Sea Change: How Markets and Property Rights Could Transform the Fishing Industry
166
Sea Change: How Markets and Property Rights Could Transform the Fishing Industry
166eBook
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Overview
Product Details
| ISBN-13: | 9780255367424 |
|---|---|
| Publisher: | London Publishing Partnership |
| Publication date: | 03/30/2017 |
| Sold by: | Barnes & Noble |
| Format: | eBook |
| Pages: | 166 |
| File size: | 2 MB |
About the Author
Professor of Finance, Public Policy and Ethics and Director of Research and Public Engagement at St Mary’s University, Twickenham, and Senior Academic Fellow at the Institute of Economic Affairs.
Paul Dragos Aligica is a Senior Research Fellow at the F. A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics at the Mercatus Center at George Mason University, where he teaches in the graduate programme of the Economics Department. He specialises in institutional theory, public choice and comparative economic and governance systems. He has authored seven books, including Institutional Diversity and Political Economy: The Ostroms and Beyond (Oxford University Press, 2014), and has written for the Wall Street Journal Europe and a wide variety of academic journals, including American Political Science Review, Public Choice, Revue française d’economie and Comparative Strategy. Aligica has been a consultant for the United Nations Development Program, the World Bank, European Union organisations and the United States Agency for International Development (USAID). He received his PhD in political science from Indiana University Bloomington.
H. Sterling Burnett has a doctorate in applied philosophy from Bowling Green State University. He specialised in environmental ethics. He is currently a research fellow in energy and environmental issues at the Chicago-based research organisation, The Heartland Institute, and is managing editor of its lead environmental publication, Environment & Climate News. Before joining The Heartland Institute, Burnett served for 18 years as the senior fellow responsible for the environment programme at the National Center for Policy Analysis in Dallas, Texas.
Birgir Thor Runolfsson is an Associate Professor of Economics at the University of Iceland. He has an undergraduate degree in economics from Lewis and Clark College and a masters degree and PhD in economics from George Mason University. He has published papers and edited books on fisheries management, as well as papers in the area of public choice and institutional economics. He has also participated in projects and written several reports on fisheries management issues both in Iceland and internationally.
Ion Sterpan is an economics PhD student at George Mason University and a graduate fellow at the Mercatus Center’s F. A. Hayek Program. He studied philosophy at Central European University in Budapest and at the University of Bucharest and worked in Bucharest with the Center for Institutional Analysis and Development. His research topic is polycentric institutional systems, which he approaches from an Austrian and Virginian political economy perspective.
Rachel Tingle studied economics at the University of Exeter before becoming a research fellow at the University of York and taking a master’s degree at the University of Surrey. She has had a varied career as an economist and journalist, which has included teaching at the Universities of Buckingham and Brunel, as well as working in the City, in economic consultancy, for a number of senior Conservative politicians, and in television, print and web journalism. For many years she has specialised in writing about the interface between economics, politics and Christianity and has written hundreds of articles and two books in this area.
Read an Excerpt
Sea Change
How markets and property rights could transform the fishing industry
By Richard Wellings
The Institute of Economic Affairs
Copyright © 2017 The Institute of Economics AffairsAll rights reserved.
ISBN: 978-0-255-36742-4
CHAPTER 1
INTRODUCTION
Richard Wellings
The depletion of fish stocks has proved to be a difficult problem to resolve. A high proportion of the world's fisheries are thought to be 'over-exploited' and yields are likely to fall in the long term. Declining catches will then have a significant wider economic impact. Around 35 million people are directly employed by the fishing industry, with a multiple of this engaged in processing and support jobs (FAO 2014). Moreover, fish comprise roughly 20 per cent of the animal protein in people's diets and often a much higher percentage in poorer countries (ibid.). While the fishing industry makes up only a small fraction of 'gross world product', perhaps 0.25 per cent, its share of GDP is far larger in many developing economies, including Indonesia, the Philippines and Vietnam.
The importance of the 'fisheries crisis' goes beyond its economic impact. The depletion of stocks is symptomatic of a far wider problem with 'open access' resources. Policies that prove effective for the fishing industry are therefore likely to have wider relevance to issues such as overgrazing of grasslands and deforestation – at least in terms of general principles.
This collection examines the economic and political causes of the problems faced by fisheries and also sets out potential solutions. If a theme unites the contributions, it is that one- size-fits-all approaches are ill-suited to this policy area, both in analysing how depletion arises and developing strategies to address it. Moreover, measures that might appear attractive in terms of economic theory may be undermined by the incentives facing political actors in the locations where they are applied.
The remainder of this introductory chapter provides a critical overview of the major issues facing the fisheries sector and a summary of key theoretical explanations for the current crisis. It argues that standard analyses of 'overfishing' are often simplistic and fail to acknowledge adequately the role of states in undermining market feedback mechanisms that would help to protect stocks.
Similarly, government action often weakens or destroys voluntary and/or community-based arrangements between fishermen, sometimes with disastrous consequences. Finally, it is clear that limited intervention in the form of the creation and enforcement of property rights is likely to be more efficient than more active state regulation of the sector.
Global fish stocks
The foregoing discussion alludes to severe problems with the world's fisheries. Indeed, much analysis of this issue begins with the assumption that several species are close to depletion. It is claimed that the oceans are likely to become 'virtual deserts' within the next few decades. The reality is rather more complex. In some respects the fishing industry could be viewed as a success story. Overall global fish 'production' has increased by a factor of eight since 1950, far outstripping population growth and enabling per capita consumption of this protein-rich food to almost treble to 19 kg per year (FAO 2014).
The aggregate data hide some worrying trends, however. Following a long period of steady growth, annual catches of wild fish in the seas, oceans and inland waters appear to have stagnated at around 90 million tonnes since the mid 1990s (Figure 1). A major expansion in fish farming therefore explains recent increases in supply (Figure 2). In particular, market-friendly reforms in China since the late 1970s have encouraged rapid growth in its aquaculture sector (FAO n.d.).
In the same period, many long-established sea fisheries have experienced substantial declines in catches. In the North West Atlantic, for example, landings have fallen by approximately 55 per cent since the 1968 peak (FAO 2011). Worse still, within these totals, the yield of certain species has collapsed. Perhaps best known is the 98 per cent fall in cod catches in the North West Atlantic between 1968 and 2003 (ibid.: 24), with the species virtually disappearing from the seas off Canada where it was once abundant.
A decline in the quality of catches has also been evident in several major regions. The share of high-value fish such as cod and wild salmon has been falling, while that of low-value species such as blue whiting and sand eels – typically used to make fishmeal or fish oils – has increased. Aggregate tonnage figures may therefore mask the extent to which fish stocks have been degraded. Moreover, they may not reflect the environmental damage caused, for example, to seabeds by beam trawling or to marine creatures not targeted by fishermen but nonetheless killed or injured by their practices (see Moore and Jennings 2000).
Given the decline in many long-established fisheries, growing catches in previously little-exploited regions such as the Eastern Indian Ocean have helped maintain levels of global supply (ibid.). Nevertheless, there are fears that these emerging fisheries will follow a similar trajectory, with growth phases a precursor to declining overall yields and a collapse in high-value species.
Such a hypothesis underlies the predictions that global fish catches will fall precipitously by the middle of the twenty-first century, with this view often combined with forecasts that climate change and marine pollution will also have a devastating impact on yields (Worm et al. 2006; Allison et al. 2009).
There is good reason to believe, however, that such concerns are overstated. Firstly, in many fishing grounds stocks appear to be stabilising or even recovering after previous slumps. And, within such fisheries, the situation may vary markedly by species. This makes an across-the-board collapse unlikely. Secondly, at least some of the environmental problems seem to have been mitigated, particularly in developed regions where high living standards have increased the demand for 'environmental goods' such as clean seas and fish caught without damaging other species. Thirdly, there is arguably growing awareness of the policy mistakes that led to the depletion of fisheries in the past. Finally, the growth of aquaculture, or fish farming, may enable the production of fish in both developed and developing countries at costs that are lower than fishing in the open seas in a situation of declining stocks.
All these issues are intertwined. However, it is the failures of past government policy and how they have contributed to current problems that is a major theme of this monograph. In order to analyse the most important theoretical issues and policy questions, the discussion focuses on sea fisheries rather than rivers and lakes, and on the continental shelf and inshore resources more than the relatively barren high seas.
The tragedy of the commons
The concept of the 'invisible hand' was developed by Adam Smith, who explained how an individual who 'intends only his own gain' may be 'led by an invisible hand to promote ... the public interest'. Unfortunately, Smith provides very few examples of situations where this principle would and would not work, or criteria to explain this. However, in the case of resources such as fisheries, the notion has been heavily criticised, though perhaps unfairly.
Most famously, Hardin (1968) describes the 'tragedy of the commons' in which individuals acting in their own self- interest bring ruin to all. He uses the example of a pasture open to anyone who wishes to graze his animals there (stating later that the problem also applies to the oceans (ibid.: 1245)):
As a rational being, each herdsman seeks to maximize his gain. Explicitly or implicitly, more or less consciously, he asks, 'What is the utility to me of adding one more animal to my herd?' ... Since ... the effects of overgrazing are shared by all the herdsmen ... the rational herdsman concludes that the only sensible course for him to pursue is to add another animal to his herd. And another ... But this is the conclusion reached by each and every rational herdsman sharing a commons. Therein is the tragedy. Each man is locked into a system that compels him to increase his herd without limit – in a world that is limited. Ruin is the destination toward which all men rush, each pursuing his own best interest in a society that believes in the freedom of the commons.'
According to this view, the only way to address the damaging effects of such behaviour is to have an external body impose a management structure over the resource – whether in the form of private ownership, government ownership, or state regulation (see Pennington 2012: 23).
This perspective has been challenged by researchers such as Elinor Ostrom, as set out in Chapter 4. In many instances, communities of resource users have managed to evolve effective rules and management structures that have avoided the tragedy of the commons without government involvement. Indeed, this is frequently the case for inshore fisheries, where cooperatives and associations prevent over-exploitation through, for example, limits on individual catches. In response to such evidence, Hardin later suggested that a more accurate title for his original paper would have been 'The tragedy of the unmanaged commons' (Hardin 1994).
Hardin's scenario is perhaps more applicable to the open seas than to inshore waters, which may be subject to effective community-based management. Fish stocks in the high seas, for example, are theoretically open to all and trawlers from all over the world are free to exploit them. Under such circumstances there are major obstacles to the evolution of the kind of community-based rules seen in many inshore fisheries.
Open access also applied to large areas of the shallow, fish-rich continental shelf before the imposition of Exclusive Economic Zones in the second half of the twentieth century. These eventually extended up to 200 nautical miles from coastlines and effectively granted the relevant governments ownership of the fish and mineral resources within them. Until the mid 1970s, for example, British trawlers caught substantial tonnages above the continental shelf around Iceland (Gissurarson 2000: 12). From Hardin's perspective there should be a strong case for governments to impose management structures on open-access fisheries, whether through direct regulation or the award of property rights to fishermen.
How market mechanisms protect fisheries
Some theoretical objections should be noted, however. In the case of unmanaged open-access fisheries, incentive structures would appear to be far more complex than suggested in Hardin's classic example. In particular, there are typically strong negative feedback mechanisms that reduce the likelihood of 'ruin', such as the catastrophic reduction in yields seen in North West Atlantic cod.
As stocks begin to decline, this will tend to affect negatively the viability of fishing enterprises, with marginal operators going out of business as costs increase and revenues decrease (see Gordon 1954; Clark 1990). The precise impact will of course depend on the impact of increased scarcity in a particular fishery on fish prices. Under conditions of free trade the effect on prices is likely to be diluted as supplies can be sourced from other regions that are not experiencing depletion. Scarcity-driven price increases for marine fish will also tend to encourage investment in alternative forms of production such as fish-farming.
Market feedback mechanisms will also figure in the calculations of fishing entrepreneurs such as trawler owners, who will be alert to market conditions. They must consider the behaviour of their competitors. If other businesses are more effective at capturing the reduced stocks, this will change the point at which the costs of additional fishing activity outweigh the benefits. In situations where search costs increase, economies of scale decline and so on, but prices do not rise sufficiently to compensate for this, entrepreneurs at the margin will tend to withdraw from the market. It should be noted that, unlike some grazing scenarios, the marginal costs of fishing activity may be rather high, including crewing costs, fuel, and wear and tear to equipment (see Abernethy et al. 2010).
This is not to argue that there cannot be circumstances in which a certain species gains 'scarcity value' as a rare delicacy or luxury item, such that prices rise sufficiently to cover the increased costs associated with falling stocks, leading to a 'death spiral' for the fishery (Courchamp et al. 2006). This would appear to be a special case, however, and does not explain the major collapses of mass-market species observed in recent history. Purported empirical examples, such as the Napoleon wrasse (a reef fish now extinct in many areas), are questionable due to their juxtaposition with industry subsidies.
Consumers may also choose to respond to price rises by substitution, for example, eating pollock instead of cod. And they may change their behaviour due to concerns about the impact they might be having on fish stocks and the environment more generally – assuming that media and campaign groups are at liberty to raise awareness of such problems. Robinson (2008: 64) explains how such consumer pressure could mitigate potential climate change problems, but his analysis could apply equally well to the conservation of fisheries:
If there is general concern that the natural environment is becoming overused, the effect may be as if it were owned. Actions by individuals are characterised not so much by narrow self-interest (in the self-centred sense) but by broader interests that include concern for family, friends and descendants. Let us assume that a large part of the population is very concerned about the world in which their children and grandchildren will grow up. In such circumstances, one would expect that both consumers and producers (the latter both spontaneously and as a reaction to the views of consumers) would act in ways they perceive would protect their successors ... [and] will demand and will be supplied with goods and services that are deemed 'green' ... The 'perpetual referendum' that constitutes the market – which means that people are voting every day by expressing their preferences – will produce votes for 'green' outcomes which producers, in their own self-interest ... will satisfy.
This explains why producers and retailers have adopted environmentally friendly practices and labelled their goods accordingly. Examples include 'dolphin friendly' tuna, 'pole and line' caught tuna and 'certified sustainable' seafood. Another initiative encourages the public to boycott restaurants that serve bluefin tuna, a species at risk of collapse. Only a fraction of fish consumers need to adopt such purchasing habits for such standards to be widely adopted in the sector, given issues of branding and economies of scale. Producers and retailers may also decide to foster sustainable fisheries practices in order to avoid risks of shaming and reputational damage.
Nevertheless, we would not expect these mechanisms to entirely mitigate the tendency towards overfishing. The benefits of behaviour that promotes conservation may be shared more widely than the costs incurred by those individuals who choose the more prudent course. There is, though, a further factor at work that encourages overfishing.
Cutting off the invisible hand
Hardin (1968: 1246) explicitly acknowledges the role of negative feedback in addressing the tragedy of the commons in his discussion of what he perceives as a problem of overpopulation:
In a world governed solely by the principle of 'dog eat dog' ... how many children a family had would not be a matter of public concern. Parents who bred too exuberantly would leave fewer descendants, not more, because they would be unable to care adequately for their children.
However, as he goes on to explain, modern society is deeply committed to the welfare state, which means the full costs of reproductive choices are not experienced by the individuals making the decisions.
In a similar way, the market mechanisms that would typically offer fish stocks some protection from catastrophic decline are undermined by the welfare state for the fishing industry. Governments around the world pump vast subsidies into the sector (see Chapter 2) which encourage overfishing by increasing the size of the fishing fleet and blunting the market processes that would help to preserve stocks. This welfare state effectively shields fishing entrepreneurs from the negative consequences of bad decisions, and encourages investment that would otherwise be seen as too risky.
(Continues...)
Excerpted from Sea Change by Richard Wellings. Copyright © 2017 The Institute of Economics Affairs. Excerpted by permission of The Institute of Economic Affairs.
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