Learning how to fish: catch shares and the future of fishery conservation.

• Author: Adler, Jonathan H.

1. INTRODUCTION II. THE TRAGEDY OF THE OCEAN COMMONS III. THE FAILURE OF FISHERY REGULATION IV. PROPERTY RIGHTS--THE ROAD NOT TAKEN V. CATCH SHARES IN PRACTICE A. Economic Consequences of Catch Shares B. Catch Shares and Conservation C. Social and Economic Consequences of Catch Shares VI. THE IMPORTANCE OF PROPERTY RIGHTS VII. CONCLUSION I. Introduction

   In a crowded meeting hall in Portsmouth, New Hampshire, the New England Fishery Management Council voted this January to recommend drastic new cuts to the catch limits for Atlantic codfish off the New England coast. (1) Over the strenuous objections of local communities and fishermen, the Council proposed 77% reductions in the allowable cod harvest for each of the next three years in the Gulf of Maine, and a 61% cut in next year's cod catch on Georges Bank. (2) The National Oceanographic and Atmospheric Administration approved the proposed catch limits and other "emergency" measures in May 2013. (3)

   New England fishermen and other opponents of the plan fear that these restrictions will doom the centuries-old local fishing industry. As one lamented- "Right now what we've got is a plan that guarantees the fishermen's extinction and does nothing to ameliorate it." (4) Proponents of the plan, however, counter that these measures are the only way to save the rapidly collapsing Atlantic cod industry. As Council member John Bullard, regional administrator of the National Oceanic and Atmospheric Administration, observed, the problem is that there are fewer and fewer codfish in the sea. "It's midnight and getting darker when it comes to how many cod there are. There isn't enough cod for people to make a decent living." (5) The dire state of the fishery gave Council members little choice. (6)

   Unfortunately, even these severe new limits may not be enough to save the New England cod fishery. The Council's most recent steps follow on years of mismanagement, overly optimistic stock estimates, and misguided fishery policies that failed to align the economic interests of the fishing community with the long-term sustainability of the fishery. Reforms adopted for the 2010 season may have been too little too late. (7) As fishery researcher Ray Hilborn has explained, the incentives and policies governing the New England groundfish fishery for many years have made the fishery vulnerable to just this kind of collapse. (8) In the 1990s, for example, the fishery stock assessments indicated that short-term catch limits and fishing effort reductions could rebuild the fishery stock and ultimately lead to higher long-term yields. Nevertheless, local fishermen and their political representatives vehemently opposed any such reductions. (9)

   It would be easy to attack New England fishermen for being short-sighted. To do so, however, would ignore the incentives they face--incentives created by the existing regulatory structure. Due to a large number of inactive trawling permits, incumbent fishermen have little incentive to agree to catch reductions, as they would be unlikely to capture the full value of the rebuilt stocks. (10) Even if catch reductions today would lead to higher catch limits in the future, a rebuilt stock could encourage inactive trawlers to resume fishing. (11) And although a variety of forces--some beyond human control--likely contributed to the fishery's present crisis, without proper incentives for the fishing community to preserve New England's stocks, overfishing and mismanagement continued, leaving one of North America's oldest fisheries increasingly vulnerable to collapse.

   The hard choices being made in an effort to save the Atlantic cod fishery today are all too common, as policymakers continue to employ and rely upon failed conservation policies, leaving fisheries the world over poorly managed and under stress. (12) By some measures, a majority of exploited fisheries are depleted or in decline. (13) Even more troubling, new research suggests that those fisheries about which scientists know the least may be in the worst shape. (14) Yet all is not lost--perhaps not even for the great Atlantic cod. These same assessments conclude that, with proper management, fishery yields could double while remaining sustainable. (15) Proper fishery management can both conserve fisheries and maintain their value as a resource for human consumption.

   One approach long recommended by economists has been the allocation or recognition of property rights in fisheries. This can be done in various ways, including recognizing rights in fishing territories or allocating portions of the catch among fishery participants. Once the subject of academic theory, ecologists, economists, and marine policy analysts have now had decades of experience with so-called "catch shares." (16) The ability of such methods to enhance economic efficiency is no longer a matter of academic speculation or economic theory. There is ample empirical evidence that such institutional reforms encourage more efficient fishery exploitation, reduce overcapitalization, and eliminate the dreaded "race to fish." (17) At the same time, there is increasing empirical evidence that property-based reforms produce social and ecological benefits as well, increasing safety for fishery participants and encouraging greater resource stewardship. The use of property-based management aligns fisher incentives with the underlying health of the resource and appears to reduce the adverse environmental effects of commercial fishing.

   While the theoretical and empirical case for property-based fishery management has become ever more compelling, many policymakers have been slow to embrace property-based reforms. Some mainstream environmental groups have embraced the growing economic consensus that property-based systems are the key to fishery sustainability, (18) and both the Bush and Obama Administrations supported the increased use of catch shares in domestic fisheries. (19) Yet some fishing interests and ostensibly market-oriented policymakers resist. In May 2012, a majority of Republicans in the U.S. House of Representatives voted to bar the adoption of new catch-share programs along the Atlantic Coast or in the Gulf of Mexico. (20) In the process, the alleged party of free enterprise and limited government turned its back on a proven market-based approach to a serious environmental problem.

   This article reviews the theoretical and empirical evidence showing the superiority of property-based approaches to fishery management, stressing recent findings on the environmental effects of such reforms. The article traces the theory behind rights-based fishery management as it developed in the post-World War II period and documents how the theoretical claims initially made by fishery economists about the benefits of using property rights in the form of "catch shares" have been largely confirmed by empirical research. Recent academic studies now show that property rights systems, such as catch shares, are, in fact, superior to traditional management techniques and should be used more broadly.

   Part II explains how marine fisheries represent the archetypal "commons" problem famously (though not originally) described by Garrett Hardin. Part III summarizes how governments have tried--and largely failed--to address the problem of overfishing through various regulatory strategies. Such strategies are not the only potential approach to fishery conservation, however. Fishery economists have long recognized the potential for property rights to align the incentives of resource users and encourage sustainability. As Part IV documents, there is an extensive and longstanding academic literature making the theoretical case for the superiority of property-based management regimes over traditional regulatory controls. Economic theory may not always predict real-world consequences, but in the case of fishery management, the empirical evidence largely confirms the predictions made by economists. As Part V shows, a growing volume of empirical research demonstrates the economic and ecological benefits of property-based management systems, such as individual transferable quotas (iTQs) and other forms of catch shares. The adoption of such approaches in several different countries has improved fishery management, making commercial fishing more efficient, less dangerous, and more ecologically sound. As Part VI discusses, maximizing the ecological value of catch shares requires protecting the underlying property rights as actual property. The more security fishery participants have in their holdings, the stronger the incentive for sustainability. Secure property rights can also form the basis for private ordering among fishery participants. (21)

   While ITQ-type catch-share programs are the most widespread, and the most studied, they are not a panacea. As noted in the conclusion, there is no single model of property-based fishery reform that is applicable everywhere. Depending on the specific conditions of a given fishery, other types of property-based reforms may be superior to ITQs. Other forms of property-based management, such as Territorial Use Rights in Fisheries (TURFs), should also be considered where appropriate. In still other cases, it may be desirable to encourage cooperative management structures in lieu of ITQs. In all cases, however, moving toward a more property-oriented management approach is the most likely way to maximize the likelihood that a fishery will be managed in a productive and sustainable manner.

2. The Tragedy of the Ocean Commons

   For most of the twentieth century, the world's ocean fisheries provided a classic example of what Garrett Hardin famously called "the tragedy of the commons." (22) In his seminal essay, Hardin postulated an open access commons, specifically a grazing pasture owned by none, but available to all--though he could just as easily have written of a marine fishery. (23) As Hardin explained with the metaphorical...