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Privatize the Seas? If Only Solving Overfishing Were so Easy

Merely having a market with clear private ownership rights does not protect against short-sightedness and greed.

In this month's Atlantic, Gregg Easterbrook writes that privatizing the seas through use of individualized transferrable quotas (ITQs) is the solution to the grave problem of overfishing. Recently, NOAA Administrator Jane Lubchenco came out strongly in favor of ITQs (which the agency is calling "catch shares"), and has committed her agency to " transitioning to catch shares " as a solution to overfishing. Would that the solution to overfishing were so easy!

Today, fisheries managers set a "total allowable catch" (TAC) for open-access fisheries. A fishery is open until that TAC is reached. Not surprisingly, there is often a mad scramble to capture as large a share of fish as quickly as possible. Sometimes fisheries, like the pre-ITQ Alaskan halibut fishery, are only open for a few days, or even a few hours.

Catch shares work to eliminate this incentive to catch all of the fish today. Thus, Easterbrook contrasts the orderly halibut fishery in Alaska today with the free-for-all of the pre-ITQ days. And catch shares do make a fishery more orderly. When a boat has a right to a specified share of the TAC, it removes the incentive to catch each fish before someone else does, the so-called "fisherman's dilemma." ITQs seeks to solve this problem by enclosing the commons and creating clear private ownership rights.

I question the assumption, though, that private ownership will convert fisherfolk into stewards of the long-term health of the fishery. As the recent financial collapse has shown, merely having a market with clear private ownership rights does not protect against short-sightedness, misvaluation and greed -- all of which come into play when we talk about overfishing. All ITQs do is remove the economic incentive to catch the full TAQ immediately -- they do nothing to address the more structural problems that bedevil fisheries management decisions: the political aspect of nominally scientific resource management decisions and overcapacity in the fishing industry.

First and foremost, catch-shares can only be an effective tool to prevent overfishing if fisheries managers set the TAC at an appropriate level. And therein lies the rub. In theory, the TAC is set scientifically, based on applying a fixed harvest rate to the estimate of exploitable biomass in the fishery. But fish recruitment fluctuates based on a host of environmental conditions -- rendering the fixed harvest rate problematic. Fishery managers are under intense pressures not to lower a TAC, even when the long-term survival of a fishery depends on reducing or even eliminating fishing pressures. The levels of uncertainty involved in estimating "exploitable biomass in the fishery" make it very difficult to defend decisions with immediate and serious economic impacts.

That brings us to the real problem with fisheries-- overcapacity, often subsidized by the very governments Easterbrook accuses of poorly regulating the fisheries. The accusation is correct -- fisheries are poorly managed, but I seriously doubt that ITQs are the answer. There are simply too many boats chasing too few fish. The argument that ITQs will result in lower fishing pressure depends heavily on the assumption that as the industry consolidates in the hands of "efficient producers," those producers will voluntarily retire a portion of their shares. This assumption of producer self-regulation is entirely speculative, and to my mind unlikely. The recent financial crisis is enough to give anyone pause about the ability of markets to self-regulate. Instead, we are likely to see near-monopoly catch share holders seeking to bend the TAC calculation to their short-term economic interests. This will happen against a backdrop of technical advances that facilitate fishing pressures undreamt of in the past, with immense floating fish processing factories decimating entire fish stocks in one go. It is hard to see how creating a market for trading catch shares will solve this problem.

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