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NAAFE FORUM: ENSURING FISHERIES BENEFITS FOR ALL GENERATIONS DISCIPLINARY AND PERSONAL PERSPECTIVES ON “ THE FISHERIES PROBLEM ”. by James E. Wilen Department of Agricultural and Resource Economics University of California, Davis. NAAFE Forum University of British Columbia, Vancouver

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slide1

NAAFE FORUM: ENSURING FISHERIES BENEFITS FOR ALL GENERATIONSDISCIPLINARY AND PERSONAL PERSPECTIVES ON “THE FISHERIES PROBLEM”

by

James E. Wilen

Department of Agricultural and Resource Economics

University of California, Davis

NAAFE Forum

University of British Columbia, Vancouver

May 2005

introduction
Introduction

CAUSE

PROBLEM

SOLUTION

how does fisheries science characterize the policy problem
HOW DOES FISHERIES SCIENCE CHARACTERIZE THE POLICY PROBLEM?

CAUSE

PROBLEM

  • Greed
  • Short sightedness
  • Prospects of wealth
  • Over-harvesting
  • Habitat destruction
  • Multi-species interaction
  • By-catch
  • Fishing down the food chain

SOLUTION

  • Tighter controls
  • Precautionary principle
  • Adaptive management
  • Ecosystem management
  • Networks of reserves
notable quotes
NOTABLE QUOTES
  • “…the shortsightedness and greed of humans underlie difficulties in management of resources.”
  • “…wealth or the prospect of wealth generates political and social power that is used to promote unlimited exploitation of resources.”
  • “…management authorities must design, justify (politically) and administer (enforce) a collection of restraints on fishing activity.”
how does economics characterize the fisheries policy problem
HOW DOES ECONOMICS CHARACTERIZE THE FISHERIES POLICY PROBLEM?

CAUSE

PROBLEM

  • Insecure
  • property rights
  • Race to fish
  • - Over-capitalization
  • - Excessive by-catch
  • - Mixed species fishing
  • - Habitat destruction
  • - Political manipulation
  • - Mixed use conflict
  • - Perverse innovation

SOLUTION

  • Fix property rights problem

- ITQs, IFQs, etc.

- Cooperatives, TURFs

wealth and innovation
WEALTH AND INNOVATION

Innovation

Competition

Organization

PROFITS

RENTS

Capitalization

LAND VALUE

  • Stewardship
  • Sustainability
  • The long view

WEALTH

the farm parable
THE FARM PARABLE
  • Without secure access privileges to land:
  • Excessive capacity
  • Resource degradation
  • Low valued products
  • Regulation
  • Perverse innovation
  • Zero surplus
  • Zero land value
the world fisheries profit loss statement
THE WORLD FISHERIES PROFIT/LOSS STATEMENT
  • Revenues $100B
  • Costs $132B
  • Maintenance $43B
  • Insurance $10B
  • Fuel $20B
  • Supplies $26B
  • Labor $33B
  • Net Loss $-32B
  • Contribution to wealth: 0
ironically
IRONICALLY…
  • In most fisheries, there is nowealth, nor are there prospectsfor generating wealth.
  • Reason:

Without secure access privileges, fishermen devote all their competitive and innovation efforts to maximizing CATCH, rather than maximizing surplus VALUE. This drives costs up to revenues.

fixing the problem addressing the cause
FIXING THE PROBLEM:ADDRESSING THE CAUSE
  • IQs, IFQs, ITQs
  • Iceland (all fisheries)
  • New Zealand (most fisheries)
  • Australia
  • Canada
  • U.S. (four fisheries)

(some fisheries)

  • Results: race to fish replaced by race to create value
  • Slower fishing (value vs. volume)
  • High-valued end markets
  • More selective gear (less by-catch/discards)
  • Reduced habitat destruction
slide17

Profits

Quota

IMPACTS OF ITQS ON PROFIT

Long-term cost savings

Immediate market gains

0

time

ITQs

significant wealth creation embedded in quota values

Rent

Share

Lease price

Ex-vessel price

ratio

SIGNIFICANT WEALTH CREATION EMBEDDED IN QUOTA VALUES
  • Example:

Capitalization

factor

Post-ITQ

revenue gains

Pre-ITQ

example new zealand
Example: New Zealand

Data from: James Sanchirico, “Sustainable Fisheries: the New Zealand Experience” presentation at the Fourth Annual International Sustainability Days Conference, Stanford University, October 13-16, 2004. See also Richard Newell, James Sanchirico and Suzi Kerr, “Fishing Quota Markets”, Journal of Environmental Economics and Management, 49 (3), 437-462, 2005.

quota value

5~10

Pre-ITQ revenues

QUOTA VALUE

Total

Quota

Value

0

time

ITQs

wealth creation
WEALTH CREATION

WEALTH CREATION

Constituency

concerned with:

  • Reduced conflicts over
  • TACs
  • Pay for management
  • Cooperative science
  • Stewardship ethic
  • Sustainability
  • The long-view
  • Innovation that
  • increases value
example new zealand22
Example: New Zealand

Data from: James Sanchirico, “Sustainable Fisheries: the New Zealand Experience” presentation at the Fourth Annual International Sustainability Days Conference, Stanford University, October 13-16, 2004. See also Richard Newell, James Sanchirico and Suzi Kerr, “Fishing Quota Markets”, Journal of Environmental Economics and Management, 49 (3), 437-462, 2005.

harvester co ops
HARVESTER CO-OPS
  • Examples:

Bering Sea Pollock Co-op

Pacific Whiting Co-op

Chignik Salmon Co-op

turfs territorial use right fisheries

Shima district,

Mie Prefecture

Tokyo

TURFS(Territorial Use Right Fisheries)
  • Examples:
  • Japanese Fishery Management Organization
  • Chilean Management and Exploitation Areas
how to rebuild stock and or implement reserves 1

Profits

0

time

HOW TO REBUILD STOCK AND/ OR IMPLEMENT RESERVES (1)
  • Without property rights

Potential

Actual

Implementation

how to rebuild stock and or implement reserves 2

Profits

0

time

HOW TO REBUILD STOCK AND/ OR IMPLEMENT RESERVES (2)
  • With property rights

Implementation

discussion 1
Discussion (1)
  • Fisheries management, and fisheries scientists, tend to focus on the symptoms rather than the cause of overfishing.
  • The cause is not greed or the prospects of wealth.
discussion 2
Discussion (2)
  • Rather, it is that current institutions and management channel self-interest to maximize catch rather than value.
  • Consequence: no surplus value and no wealth in fisheries.
  • Irony: it is the absence of wealth or prospects for wealth that eliminates the stewardship ethic.
discussion 3
Discussion (3)
  • Solution: create secure access privileges – ITQs, harvester coops, or TURFs.

Can be designed and implemented to address most objections.

  • Result: real wealth will be created almost instantly. Moreover, expected wealth gains will also immediately be capitalized into access privilege values.
discussion 4
Discussion (4)
  • My rule of thumb – 5~10 current revenues.
  • This wealth immediately generates a constituency interested in preserving and increasing the capitalized value.
  • Value-increasing competition and innovation only enhance the stewardship ethic.