Tuesday, July 29, 2008

Markets Can Make Fisheries Sustainable

This article discusses government regulatory policy to combat over-fishing. The author of the article focuses on the effectiveness of IQF's (Individual Transferable Quotas) in the fishing industry. The system is similar to tradable permits in the control of pollution. The government issues IQF's to fishermen in an attempt to counteract overuse of popular fishing areas in the ocean ( a common resource). The IQF's establish well-defined property rights for fishermen. The author comments on the higher effectiveness of the IQF system in contrast to other methods of government control on the fishing industry. Governments can limit the fishing season or net sizes, but both of these options lead to over-capitalization. Costs for the fishermen increase but the pressure on fish stocks in not relieved. The IQF's on the other hand lead the market to more efficiency because the quotas are tradable, they lead to increased safety through reduced incentives to go out in inclement weather, and they eliminate the incentive for the government to shorten the season, leading to an improvement in the quality supplied. New Zealand uses an IQF system to regulate nearly its entire fishing industry. In the United States, IQF's have improved the over-fishing of Alaskan halibut and Virginian striped-bass. This article provides a real-world example of how to efficiently use and maintain a common resource as discussed in Chapter 20.  


Greg Delemeester said...

Nice post. IQFs represent an application of the Coase Theorem. The Coase Theorem argues that, if property rights are well defined and transactions costs are low, then private bargaining can solve an externality problem. ITQs are an attempt to define property rights and facilitate efficient harvesting of fish.

christa schott said...

This article seems to be a very good example of how the over use of common resources are being stopped by the government. Theses IQF’s are also protecting the habitat, and allowing the fish to replenish themselves so they will be around for future generations.