Ragnar Arnason

Minimum Information Management in Fisheries

This paper deals with problems of optimal management of common-property fisheries. It advances the proposition that many fisheries management schemes, which are theoretically capable of generating efficiency, are actually not practicable, owing to their huge informational requirements. This applies, for instance, to management by means of corrective taxes/subsidies. The paper proceeds to show that there exists, under fairly unrestrictive conditions, market-based management systems that require minimal information for their operation, but lead nevertheless to efficiency in common-property fisheries. One such system is the individual transferable share quota system.

On Catch Discarding in Fisheries

This paper examines the economics of catch discarding in fisheries. To study this issue a simple dynamic fisheries model is constructed. On the basis of this model it is demonstrated that in a differentiated fishery discarding of catch may be socially optimal. The paper goes on to show that individual firms in a free access, competitive fishery employ the socially optimal discarding rule. In contrast, the individual transferable quota (ITQ) fisheries management regime tends to generate an excessive incentive for discarding catch. The problem, however, does not appear to derive from the ITQ system as such. Rather, it seems to depend on the imperfect application of the system to real fisheries. The concept of a discarding function is defined and it is shown that at least within the framework of the model employed the discarding function for an ITQ fishery dominates the one for free access, competitive fisheries. Numerical examples are provided. Finally, possible remedies of the discarding problem are briefly discussed.

Property Rights in Fisheries: Iceland’s Experience with ITQs

The fundamental problem of economic inefficiency in fisheries, the so-called common property problem, may be seen to be caused by inadequate or lacking property rights in the underlying natural resources. The introduction of Individual Transferable Quotas (ITQs) into fisheries represents an attempt to correct this failure. ITQs, however, are not property rights in the relevant natural resources, i.e. the fish stocks and their habitat. They are merely harvesting rights and thus far from ideal as property rights. Nevertheless, ITQs have been introduced in numerous fisheries around the world, apparently with generally, even consistently, good economic results. This paper outlines the basic theory of property rights and the strengths and weaknesses of ITQs as property rights in fisheries. The paper goes on to discuss the Icelandic ITQ system and compares its property rights value with that of the New Zealand ITQ system and the Norwegian IQ system. Finally, the paper reviews some measures of the economic outcomes of the ITQ system in Iceland.

The Icelandic Individual Transferable Quota System: A Descriptive Account

This paper provides a brief description of the evolution and current structure of the individual quota system (IQ) in the Icelandic fisheries. This particular fisheries management system was introduced at different times in different fisheries—in the herring fisheries in 1976, in the capelin fishery in 1980 and the demersal fisheries in 1984. Since 1990 all Icelandic fisheries have been subject to a uniform system of individual transferable quotas (ITQs). The paper discusses the social and economic impetus for the initial adoption of the ITQ fisheries system in the various fisheries, sketches its subsequent development and describes the key elements of the current system. Assessments of the economic impact of the ITQ system are presented in the last part of the paper. Although a definitive study of this impact is not available, the various indicators presented generally indicate an improvement, sometimes substantial one, in the economic efficiency of the fisheries in question.

Costs of fisheries management: the cases of Iceland, Norway and Newfoundland

This paper reports on the results of an investigation of management costs in the fisheries of Iceland, Newfoundland and Norway and discusses them in a more general framework. Management costs are defined as costs necessary to overcome the problems associated with common property. The question of whether management costs should be paid by industry is discussed, as is the likely effect of user pay on the efficiency with which management is provided. Since management has public goods characteristics, it is likely that there is an unavoidable role for government in providing these services. The question of who pays for it is separate, and recovering costs from industry has both efficiency and optimal taxation aspects. A greater involvement in management by industry further raises the question of compatibility between the industrys interests and the public interest. Measured as percent of gross value of fish landings the management costs are by far highest in Newfoundland (15-25%), lowest in Iceland (about 3%), with Norway in the middle (about 10%). Management costs thus appear to be substantial and quite variable. This gives rise to three conclusions. First, when calculating optimal harvesting and investment paths one must take the management costs of implementing these paths explicitly into account. Second, what is the economic efficiency of management? Could the same level of benefits be produced at lower costs? Third, can fisheries management expenditures of the magnitude discussed be justified in the sense that the benefits exceed the costs?

Optimal Feeding Schedules and Harvesting Time in Aquaculture

This paper considers the interdependent questions of what feeding schedule to adopt and when to harvest in aquaculture. Profit maximizing feeding schedules and harvesting times are derived under different specifications of the biomass growth function. While few generally valid restrictions on the shape of profit maximizing feeding schedules appear to be available, an important result of the analysis is that provided the rate of discount is positive marginal revenue of feeding must exceed marginal cost except at harvesting time when the two are equal. The problem of selecting the optimal feeding schedule in aquaculture exemplifies a much wider class of production problems characterized by the requirement that inputs have to be supplied some time before outputs are obtained. It follows that many of the general results derived in the paper are applicable to this more general class of production problems.

On the ITQ fisheries management system in Iceland

This paper provides a brief description of the origin, evolution, structure and performance of the ITQ (individual transferable quota) system in the Icelandic fisheries.The current ITQ fisheries management system in Iceland was instituted gradually over a period of 15 years. An IQ (individual quota) system was initially imposed in the herring fishery in 1975 and transformed into a fully fledged ITQ system in 1979. An IQ system was introduced in the capelin fishery in 1980 and turned into an ITQ system 1986. An ITQ system was introduced in the demersal fisheries in 1984. Since 1990 all fisheries within the Icelandic EEZ (exclusive economic zone) have been subject to a uniform system of individual transferable quotas with only minor exceptions. The system, however, is still evolving and consequently subject to further modification and change.The paper discusses the social and economic impetus for the initial adoption of the ITQ fisheries management system in the various fisheries, sketches its subsequent development and describes the main features of the current system. It presents assessments of the biological and economic impact of the ITQ system and discusses its future prospects.The paper finds clear evidence of positive biological and economic impacts of the ITQ system in the herring and capelin fisheries. In the demersal fisheries, the evidence is more mixed, although also in these fisheries there is evidence of substantial economic benefits stemming from the ITQ system.

Property Rights in Fisheries: How Much Can Individual Transferable Quotas Accomplish?

Individual transferable quotas (ITQs) are one of the property rights instruments that have been employed to improve economic efficiency in fisheries. ITQs are not high-quality property rights in the basic fundamental marine resources on which fisheries are based. As a result ITQs cannot be expected to generate full efficiency in the use of these resources. This article examines to what extent ITQs are capable of generating economic efficiency in fisheries. It is shown that ITQs can greatly improve efficiency in fishing. Moreover, by including recreational fishers in the system, ITQs can strike an efficient balance between commercial and recreational fishing. On the negative side, it is shown that on their own, ITQs are not capable of generating full efficiency in fisheries. In particular, ITQs are not sufficient for setting the socially optimal total allowable catch, ensuring the optimal use of the ecosystem, or harmonizing fishing with conflicting uses of marine resources such as marine tourism, mining, and conservation. Potentially counteracting these limitations, ITQ holders as a group have an incentive to manage overall ecosystem use for the long-term benefit of their fishery and negotiate the adjustment of their fishing activity toward the interests of conflicting uses of the marine resources.

The Norwegian Spring-Spawning Herring Fishery: A Stylized Game Model

This paper presents an empirically based, game-theoretic model of the exploitation of the Norwegian spring-spawning herring stock, also known as the Atlanto-Scandian herring stock. The model involves five exploiters; Norway, Iceland, the Faroe Islands, the EU, and Russia and an explicit, stochastic migratory behavior of the stock. Under these conditions Markov Perfect (Nash) equilibrium game strategies are calculated and compared to the jointly optimal exploitation pattern. Not surprisingly, it turns out that the solution to the competitive game is hugely inefficient, leading very quickly to the virtual exhaustion of the resource. The scope for cooperative agreements involving the calculation of Shapley values is investigated. Although the grand coalition of all players maximizes overall benefits, such a coalition can hardly be stable over time unless side payments are possible.

Optimal Feedback Controls: Comparative Evaluation of the Cod Fisheries in Denmark, Iceland, and Norway

The economic efficiencies of the Danish, Icelandic, and Norwegian cod fisheries are examined. For this purpose, nonlinear aggregate models of these fisheries are constructed. Comparing the calculated optimal harvest and biomass quantities with the actual fisheries provides a measure of the degree of efficiency in these fisheries. The comparisons confirm that the cod harvesting policies of these countries have been hugely inefficient in the past. It appears that inefficiency has been increasing over the last three to four decades, even after TAC regulations replaced open access, indicating that the management policies adopted by all three countries have failed to cure overfishing. Copyright 2004, Oxford University Press.