Topic 3Topic 3Fisheries ManagementFisheries Management

Part 1 Theory Part 1 Theory

Lecture Notes By

Ragnar Arnason

Secretariat of the Pacific Community

Coastal Fisheries Policy and Planning Course, 28/01/08 – 8/02/08, Apia, Samoa

Orientation• Have completed:

Policy: What is it and how to formulate itLegal framework: Constraints and obligationsFundamental elements of fisheries economics

• Today (and for the rest of the course): Fisheries management and its application to the

South Pacific fisheries

• Begin by basic fisheries management theory

Lecture 1Fisheries Management: Introduction

• The institutional framework under which the fishing activity operates

• This may be set by(a) Social custom and tradition(b) The government (the fisheries authority)(c) The association of fishermen(d) Other means

• It may be explicit or implicit

An appropriate FMR

• Without an appropriate FMS, no long term profits

• With an approirpirate FMS realtively high profits

$

Effort

Poormanagement

Goodmanagement

FMR: Main components

Fisheriesmanagement

system,

FMS

Monitoring,control &

surveillance,MCS

Fisheries judicial system,

FJS

•All links in the same chain•Interdependent•Each must be designed w.r.t. the others

Methods for Fisheries Management:Fisheries Management Systems

Biologicalfisheries

management

Economicfisheries

management

Direct

Taxes

Indirect

Property rights

Equations

• Sustainable fisheries modelG(x)-y =y = Y(e,x) = ex

c = C(e) = c e2

• Dynamic fisheries model

2x x y

2

( )

x x x y

e p y c e

y a e x

Lecture 2.ABiological Fisheries Management

• Purpose: Increase the biological yield of the resource

• Methods: Protect young fish, spawners and habitat

• Common measures– TAC– Area closures– Seasonal closures– Gear restrictions– Pollution restrictions

Biological Fisheries Management: Effects

Value, $

OSY CSY Effort, e

The Sustainable Fisheries Model The Dynamic Fisheries Model

Biomass, x

Effort, e

OSY CSY

• So, little or no long term gains• Gains along adjustment path• Note also the cost of management

Loss Profits

Lecture 2.BDirect Economic Restrictions

• Purpose: Enhance the economic yield from the resource

• Method: Constrain fishing effort and capital• Common measures:

– Limited fishing effort (days at sea, fishing etc.)– Capital restrictions (vessel size, power, shape, type,

equipment)– Investment restrictions – Gear restrictions (number, size, type)

Direct Economic Restrictions: Effects

Value, $

OSY CSY Effort, e

The Sustainable Fisheries Model The Dynamic Fisheries Model

Biomass, x

Effort, e

OSY=CSY

• So, little or no long term gains• Losses along adjustment path• Note distortive effect• Note also the cost of management

Loss Profits

Lecture 3Taxation

• Purpose: Obtain economic rents• Method: Induce industry to reduce effort (in a wide

sense) by making it less profitable• Variants:

– Tax on the volume of landings– Tax on the value of landings– Tax on inputs [Not recommended because of

substitution effects]

Note: Nowhere used as a fisheries management method

Effects of Taxes (on landings)

Value, $

OSY= CSY

CSY Effort, e

The Sustainable Fisheries Model The Dynamic Fisheries Model

Biomass, x

Effort, e

• So, Long term gains equal to taxation revenue• Private losses along adjustment path• Remember the cost of management

Loss Profits

Tax

Lecture 4Property Rights

• Purpose: Obtain economic rents• Method: reduce or eliminate the common property

externality => private incentives coincide with public objectives

• Variants:– Licences– Sole ownership– Turfs– IQs/ITQs– Communal property rights

Property Rights Regimes: Effects

Value, $

OSY CSY Effort, e

The Sustainable Fisheries Model

Property rightvalue

• So, long term gains equal to property right value• Private gains along adjustment path• Remember the cost of management

The Dynamic Fisheries Model

Biomass, x

Effort, ee=0

x= 0

.

.

Competitive

Optimal

Property Rights (cont.)

• The above theory applies to all property rights regimes– Sole owner rights– Territorial use rights (TURFS)– Individual Quotas– Community rights

• However, the efficiency of the regime depends on the quality of the rights

• The higher the quality of the property right the more efficient the fishery

Quality of Property Rights

• Many important attributes• The following are often quoted

– Quality of Title (security)– Exclusivity– Permanence (durability)– Transferability

Property Rights Attributes:A Representation

TransferabilityTransferability

SecuritySecurity PermanencePermanence

ExclusivityExclusivity

Security

Exclusivity

Permanence

Transferability

Actual property right

Perfect property right

Some ITQ property rights

Security

Exclusivity

Permanence

Transferability

New Zealand

Iceland

1

1

1

1

Norway

Q-measures of property rights

1 2,

1 1

( ) ( ),ji

N Maa

i j ji j N

x w w x

Q SE

P(w1

+ w2T

)

Q

, , , , w1, w2>0 and w1 + w2 =1

Results of three ITQ systems

Estimated Quality of Quota Property Rights: Iceland, New Zealand andNorway

Characteristics Iceland New Zealand Norway

Security 1.00 1.00 0.90Exclusivity 0.90 0.95 0.70

Permanence 0.80 1.00 0.50Transferability 0.90 0.95 0.10

Q 0.86 0.96 0.44

Lecture 5ITQ-systems

• Shares in TAC (much superior to quantity quotas)

• Annual quota for firm i: q(i)=a(i)TAC• The q(i), being a property right, will be fished in the

most efficient manner• If the a(i) is a permanent asset the firm can plan and

will adjust its capital structure to fit.• Nota Bene: The ITQ is not a property right in what

really counts; the fish stocks themselves.– Unlike e.g. a farm property right– No stock enhancement, genetic improvements, feeding, spawning

assistance etc. will be undertaken by individual ITQ holders

ITQ markets and prices

• There will arise a market and a price for both q(i) and a(i). (Why?)

• These prices will faithfully reflect the marginal benefits of using (and holding) these quotas. (Why?)

• Price of q(i) will be approximately marginal variable costs of using these annual quotas. (Why?)

• Price of a(i) will approximately equal the expected present value of using the expected quotas for fishing. (Just as the value of any productive asset)

• It follows that the price of a(i) will provide a measure of the appropriateness of the TAC-policy.

Fisheries management under ITQs

• The fisheries authority just has to– Set the TAC– Enforce the property rights

• But setting the TAC correctly requires immense biological and economic information. (Basically everything about the fishery)

Minimum information management, MIMS

Quota values,resource

rents

Total allowable catch, TAC

MIMS in the multispecies Context

Total Quota, TAC

Quota price

Positive

Positive(i.e., fishery)

Negative

Negative(i.e., stock enhancement)

Unprofitable stockenhancement

(subsidized releases)

Profitable stockenhancement(ocean ranching)

Unprofitable fishery(subsidized removal

of predators/competitors)

Profitable fishery(Commercial fishery)

Lecture 6Community fishing rights

Setting: A group of people (N1) with property rights=> they have a degree of common interest.

Can they manage themselves well?

• N=1, easy• N>1, more difficult => need to bargain, negotiate etc.• Fundamentally a bargaining game• Nature of problem:

– Must agree on procedures (voting, majority etc.)– Must talk– Must reach a conclusion

• Some formal framework (legal) may help

Available theorems

• If each group member’s benefits increase with total benefits he will support the common good.

• That happens e.g. in limited companies (i.e. in principle)

Advantages of self-management

• Vested interest in good management=> (a) Good decisions

(b) Minimum cost management

• Have much of the best information• The government does not have to be involved

Fisheries management systems:Summary

• Only indirect economic methods work• The most promising are:

– Property rights• Sole ownership• Turfs (where applicable)• ITQs (where applicable)• Communal rights

– Taxes• Taxes on landings• Taxes on the value of landings

Lecture 7Monitoring, Control and Surveillance

• Data monitoring (monitoring and surveillance) – Gather data on the fishery and fishery operations for the

purpose of management (landings, days at sea, fishing costs etc.)

• Enforcement monitoring (monitoring and control)– Detect violations of fishery rules– Induce correct behaviour– Reporting violations (citing)

Data gathering monitoring

1. Biological monitoring (for biological research, stock assessment etc.)

–Examination of landed catch–Records of fishing behaviour (location, timing, gear, log-books, observers)

–Field trips on research vessels, –Oceanographic research–Climate research–Modelling and prediction

• These activities are usually shared between the marine research agency and the enforcement agency

2. Economic monitoring (economic research, costs and prices)– Study of fishing company accounts, – prices, – technology– fleet developments– fishing effort by gear and vessel type– harvesting functions,– cost functions

• These activities are usually carried out by an economic or fisheries economics research agency

• The economic monitoring is a very important function.

• Without it:(a) the TAC and other management measures cannot be set

optimally.(b) Progress in fisheries management cannot be judged.

• Nevertheless, this function is often underdeveloped compared to the biological research function.

• Best carried out by a special office or institute

Note: With fisheries self-management centralized data monitoring is no longer necessary

Enforcement monitoring

• Different fisheries management systems employ different controls.

=> Different enforcement monitoring is needed for different fishereis management systems

1. Biological fisheries management

TAC: monitoring of landings (at landing sites) and catch (at sea)

Area restrictions: monitoring of fishing locations (at sea, remote sensing, log books, black boxes)

Seasonal closures: monitoring of vessels in ports, monitoring of vessels at sea (observation, remote, log books), monitoring of landings (off season species in the catch) etc.

Gear restrictions: monitoring of gear (at sea and on land)

Fish size restrictions: monitoring of landings and catch

2. Direct economic restrictions

Effort restrictions: monitor effort (days at sea, fishing time, vessel size and power, gear size etc.)

Investment restrictions: monitor investments (vessel registry, vessel inspection, shipyards, import level, equipment certification)

Vessel size and power restrictions: (see investment restrictions)

Gear restrictions: (see biological fisheries management)

Other restrictions: monitoring depends on the type of restriction

3. Taxes

Taxes on the volume of landings: monitor landings

Taxes on the value of landings: monitor volume and price of landings

Taxes on inputs: monitor the purchase and use of inputs.

Tax on exports: Is it a good idea? May be in some cases.

4. Property rights

Licences: monitor fleets, check for licences (mostly in

port)

Sole ownership: not much monitoring is needed. (The owner will do it himself)

Turfs: usually not much monitoring is needed. (The adjacent owners will do it themselves)

Individual quotas: monitor catches (as landings in ports or (better) as harvests at sea or as volume in processing and trades; impose periodic (daily) harvest reporting requirements)

Community or group rights: monitor adherence to the rights (areas, quotas etc.)

Note very well!• The effort to monitor the various

restrictions varies a great deal and, consequently the cost as well.

• Taxes on landings and some property rights systems (sole ownerships and turfs) are probably the easiest to monitor

Lecture 8The cost of MCS

• Very significant • Available estimates suggests between 3-25% of

the gross value of landings (with a mean of some 8%).

• The most important cost items are:(i) Biological research(ii) Enforcement

• This high cost should affect:– The optimal fisheries policy– The choice of a fisheries management system

MCS costs(especially enforcement)

EffortEcomp

MCScosts

Impact of MCS costs on the optimal fisheries policy

Costs without MCS

Costs with MCS

EffortE* E**

Impact of MCS costs on the optimal fisheries policy

-Very high management costs-

Costs without MCS

Costs with MCS

EffortE* E**

Optimizing the MCS activity

• High costs => important to do MCS correctly and efficiently

• The problem is to minimize MCS costs subject to a desired level of MCS

• Note that there is a trade of between MCS costs and management regime effectiveness

(The more MCS => the higher MCS costs => the more effective

the FMR)

The optimal MCS level

MCS activity

$

MCS*

Marginal cost

Marginal benefits

So to determine the optimal MCS we need:

• An estimate of the MCS cost function (marginal costs)

• An estimate of the benefits of MCS (marginal benefits)

These may be difficult to obtain!

Monitoring and enforcement technology

• At land and on sea• Dockside monitoring• On-board observers• MCS vessels and airplanes• Remote sensing (satellite, radar, reporting)

• Automatic recordings (black boxes)

• The paper trail method• Optimal investment in MCS technology (cost-benefit

studies)

Who should pay?

• Governments are subject to various problems of inefficiency including rent seeking:

Rent seeking matrixDistribution of Benefits and Costs amongst the Population

Distribution of CostsNarrow Wide

Narrow I IIDistributionof benefits Wide III IV

• Only box IV is likely to be reasonably efficient

• The principle for efficiency is that those that benefit should pay!

Provision of Fisheries Management ServicesBeneficiary is the fishing industry

Arrangements Provider Payee

1 Current arrangement Government Government2 Cost Recovery Government Fishing Industry3 Contracting out Private sector Government4 Self-Management Fishing Industry Fishing Industry

• This seems to recommend self-management

Lecture 9Fisheries Judicial System; FJS

• Purpose(a) Process alleged violations(b) Apply sanctions as appropriate

• A key component of the FMR=> Important to devise the appropriate FJS

The simple theory of crime

• Basic Axiom:

Violations will occur if their expected value

to the perpetrators is positive

Benefits of Crime

Violations

Profits

Violations

MarginalProfits

Total Marginal

Costs of Crime

Violations

Marginalexpectedpenalties

Violations

Expectedpenalties

Total Marginal

The greater the benefits and lower the expected costs the more violations

Violations

$ Marginal$

Violations

More details:

Expected value: i x(i)p(i), x(i) = outcome i, p(i) = probability of outcome I

Expected value of a violation, V(z):

Let z be a violation Let (z) be the (expected) profits from the violation Let C(z) be the expected penalty for committing the violation

=> V(z)=(z)-C(z)

Example of C(z)C(z)= p1(discoveredz)p2(guiltydiscovered)p3(penaltyguilty)penalty p*penalty

Expected costs of violations

P1 P2 P3 P*0,1 0,5 0,8 0,0400,5 0,5 0,8 0,2000,5 0,1 0,5 0,0250,1 0,1 1 0,010

Arithmetic of probabilities

=> So basically p* will not be large in most cases!!

V(z)=(z)-C(z)

• C(z)=p*penalty• But p* is usually very low

=> penalty will have to be high to make V(z) negative

To get few violations

• Low benefits of violations (i.e. unrestrictive rules)

• High probability of a penalty for violations(i.e. high p* this requires a high probability of detection and therefore high MCS costs)

• High penalties (This can substitute for high p*, i.e. high MCS costs)

The design of the FJS

(1) In accordance with the theory of crime(2) Legal basis should make it sufficiently easy

to convict–Clear, operative definiton of violations–A clear stipulation of the burden of proof

(3) Effective processing of alleged violations–Administrative fines, special courts–Speedy processing.