Free-market Environmentalism And Fish Populations

One of the most important insights of the past 30 years is how property rights definition over natural resources can align economic and environmental incentives. If you own something, you have the right to its future use, and to alienate (sell, trade, give away) that right. Note the phrase “future use”. This is really important when discussing natural resources, and fish are a good example of this forward-looking aspect of property rights. Problems of overfishing in the past 50 years (some would claim even longer) have caused the decline of the North Atlantic cod population and the North Atlantic fishing industry. One way to get out of that vicious circle is to define fishermens’ property rights in fish populations, and make those rights tradable.

This Forbes column by Robert Stavins, an environmental economist at Harvard University, hits the nail on the head. Stavins’ column does a nice job of describing what Garrett Hardin called the “tragedy of the commons”, which I prefer to call the “tragedy of open access” to illustrate the point that the problem arises from either the inability or the unwillingness to define and enforce property rights/use rights. An excerpt:

The conventional restrictive regulatory approaches have driven up costs. If the government limits the season, fishermen put out more boats. If the government limits net size, fishermen buy more costly equipment, like sonar. Economists call this overcapitalization. Costs go up for fishermen, but pressure on fish stocks is not relieved.

The answer is to adopt the same type of innovative policy that has been used for decades in the realm of pollution control: tradable permits. Sixteen countries, some with economies more dependent than ours on fishing, have successfully adopted such systems. New Zealand has had one in place since 1986; it has put a brake on overfishing, restored stocks to sustainable levels and increased fishermen’s profits.

There are several tradable quota systems already in operation in the U.S., including for Alaska’s Pacific halibut and Virginia’s striped-bass fisheries. The time is ripe for broader adoption of this innovative approach, because a shortsighted congressionally imposed ban on the establishment of new quota systems has recently expired.

The first step in establishing a quota system is to determine the total allowable catch. The next crucial step is to allocate shares of that total limit to fishermen in individual quotas that are theirs and theirs alone (read: well-defined property rights).

New Zealand’s tradable permit system has been a stunning success, and these and other experiences should lead us to Stavins’ conclusion: use property rights and markets to sustain fish populations and the viability of the fishing industry in the long run.