (scallop & Alaskan halibut) who have implemented the ITQ system in the United States, but wide scale adoption is unlikely.

“Tragedy is the price of freedom in the commons… In other words, in a crowded world survival requires that some freedom be given up.” – Garrett Hardin
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