+t.\'l.T OF Co

.. "'01il' "'", q'f" 'k

t~ t!'J ..; NOAA Technical Memorandum NMFS-F/NEC-99

.f'() '+~

S1".qTES Of po:

Sole Ownership

of

Living Marine Resources

u. S. DEPARTMENT OF COMMERCE

National Oceanic and Atmospheric Administration

National Marine Fisheries Service

Northeast Region

Northeast Fisheries Science Center

Woods Hole, Massachusetts

May 1993
Recent issues in this series

85. Factors Influencing Spring Distribution, Availability, and Recreational Catch of Atlantic Mackerel (Scomber

scombrus) in the Middle Atlantic and Southern New England Regions. By William J. Overholtz, Reed S.

Armstrong, David G. Mountain, and Mark Terceiro. August 1991. iii + 13 p., 9 figs., 3 tables. NTIS Access. No. PB92·

160209.

86. Status of Fishery Resources off the Northeastern United States for 1991. By Conservation and Utilization

Division, Northeast Fisheries Science Center. September 1991. iii + 132 p., 6 figs., 72 tables. NTIS Access. No. PB92·

113786.

87. Evidence of Structural Change in Preferences for Seafood. By Steven F. Edwards. January 1992. iii + 12 p., 3 figs.,

I table. NTIS Access. No. PB93·114650/AS.

88. Synopsis of Principal Diseases of the Blue Crab, Callinectes sapidus. By Gretchen A. Messick and Carl J.

Sindermann. January 1992. iii + 24 p., 13 figs., 2 tables. NTIS Access. No. PB92·219757.

89. Proceedings of the NEFC/ASMFC Summer Flounder, Paralichthys dentatus, Aging Workshop, 11·13 June

1990, Northeast Fisheries Center, Woods Hole, Mass. By Frank P. Almeida, Raoul E. Castaneda, Roman Jesien,

Richard E. Greenfield, and John M. Burnett. January 1992. iii + 7 p., 8 figs., 2 tables. NTIS Access. No. PB93·114643/

AS.

90. Fish and Megainvertebrates Collected in the New York Bight Apex during the 12-Mile Dumpsite Recovery

Study, July 1986 • September 1989. By Stuart J. Wilk, Robert A. Pikanowski, Anthony L Pacheco, Donald G.

McMillan, Beth A. Phelan, and Linda L Stehlik. October 1992. iv + 78 p., 9 figs., 2 tables, 2 app. NTIS Access. No. PB93·

158772.

91. The Large Marine Ecosystem (LME) Concept and Its Application to Regional Marine Resource Management

-- 1-6 October 1990, Monaco: Conference Summary and Recommendations. By Kenneth Sherman and Thomas

L Laughlin, eds. October 1992. v + 37 p., 3 app. NTIS Access. No. PB93·185965.

92. Report of the Meeting of the ad hoc Committee on Large Marine Ecosystems, 22-23 March 1991, UNESCO

Headquarters, Paris, France. By Kenneth Sherman and Thomas L Laughlin, eds. October 1992. iii + 19 p. + 1 erratum,

I fig., 4 app. NTIS Access. No. PB93·215747.

93. Large Marine Ecosystems Monitoring Workshop Report: 13·14 July 1991, Cornell University, Ithaca, New

York. By Kenneth Sherman and Thomas L Laughlin, eds. October 1992. iii + 22 p., 2 tables, 2 app. NTIS Access. No.

PB93·234284.

94. Summary of the Symposium on the Northeast U.S. Shelf Ecosystem: Stress, Mitigation, and Sustainabilty -.

12-15 August 1991, University of Rhode Island, Narragansett, Rhode Island. By Kenneth Sherman, N. Jaworski,

and T. Smayda, eds. October 1992. v + 30 p., 3 app. NTIS Access. No. PB94·103439.

95. Status of Fishery Resources off the Northeastern United States for 1992. By Conservation and Utilization

Division, Northeast Fisheries ScienceCenter. October 1992. iv + 133 p., 60 figs., 67 tables. NTIS Access. No. PB93·144103.

96. An Indexed Bibliography of Northeast Fisheries Science Center Publications and Reports for 1989. By Jon A.

Gibson. November 1992. iii + 20 p. NTIS Access. No. PB93·213601.

97. Water-column Thermal Structure in the Middle Atlantic Bight and Gulf of Maine during 1978-92. By Robert

L Benway, Kevin P. Thomas, and Jack W.Jossi. March 1993. viii + 154 p., 147 figs., 2 tables. NTIS Access. No. PB93·

223147.

98. Marine Invertebrate Cell Culture: Breaking the Barriers·· Proceedings of an International Workshop, 16 June

1991, Anaheim, California. By Aaron Rosenfield, ed. March 1993. vi + 25 p., 2 tables, 3 app. NTIS Access. No.

PB93·213593.
NOAA Technical Memorandum NMFS-F/NEC-99

This TM series is used for documentation and timely communication of preliminary results,

interim reports, or special purpose information, and has not undergone external scientific review.

Sole Ownership

of

Living Marine Resources

Steven F. Edwards" Allen J. Bejda2 , and R. Anne Richards'

1Woods Hole Lab., National Marine Fisheries Serv., Woods Hole, MA 02543-1097

2 J. J. Howard Marine Science Lab., National Marine Fisheries Serv., Highlands, NJ 07732

U. S. DEPARTMENT OF COMMERCE

Ronald H. Brown, Secretary

National Oceanic and Atmospheric Administration

D. James Baker, Administrator

National Marine Fisheries Service

Rolland A. Schmltten, Assistant Administrator for Fisheries

Northeast Region

Northeast Fisheries Science Center

Woods Hole, Massachusetts

May 1993
NOTE ON SPECIES NAMES

The NMFS Northeast Region's policy on the use of species names in technical publications and reports is to follow the

American Fisheries Society's (AFS) lists ofscientific and common names for fishes (Robins et al.1991)', mollusks (Turgeon et a1.

1988)", and decapod crustaceans (Williams et a1. 1989)<, and to follow the American Society of Mammalogists' list of scientific

and common names for marine mammals (Wilson and Reeder 1993)d. This policy applies to all issues of the NOAA Technical

Memorandum NMFS-F/NECand ·F/NER series.

Robins, C.R. (chair); Bailey, R.M.; Bond, C.E.; Brooker,J.R.; Lachner, E.A.; Lea, R.N.; Scott, W.B. 1991. Common and scientific names of fishes from the United

States and Canada. 5th ed. Amer. Fish. Soc. Spec. Pub/. 20; 183 p.

h Turgeon, D.D. (chair); Bogan, A.E.; Coan, E.V.; Emerson, W.K.; Lyons, W.G.; Pratt, W.L; Roper, C.EE.; Scheltema, A.; Thompson, EG.; Williams, J.D. 1988.

Common and scientific names of aquatic invertebrates from the United States and Canada: mollusks. Amer. Fish. Soc. Spec. PubI. 16; 277 p.

, Williams, A.B. (chair); Abele, LG.; Felder, D.L; Hobbs, H.H., Jr.; Manning, R.B.; McLaughlin, PA.; Perez Farfante, 1. 1989. Common and scientific names of

aquatic invertebrates from the United States and Canada: decapod crustaceans. Amer. Fish. Soc. Spec. PubI. 17; 77 p.

d Wilson, D.E.; Reeder, D.M. 1993. Mammal species ofthe world: a taxonomic and geographic reference. Washington, DC: Smithsonian Institution Press; 1206

o.
INTRODUCTION

But why, it is asked] does the secondary Jaw of nations

which {separa.tes animals oftile forest and fish ofthe rivers

Froin the ancient cOlntnunityofrightsJcease to operate the

same way wben we considerthe sea. I reply, beesuse in the

{orrn~r case it is expedient and necessary, For everyone

admitsthatifa greatmanypersonshunton the landor fish

in the river, the forest is easily exhausted ofwild animals

and the river of fisht but such a contingency is impossible

in the case ofthe sea,

(H. Grotius, writing in the 1600s;

see Keen 1988~ p. 24)

Even when we perceive the errors of the past a.nd the

dangers ofthe future, it is not obvious how we should, or

can, alter human institutions to improve human welfare.

In this crowded world ofours, UnmSlJaged COUlmons are

no longer tolerable: but ho~Y shall we manage thetn?

(Hardin and Baden 1977, p. xii, their emphasis)

Contrary to 17th century thought, open access depletes

living marine resources and their economicvalue despite earnest

attempts' by governments throughout the world to regulate the

fishing industry (Christy 1978; Crutchfield 1961, 1979; Scott

1979; Wilen 1989). In response~ coastal states have begun to

institute usufructuary rights in fisheries, focusing primarily on

waysto limit the number ofvessels or on ho\ov bestto assign catch

quotas or fishing effort to individual fishermen (MoUett 1986;

Muse and Schelle 1989; Neher et aI. 1989; Pearce 1979; Rettig

and Ginter 1978). In this document, however, the Research

Council of the Northeast Fisheries Science Center explores the

largely overlooked idea of sole ownership, including common

property and individual private property institutions.

Neitherlimited entry norindividual quota systems compre..

hensively address the problems inherent with open access or

state ownership. Limited entry alone fails to conserve fish

resources because it institutionalizes excess capacity of fishing

fleets and because fishermen are adept at undermining govern..

ment restrictions on fishing technology and practices (Wilen

1989). Individual quotas, including ITQs, provide fishermen

with incentives to economize 'on fishing effort. Howevert

significant elements of open access persist under any individual

quota system because fishermen are inclined to maximize the

,return on their quota, not to harvest in ways that husband fish

resources(Copes 1986;Keen 1983). In addition, agovernment's

role in setting the overall quota for a fishery inviteslobbying that

in itselfdissipates valuebecause the time and effort expendedon

influencing regulations does not make a net contribution to a

nation's production of goods and services (e,g., Ackroyd et aJ.

1990; Anderson and Hill 1991; Hide and Ackroyd 1990).

Sole ownership would assign the exclusive rights to use a

discrete. self-sustaining fish resource to a single public or private

Page 1

entity. such as a cooperative, government board, private corporation, or international authority, to use Scott's (1955) ex..

an\ples, Although considered by many to be politically unwork·

able, private ownership could potentially provide incentives to

husband a fish resource for either commercial exploitation or

sale to other interests, including recreational fishermen, conser..

vationists, and oil companies, Indeed, prior to the 20th century,

the federal government gave orsold more than abillion acres of

federal holdings of natural resources to fanners; miners, ranch"

ers, timber companies, and railroads. OUf current distrust of

markets is a legacy of Gifford Pinchot and the Forest Service

whose views of markets were influenced by open..access exploitation, not by harvest when property rights are unattenuated.

Sole ownership tends to be treated abstractly or ambiguously in the fisheries literature, but there are many real world

instances, including those in the United States. For example.

snlall communitiesand associations have exercised territori.al use

rights in coastal waters throughout the world for centuries

(Christy 1982). In the United States, a sizable fraction of the

oyster beds along the coasts of the Atlantic Ocean and Gulf of

Mexico are privately owned or leased (Agnello and Donnelley

1979). Also noteworthy is the businesslike manner inwhich the

U.s. government managed the Pribiloffur seal fishery through..

out most ofthe 20th century (National Advisory Committee on

Oceans and Atmosphere 1984).

The Research Council's inquiry into sole ownership is

intende~ to promote an informed and timely evaluation of

alternative institutions for management of living marinere..

sources within the ZOO-mile limits of coastalstates. Although we

only scratched the surface, it is apparent that the potential

benefits of sole ownershipt particularly private forrnst warrant

continued investigation.

STATUS OF U.S. FIS;H

RESOURCES AND FISHERIES

Wealth thatisfree for allis valued bynonebecause hewho

is foolhardy enough to wait for its proper time ofuse will

only find thatit has.been taken by another..,.the fish in the

sea. are valueless to the fisherman, because there Js no

assurance that they will be there for him tomorrow ifthey

are left behind today.

(Gordon 1954, p. 135)

TRAGEDY OF THE FISHERY

C'OMMONS

In his popular allegory. Hardin (1968) attempted to illus..

trate the "tragedy ofthe commons" with a common pasture.! As

a rational being seeking to maximize his own gain, each,

1 Actually, ~rdin mistakenly ~efers to commo? property ~res communes) when he means open·access resources (res nul//us). See Bromley (1991), He also failed

to see the VIrtues of the EnglISh commons prior to the tIme prices and technology favored closure (Hanna 1990). .
Peg. 2

herdsman will keep as many cattle.s possible,on the paswrc. In

his mind, tnc personal gain from adding an additional aninul to

his herd is outweighed by the effects of the animal on the

pasture', produaivity and, theTefore, all herdsmen. Also.

widwxn a bindinl contract, other herdsmen make similar

deci:stons. Together, then, the herdsme:n exhaust the pnxluctiv.

ity of the pasture.

And so it goes for any open·access resource, whether it be

grazing land, forests, water supplies. minerals, or fish. As

Gordon (1954) txplained in his seminal piper, open-access

rcsourm art not valued.

RESOURCE DEPLETION AND

EXCESS CAPACITY

The usCongress intended the Magnuson Aa to prevent

overflshing while achieving optimum yield from each ftshery.

Although iIl-defmcd, -optimum- rd'm, in part, to e(fident use

of fuh re50UfCfS (or lIeIfood ,00 recreation. Eight regional

fishery mlnagement councils (regional councils) were established to -limit llCCC$$ to the fishery in order to achieve optimum

';'1.1'-

Despite the provision for limited, Of conrrol.kd, access, and

about 15 yean ofmanaeement by regional councils, aca:ss

to fish rtSOUfCCS prevailsinUSwarers.1 Foreign fleets have been

virtually replaced by technolos:k:ally advanced domesric f1ects,

preventing already ovetftshed stocks,such as haddock, Atlantic

cod, and Atlantic halibut in the Northwest Atlantic, from

recovering. In contrast ro expectations, neither commercial

landings nor gross revenues (adjusted for inflation) in the

National Marine FISheries Service'. (NMFS) Nonhea.u Region

or in the conterminous United States increased signifICAntly

rompa.rcd to 1977 (Figures Iaand Ib). (The NMFS Northeast

Region, hereafter called the Northeast, comprises the coastal

states from Maine to Virginia, the Great lakes states, and

Pennsylvania and West Virginia) In fact, after experiencing

losses in traditional gToundflSh fISheries durine tht 1980s, Us.

commercill fishermen redirected effort at previously

·urxkrucilized" species, including Alaska groundflShes and, in

the Northwest: Atlantk, pot1ock, hikes, and elasmobraochs.

Poor landinp reflect the depleted &titus of the ItlXks. A

report commissioned by the National Oceanic and Atmospheric.

Administrarion (NOAA) in 1985 found that by the mid.198Os,

SO percental the ffilllaltJnent units (ie., userMlapofspecies

or steeb covered by • fishery management plan) wen! being

overflShed by domestic fIeeu (Hargiset.1. 1986). The majorlty

ofthe: overfished species listed in the NOAA report were from

the Nonheast (e.g., groundfllhes and sea sa.lIops) and the Gulf

of Mexico (e.g., mackerels and reeffJsh). In addition, the list of

ove:rapitaliud fuheries included Atlantic surfcJams and PacifIC

halibut and other groundfishes (e.g., sablefish), 85 well as most

of the overfished species.

Four years later, in its assessment ofthe ntedsofNMFS,the

National Hsh and Wildlife Foundation reported little positive

change in the list of overflShed species (Chandlu and Turnbull

1990). In addition, the foundat'on emphasized the following

trends, which were apparent as of 1989:

L Fish stocks managed under 150fthe 30 manage·

ment plansdeclined siner: theMagnuson Act took

effea. in 1977, and many, including Nonheast

groundfl$hes, were still declining.

2. Ten of the overflShed units would require 5·20

years to recover, even if all fishinG ceased.

3. Stocks of several spKles that recently Ixcame

fully exploited are now declining, including Gulf

clMexicoshrimp,Pacifiegroundfssha, and Alaska

poI1od.

By 1989, management units that were listed as being either

overflShed or fully exploited and decreasing constituted roughly

one-third of the total Us. hatvt:St of finfish and shellfish.

PROFITABILITY OF U.S. FISHING

INDUSTRY

Economk theory predKt! that the profits which are a«rib.

utable to the productivity of a ftsh resource will attract entry in

an open..ca:u llshery until the.resource is depletedand its value

dissipated. (Gordon 1954). Three studteli bear out: this theory.

In the first, Norton er ..L (1985) found that profits in four

northeastern US. fisheries..American lobster, groundfish, sea

scallop, and Atlantk surfclam and ocean quahog·-declined

between 1976 and 1982. Kearney/Centaur Corp. (1988)

reached similar concluskms for 60 pe:rcent of the fISheries that

were managed by ftShery management plans by 1986, including

VOOn(ifIshes and sea scallop' in the Northeast.

Kearney/Centaur (1968) also reported that profitabilityof

40 percent of the fisheries it studied either remained stable or

increased during 1976086, including gains in fISheries for red.

drum in the Gulf of Mexico, Tanner and red kina: crabs off

Alaska. and Alaska voundflShes. Howevff, within only a few

yean, most of these steeb were either fully exploited Ind

decreasing or, in the case of red drum, already overftshed,

accordina: to the National FISh and Wildlife Foundation (Chandler Ind Tumbulll990).

Conrad (1987) reported similar resultsfor the U.S. ftShing

industry lSI whok. Durina: 1977-85. when foreign fleets were

IrodIldtIM(oIIowirot:(I) IlmittdmltytotM putJl: 1Cirv.fOlhtry (or b1udin ru....;(2) limiltd entrY to Pacif'lCalmon flshcriet in OrO(lOl'land Wuhil\illOn'

(J) ITQ of AtIantk IUriclamtand ocan quahop In tM Nort'--:; and (.of)' ITQ IMnql:lMnt ol....,.mllsh in d~ Southeasc. '
PageS

10 ----------------------,

'"' ......

.- ........... ..,.,..,.--,., ..,.~--_ ........ ~-.

". .... "".... '",

"

1981 1985 1989

0-1-------..-------..,..------..... 1981 1985 1989 19770-1-------...-------,----------1

1977

Year Year

Total U..S..

North•••t ..eglon

• -. Oonterminoul atatea Totel U..S..

Not the••t region

Contermlnou. atatea

Figure 1a. Size (in billions of pounds) of U.s. commercial harvest of

fish resources, exclusiveofjointventures, in the Northeast

(i.e., coastal states from Maine to Virginia, Great Lakes

states, and Pensylvania and West Virginia}t in states

conterminous to the Northeast, and in the United States

as a whole during 1977..89. (Source: various annual

issues of Fisheries ofthe United States. Available from:

National Marine Fisheries Service, 1335 East·West Hwy.,

Silver Spring, MD 20910.)

Figure Ib~ Revenues (in billions of 1989 U.S. dollars) from U.S.

commercial harvest of fish resources, exclusive of joint

ventures, in the Northeast (i.e., coastal states from Maine

to Virginia, GreatLakesstates, and Pensylvania and West

Virginia), in states conterminous to the Northeast, and in

the United States as a whole during 1977·89. (Source:

various annual issues of Fis1Jerje~~ ofthe United States.

Available from: National Marine Fisheries Service, 1335

East-West Hwy.• Silver Spring, MD 20910.)

greatly reduced in U.S. waters, .net earnings soon peaked and

then became negative following buildup of the U.S. fleet.

Conrad (1987) concluded that not quite one decade after the

Magnuson Act took effect, fisheries in what becameU.s. waters

returned to the ovemshed situation previously created by

foreign fleets.

ECONOMIC VALUE OF FISH

RESOURCES

Clearly, under open access, private industry will deplete a

resource and dissipate its value in the competitive pursuit of

profit.3 However, reduced profits do not address the broader

concerns of economists where resource depletion is concerned.

In thissection, we attempt to explain what resource economists

have in mind when speaking of benefits, costs, and efficiency.

Achieving maximumeconomic (allocative) efficiency from

the nation's fish resources·..modified by other important social

goals·..is espoused by the Magnuson Act. This policy is akin to

"getting the most" from the nation's pools of labar, capital, and

natural resources, hence its appeal. Maximum economic effi·

ciency is tantamount to maximum net economic value....J.e., the

greatest ndistance" between the gross value of fish to the public

(including re,creationists and those people who value species

conservation) and the social economic costs of catching and

supplying fish.

The gross economic value ofa good orservice, such as fish,

is defined as the maximum amount of income that people are

willing to spend to obtain fish, taking into account tastes and

preferences. The reference to "maximum" should imply being

indifferent between using or not using fish or the marine

environment for food, recreation, or conservation. That is,

paying one's maximum willingness"to·pay to obtain the good or

service in question is tantamount to not having the good or

service, butspending the same amount on other things that are

valued. '

The gross economic value of a good or service is approxi·

mated by the area behind a demand curve (Figure 2a). Market

prices and the quantities sold at each price are used to estimate

demand. Demand is negatively sloped because satiation makes

people less and less willing to spend money on additional

amounts of a good or service. However, it is the constraint that

1 Although not treated here, recreational fIShermen also dissipate resource rents in an effort to maximize personal utility, or'well-being.
Page 4

10 20

Quantity of Fish

Sooial Supply

""

$12

$

<3

..........

!

c

$8 .6

J.-Z

.........

's.

tv

$0

10 20 0

Quantity of Fish

.0

o

112 ---------------------,

Figure 2a. Economic value as depicted with a generalized demand

curvei

Figure 2b. Social ,costs as depicted with a generalized supply curve,

one's income places on purchases·..not market prices....that gives

economic value monetary units. In theory, any constraint on

behavior, including one's leisure time, could also be used to

measure economic value.

In contrast, social economic costs of supplying a good or

service, such as fish, are defined in terms of opportunity costs,

or the foregone economic value ofthe goods or services that the

labor and capital used to capture and supply fish could have

produced if employed elsewhere in the economy. Opportunity

costs include the value of goods and services that the entrepreneur could produce if his/her time and money were invested

elsewherei

Soci,al economic costs tend to be measured by the costs of

employing labor, capital, and other productive resources, although factors such as marketstructure and alternatiye employ.

ment opportunities must be considered (Figure 2b). For

example, the financial cost of crewto a vessel owne'r isthe crew's

share of landings revenues. However, if the crew had little or

no other employment options, the social economic costs ofthem

fishing would be zero because no production is foregone

elsewhere in the economy. In contrast, under full employment

in a perfectly competitive economy., the crew's salary is math~

ematically equal to opportunity costs and, therefore, social

economic costs.

The three components of net economic value that are

germane to maximizing economic efficiency...<onsumer surplus,

producer surplus, and resource rents-.-ean be developed from

these notions of gross value and social economic costs. In a

market; the interaction ofdemand and supply determines price.

This is shown in Figures 3a and 3b where landings, Q, meet

demand at price, P. As just discussed, the area beneath demand'

and left of Qis the gross economic value of landings in these

figures.

Figure 3a is supposed to represent the situation when a fish

resource is owned and valued. Here, gross value is divided into

four parts. First consider the area above the price line, which is

called consumersurplus (CS)~ Consumersurplus measures the

value that consumers enjoy at no cost..·a "profit" for consumers,

if you will.. Consumer surplus can also be viewed as the income

that consumers would be willing to spend on fish but, instead,

are able to spend on other goods and services. That is, consumer

surplus is the difference between gross value, or maximum

willingness.to-pay as defined earlier, and what consumers actually spend at market prices..

The remaining areas in Figure 3a are financed by consurn..

ers' expenditures on seafood. Beginning at the bottom is an area

labeled SEC for social economic costs. This area is supposed to

represent the value of goods and servicesthat the nation forgoes

when labor and capital are used to harvest fish instead of to

produce other goods and services~ as discussed above. It is

income for labor and capital, but a cost of productive resources

for the nation.

Above social economic costs in Figure 3a lies an area called

PSt or producer surplus. Producersurplus can be thought of as

the amount of income earned by fishermen (i.e., crew, captains,

and vessel owners) that exceeds what they could earn being

employed elsewhere in the economy. The extramargin of profit

earned by "highliners" (i..e..,those who land the most fish for the

least effort) exemplifies producer surplus.

The box immediately below the price line in Figure 3a is

resource rent (RR). Resource rent is the income that an owner

of a fish resource could receive from his/her Of, if leased,
Page 5

....,

8

0 (.)

8, 8- «I S

os ..

0 cs 5p

! PS t

t

I --------,I J I

1U RR I

(ij I I C I C I

.~ ----------------, .~ t

PS I SEC I

I

:2 I I ----------------, 2 I I f

SEC I I I I t I

Q

Quantity of Fish

Figure 3a. Components of net economic value offish resources and

harvests when allocative efficiency is maximized (P =

landings price; Q = landings amount; CS == consumer

surplus; RR = resource rent; PS =producer surplus; and

SEC =social economic cost).

othees(st) use of the resource, as opposed to income earned by

labor or capital. Thus, the federal government CQuld, if the

Magnuson Act was suitably revised, charge U.S. fishermen a fee

for use offish resources,similar to the way foreign fishermen are

charged to fish in U.S.. waters. This could be done, for example,

through an auction just as tracts of seabed on the continental

shelf are leased to oil companies. Alternatively, iffish resources

were owned privately by, say, individual fishermen or associa..

tions offishermen or even processors, resource rentwould be the

market value of their fish resource asset.

The rental value of a fish resource is similar to the value of

residential land, farm land, timber land, or any other natural

resource. For example, the value offarm land (revealed by sales

or leases) reflects its fertility and location to markets; this value

isseparate from what is paid for the seed, labor, and capital used

to farm the land.

Net economic value, then, is the difference between gross

value and what it costs society in terms of use of productive

resources to harvest, process, distribute, and retail fish.. Net

economicvalue is composed ofresource rent, producers'surplus,

and consumers' surplus. Allocative efficiency is maximized

when the combination of these three net values is greatest....not

whel1: one or two categories is maximized or when profit is

maximized (see Copes 1972).

The dearth ofbasic economics data on fisheries and related

markets precludes estimatingbenefits and costsinmostfisheries.

However, crude estimates of the.dissipation of resource rents

range up to $230 million annually for Gulf of Mexico shrimp

Q

Quantity of Fish

Figure 3b. Components of net economic value under open-access

conditions (P == landings price; Q ;:::; landings amount; CS

:::; consumer surplus; RR:::; resource rent; PS = producer

surplus; and SEC social economic cost).

(Table 1). Over time, foregone resource rents alone probably

amount to tens of billions of dollars.

There are other important categories of efficiency".in addition to allocative efficiency....that tend to be overlooked when

fisheries managementis discussed; however, they are essential to

comparisons ofproperty"rightsinstitutions and the relative sizes

of consumers' surplus, producers' surplus, and resource rent.

Technicalefficiency, or "best-practice" efficiency. concernsuseof

the most advanced technology available. In contrast, dynamic

efficiency relatesto the development ofmore advanced technol..

ogy. FinallyJ X.efficiency concerns the ability and inclination of

amanager to undertake maximizing behaviorin the production

of a good or service~ including in the public sector.

Technical inefficiency is imposed on the fishing industry

and, therefore, the nation when regulations interfere with the

application or use of the most efficient technology. Extreme

examples include the requirement that oyster dredges be pulled

by sailing vesselsin.parts ofChesapeake Bay and the prohibition

of pot and wheel technologies in certain salmon fisheries in the

Pacific Northwest. Also, government regulations can distort

technological change in ways that "get around" the roles rather

than reduce costs, resulting in dynamic inefficiencies. Dynamic

inefficiencies may also arise due to disincentives to invest in the

fish resource. For example, New Zealand's Chatham Island

fishermen did not organize to fund research on growth and

recruitment of abalone until they owned ITQs (Hide and

Ackroyd 1990). Finally, regarding X.inefficiency, there is

empiriCal evidence that the public sector is less productive than
PageS

Tahle 1. l'otelltial resource rents in ttS. conlmercial fisheries.

Fishery

Annualized

Value

(Smitlion)

Capitalized

Value

($billion)b

the private sector in the production of similar public goods or

services, including forestry products (Button and Weyman.

Jones 1992).

Pacific groundfish trawl 14 0.5

(I:-Iuppert and Squires 1987)

Pacific groundfish trawl 14 0.5

(Economic Assessment Team.

National Marine Fisheries Service 1991)

Gulf of Awska sableflsh 16 0.5

(Economic ASSl'l5S1nent Tcanl.

National MarlneFishcries Service 1991)

Maine lobster 21 0.7

(Rothschild et nl. 1977)

Pugct Sound salnlon 24 0..8

(Crutchfield and }'ontecofVO 1969)

New England yellowtail flounder 28 0.9

(Gates and Norton 1974)

Alaska hatlbut 74 2

(Economic AsseSSlnent Tearn,

National Marine Fisheries Service 1991)

,Atlantic sea scallops 80 3

(Economic Assessment Team,

National Marine Fisheries Service 1991)

New England groundflsh 130 4

(Edwards and Murawski 1991)

Gulf of Mexico shrimp 230 8

(Economic Assessment Team,

National Marine Fisheries Service 1991)

All U.S. fisheries 380 13

(Eckert 1979)

All U.S. fisheries 610 20

(Christy 1977)

All U.S. flshen.es 1130 38

(Keen 1988)

All U.S. fISheries 1800 60

(Economic Assessment Team,

National Marine Fisheries Service 1991)

• Source: Economic Assessment TeamJ National Marine Fisheries Service

(1991). Resource rent is the value ofthe resource (vis-a..vislabor or capita1),

net of.harvelJting costs. Resource rents are reasoned to be zero when open

access prevails.

b Capitalized values are net present values in perpetuity, calculated by dividing

the annualized values by a social discount rate of three percent.

OPTIONS FOR

CONTROLLED ACCESS

{A}s long as vessels race for fish, neither a tax system nor

a quota system will prevent lop-sided overinvestment in

speed and capacity. Only sole ownership can do this.

(Scott 1979, p. 736)

According to the property rights paradigm, the maximum

value of a good orservice requires unattenuated property rights..

..rights that are well..defined, divisible, transferable, exclusive,

and enforceable (Alchian and Demsetz 1973; Anderson and

Leal 1991; Cheung 1970; Demsetz 1964; Stroup and Baden

1983). Being well·defined refers to rights being spelled.out and

unequivocal. Divisibility allows separate attributes of the

resource to be contracted in space and time and for different

purposes; although, use of any physical property is limited in

certain ways to protect the general public. Just as it is illegal to

burn your house down or drive your car recklessly, it is illegal

to extinguish a species. Transferability without restriction on

duration facilitates ownershipmoving into the handsthatvalues

the resource most (including sometimes disparate interests such

as recreation and conservation), and, importantly, ensures that

the future value ofthe resource will be accounted for in current

harvest decisions. Finally, without backing by the state, others

could not be easily excluded and rights would become tenuous.

To understand the connections between the value of a fish

resource·.i.e., resource rents··and rightsrequiresthe definition of

property: Property is a benefit, such as income, that one can

expect from use ofa resource over.time (Bromley 1992). A

property right is a claim to property that an authority, such as

government, will protect by assigning duties to others who

would interfere with property, and by enforcing others' duties.

Property is diminished in direct proportion to the attenuation of

the above aspects of rights.

For decades, coastal states attempted to control fishing

mortality by micromanaging the fishing industry""i.e.. by setting

regulations intended to control the performance of fishing

technologies and fishermen. In the United States, for example,

the scores of fishery management plans and amendments

describe an array offailed fishery quotas and effort controlssuch

as total allowable catches, area closures, and mesh-size restrictions. Due to the failure of these regulations to conserve fish

stocks and maximize net benefits, coastal states now seek to

infuse usufructuary rightsinto their fisheries through a number

of .controlled-accesspolicies.4 In what follows, four types of

controlled access..·limited entry, individual quotas, area licensing. and sole ownership'.are discussed. This classification is a

matter of convenience, not of significance.

• For revi·ews of limited-access progra'ms throughout the world. see Mollett (1986), Muse and SChelle (1989), Neher etal (1989), Pearce (1979), and Rettig and

Ginter (1978).
LIMITED ENTRY

Limited entry nlotlc restricts only the number of vessels or

fishermen in a fishery. Whether achieved by a moratorium on

entry or by culling the numbers of vessels with, for example.

"buybacks,» only licensed fishermen can harvest fish in a limited..

entry fishery. Limited entry is mosteffective in fisheries with few

participants, thus providing an opportunity to plan harvests

cooperatively. The early limited.-entry prawn fishery in western

Australia during the 1970sillustrates how only a few fishermen

will collectively plan total harvest of a new resource (Meany

1979).

Sales of fishing licenses reveal that a fish resource attains

value in a limited..entry fishery (Meany 1979; Muse and ScheUe

1989; Wilen 1989). However, several drawbacks constrain the

maximunl value of a fish resource and its production, particularly in fisheries with excess effort and capital, such as in the

Northeast. Foremost, the persistent incentive to increase one's

landings from what remains an open-access resource still leads

to overcapitalization and resource depletion as profits are

invested into more powerful and effective fishing technology.

Consequently, fishery managers and fishern1cn enter a wasteful

and costly cycle of effort controls and subterfuge (Wilen 1989).

Another problem with limited entry is that multispecies and

multipurpose fleets are difficult, if not impossible, to classify for

licensing purposes, often resulting in convenient, but ineffectual

regulations, Finally, discarding ofillegal and low·valued species

reveals little or no incentive to husband the resource in a limited..

entTy fishery.

AU things considered, limited entry contributes little, if

anything, to optimum yield over the long haul, particularly in a

fishery which already has excess capacity. Limited entry was

abandoned in Iceland (Arnnson 1986), Australia (Geen and

Nayar 1988), and New Zealand (Ackroyd et al. 1990) in favor

of individual quotas.

INDIVIDUAL QUOTAS

Individual quotas go well beyond merely deciding who can

participate in a fishery. I..andings (or, conceivably, effort or

value) are allocated to individual vessel owners or crew. The

quotas may be absolute or a fraction of the total allowable catch

(or effort or value), and they mayor may not be transferable.

Individual quotas are an improvement over limited entry

becausefishermen aremore free to decide technologyand fishing

praeticest thereby minimizing the costs ofinefficient harvesting.

The chances of individual quotas achieving optimum yield

appear to be greatest in single-species fisheries with few partici"

pants and when quotas are transferable and linked to specific

geographic areas.

Quota sales are evidence that rights conveyed by an ITQ

system increase the value offish resources (Ackroyd et al. 1990;

Geen and Nayar 1988; Muse and Schelle 1989). Nevertheless,

individual quotas are not panaceas to protect fish stocks or to

Page 7

achieve efficiency (Copes 1986). Foremost, fishermen own

shares oftotal allowable catch. not the resource itself; therefore,

there is no incentive to husband the resource, Anecdotal

evidence summarized by Muse and Schelle (1989) supports

beliefsthatillegallandings are commonplace. Also, tlhighgrading,»

or discarding lower..valucd species and sizes of fish in order to

maximize profit from quota, results in untold waste, but

indications are that it can high. For example, in the Lake

Superior lake trout fishery, highgrading is placed at 30..50

percent of total catch (Muse and Schelle 1989). A related

problemistnislabeling ofspecies when one lacks a quota orwhen

the aggregate quota is filled~

III addition to little incentive to husband a resource,

management by the public sector results in "government fail·

ures" and waste, including the following:

1. Individual quotas impose rigidity on the system

when the fishing industry should be able to

respond to market and stock conditions in short

time frames.

2. Public officials are influenced by competing special interest groups, which tendsto undermine an

individual quota system, such as in New Zealand

(Ackroyd et al. 1990; Hide and Ackroyd 1990).

3. In fact, individual quota systems can increase

such "rent seeking" because they result in wealth

controlled by government.

New Zealand's experience with ITQs is being watched

closely by fishery managers worldwide. According to' Ackroyd

etal. (1990) and Hide and Ackroyd (1990), the husbanding and

government failures threaten to undermine New Zealand's

efforts to conserve.fish stocks and to return economic benefits

to the nation. See Muse and Schelle (1989) for reviews of the

New Zealand and other ITQsystemsthroughout the world, and

see Neher et al. (1989) for proceedings of a recent conference

that covered ITQs,

AREA LICENSING

Area licensing mightbe considered a form oflimited entry,

except that a license is associated with a specific geographic area

of the marine environment, bringing the resource closer to reat

estate.

Experience with. area licensing is greater than one might

think.. Oyster and other shellfish beds in estuaries along the

Atlantic and Gulf ofMexico coasts are partitioned and leased to

fishermen (Agnello and Donnelley 1979)..In BritishColumbia,

the roe herring fishery is divided into three areas·(MacGillvray

1986). Also, small communities and fisher.men associations

have regulated use of nearshore fisheries throughout the world

for centuries, sometimes through illegal means (Christy 1982).

Areas can also be cordoned, such as when salmon are penned.
PageS

Area licensing is subject to many of the same limitations as

limited entry and individual quotas. It can work well when few

fishermen are licensed to use an area and when the resource can

be confined to that area, such as in \vestern Australia's prawn

fishery during the 19708 (Meany 1979). However, when

fishermen are numerous and the stock moves about, the fishery

is a veritable open-access system.

SOLE OWNERSHIP

From a taxonomic perspective, the literature on sole own..

ership covers a hodgepodge of property institutions. To help

clarify the idea,Bromley's(1992) classificationof property rights

institutions for natural resources will be applied here.

As currently practiced throughoutthe world, limited entry,

individual quotas, and much of area licensing are parts ofstate

ownership regimes, as are the usual forms of ineffective and

intrusive controls on fishing technology and practices. Under

common property--a second property institution....a fish resource

would be owned and managed by a group of individuals,

conceivably those who gained access under state ownership. In

contrast, one person or corporation would own rights to the

resource under an individual private property regime, such as a

commercial fishing corporation, a conservation organization, or

an oil company. Of course, a fourth category is open access,

which does not qualify as property.

Sole ownership institutions would share the following

attributes, however. The state government, common property

organization, or private party (possibly nonprofit) would own

exclusive rights to the fish resource, including the right to

determine harvest policy. Also, the resource and rights would

be clearly defined along ecological, technological, and spatial

dimensions such that the resource is self..sustaining and use by

others is subject to contract. FinallyI the property rights would

have full backing of the state.

In many cases, the resource would be an assemblage of

species that interact with each other and with particular fishing

technologies in space and time. The underlying structure ofthe

resource must be based on the species' behaviors, including

migrations, and on ecological relations, including considerations

of trophic structure, habitat requirements, and the stability,

resilience, and persistence of an ecosystem. Accordingly, sole

ownership resources should be defined in terms of ecosystems

and should be conceptually much broader than current fishery

management units that are defined primarily by gear properties.

Early life history and seasonal changes in ecological relations

must also be considered. Species that undergo extensive

migrations, such as bluefish, probably require the defining of

large, geographic areas, perhaps entire seaboards. Other re·

sources, ,particularly shellfish, would most likely involve much

smaller areas. Still other species that migrate 'throughout

territorial seas and international waters, such as bluefin tuna,

require oceanic definition.

Superimposed on the basic ecological definitions of sale

ownership resources are constraints imposed by harvesting

technologies. Conceivably, a discrete ecological unit could exist

within an ecosystenl, but it would not constitute a separate sole

ownership resource unless it could be harvested independently

ofotherspecies. Ifthe potential for bycatch is large, the resource

should include the entire multispecies complex captured by

different gear types, whether or not there are strong ecological

interactions among the species. Similarly, indirect effects of

harvesting technologies...such as damaging habitat that is impor..

tant to the production of prey in another fishery.-could lead to

potential conflicts between ecological units that might be sub..

sumed within a single sole ownership resource.

As noted above. ownership of a suitably defined resource

could be public or private. The currentsystem of eight regional

councils and NMFS has not been cOlnpatible with true central·

ized decision..making or with this resource definition. However,

one should not forget the role that the Bureau of Commercial

Fisheries and, later, NMFS played in the harvest of Pacific fur

seals (National Advisory Committee on Oceans and Atmo·

sphere 1984). That is, between about 1920 and 1985, the U.S.

government subcontracted with the private sector to harvest,

process, and auction pelts from fur seals on the Pribilof Islands.

Under the two private forms of sole ownership""common

property or individual private property--ownership could be

vested with commercial fishermen, recreational fishermen, sea·

food processors, conservation organizations, or other users ofthe

marine environment, including mining or oil and gas companies.

The public sector's role in a private ownership system would

depend on how likely it is for a profit-oriented corporation to

achieve maximum net economic value and other social goals,

including marine mammal protection. Thus, private ownership

mightbe subjectto government oversight, as with public utilities,

with a minimum attenuation of rights, such as disallowing

biological extinction of any species.

There are a number of potential advantages of private

ownership that might not be apparent. First, private owners

would have incentives to husband the resource for long-term

benefits. For example, an owner ofexclusive accessto Northeast

groundfishes could research the food habits of elasmobranchs

and then possibly ~'weed them out" if they were found to

compete significantly with, or prey on, gadids and flounders..

This type of incentive contrasts with the incentive of a license

holder in a limited·entry fishery to maximize his share of

landings, or of a fisherman in an ITQ fishery to maximize the

economic return from his quota.

Another likely advantage of private ownership is the

,incentive that private property rights creates to take account of

the interests of others. For example, coalitions of charter boat

owners or of recreational fishermen could sublet or purchase

property rights from a fishermen's cooperative or corporation

duringaparticulartimeofthe year, ina particular area, orin toto.

This has, in faet, occurred in salmon riversin Great Britain, and

is being discussed in Iceland and elsewhere (Anderson and Leal

1991). In addition,· conservation organizations· could solicit

funds from the public to purchase species or area-specific

property rights, including rights to fisheries that interact with

marine mammals. This is not unlike what the Nature Conser·
vancy does to preserve rare wildlife throughout the United

States and internationally. Also, a private owner tnight Inaxi..

mizc the joint use of its resource, just as the National Audubon

Society leases oil and grazing rights to parts of its bird sanctuary

at the Rainey Wildlife Sanctuary in Florida (Stroup and Baden

1983). Similarly, an oil company could acquire fishing rights to

areas of the seabed where there is likely to be significant oil or

gas deposits. In each case, allocation would be handled efficiently

by markets rather than the wasteful political process.

Finally, private owners....whether commercial fishermen,

sport fishermen, conservationists, or oil companies...would most

likely operate tnore efficiently than government agencies both in

terms of X-efficiency (Le., using less labor and capital in its

operations) and ofdynamic efficiency (i.e., technologicalchange).

That is, governtnent agencies tend to grow with less accountabil·

ity for results than what is imposed on the private sector

(Anderson and Leal 1991; Stroup and Baden 1983; Wahl 1989;

Wolf 1990). Also, government regulations on fishing industries

are characterized by attempts to neuter technological change and

to interfere with the efficient combination of labor and capital,

not to promote or reward efficiency. Finally, if private rights are

exclusive and enforced by the state, the resources used in rent

seeking and political capture would be put to productive use

elsewhere in the economy.

Of course, sole ownership is problematical, but many

problems are artificial or political in nature. Past efforts by

commercial fishermen to control fishing mortality and markets

have been scuttled by the government (johnson and Libecap

1982), but controlled access; including private ownership of a

resource, does not appear to be inherently unconstitutional

(Fletcher 1965; Koch 1978). Regarding due process in the Fifth

Amendment to the U.S. Constitution, the U.S. Supreme Court

has upheld government restrictions on the "right" to pursue a

specific vocation when the restrictions are in the public's best

interest. Equal protection under the 14th Amendment would

not be violated either, assuming that criteria used to develop

private ownership did not discriminate. FinallyJ there also seems

to be no basis for the legal "taking" of a property right to fish

resources, to access, or to capital if, once again, the activity is

detrimental to the public's welI·being, as resource depletion

appears to be.

There is alsomuchmischiefsurrounding claimsthat private

ownership is tantamount to monopoly whereby the owner can;

as is often remarked, deplete the resource and I~arbitrarily"raise

prices. First, a private owner is not a monopolist unless he is the

only supplier of a fish product and, therefore, is the only

company facing market demand. This possibility appears

unlikely as a rule,. though, because the United States imports

roughly 50 percent of its seafood.

However, even if a monopoly emerged in certain fisheries,

it is unclear whether it would threaten the resource or subtract

from efficiency. Consider the evidence. Munro (1982) showed

that even a bilateral monopoly in both the harvesting and

processing sector could yield more benefits than open access

under state ownership. Also, in addition to the Sherman

Antitrust Act, which was used'between the 1930s and 19508 to

Page 9

dismantle fishermen unions and trade organizations (Johnson

and Libecap 1982), contestable market theory argues that in

order to discourage entry of new firms, a monopolist would not

necessarily undertake monopoly pricing (Baumol et al. 1982).

Moreover, the rate atwhich a monopolist harvests a fish resource

would depend, in part, on the balance among the rate of return

on his highest paying alternative investment (reflecting the

monopolises discount rate) and on the expected growth in the

value of the asset. Asset value is determined by expected prices

and future technology, not merely the intrinsic growth rate of

the fish stock as some people claim. Accordingly, the apparent

growth ill the demand for fish··stimulated by its health benefits

and soon to be accelerated by a seafood inspection program

(Edwards 1992)··would deter depletion. Also, even ifamonOl)()·

list were inclined to deplete a fish resource. conservation

organizations could purchase harvest rights from the owner;

plus, there is the Endangered Species Act. Finally, it is arguable

whether a monopolist with unattenuated property rights poses

the same threat that competitive fishermen with uncertain rights

in a state ownership regime present to a fish resourcei!

EXPERIENCE WITH SOLE

OWNERSHIP

The abstract notion of sole ownership of marine fish has

been known for some time. Recently, though, Keen (1983,

1988) has advocated sole ownership in practice. Although

examples ofsole ownership..·or arrangements that resemble sole

oWllership··are many, assessments of their performance are

difficult to find either because the data are private or because

data were never collected for hypothesis testing. Only a. few

instances related to sole Qwnership follow.

Transferable Fishing Rights

Scott (1988) described a theoretical progression from open

access to limited entry or individual quotas and then to private

ownership provided that transfers of licenses or quotas are not

encumbered by government regulations or politicians. This

would occur asrightsto the resource become concentrated bythe

most efficient fishermen (or other claimants) who seek to

capitalize on the value of the resource. Although there are

relatively few controlled·access programs throughout the world,

it is interesting to note where such a progression has taken place,

In their review of individual quota fisheries worldwide,

Muse and Schelle (1989) reported a number of cases when the

governm,ents of Australia; -Canada, Iceland, and New Zealand

abandoned limited entry for individual quotas. In addition,

quotas in these ITQ fisheries have been consolidated~ For

example, during the first two years ofITQ management inNew

Zealand, the total number of quota holders decreased by only 6

percent; however, the number of quota holders with more than

50 tons decreased nearly 40 percent, and the amount of quota
Page 10

held by the top 10 owners increased from" 57 percent to 80

percent (Sissenwine and Mace 1992). Similarly, in Atlantic

Canada where fish markets tend to be vertically integrated as in

New Zealand, the four processing companies that owned the

majority of the total allowable catch merged into only two

corporations within two years (Muse and Schel1e 1989). Finally,

rights to the western Australia prawn fishery, which initially

were issued to several processors,soon becanle concentrated into

fewer conlpanies (Meany 1979).

State O\Nnershlp of Pacific Fur

Seals

Unlike the cases where private companies harvested the

fish resources; it was the u.s. government that ran the business

ofPacific fur seal harvests. After purchasingAlaska in 1867, the

United States adopted Rtlssia·s policy of harvesting only bach·

elor seals in its two, sequential, 20"year leases with private

companies. Each year, the lessee paid the U.S. government a

rental fee and royalties on pelts.. However. by the early 1890s,

technological advances enabled harvesters from the United

States, Canada, and, later, Japan to take fur seals at sea,

effectively undermining the lease and subjecting the resource to

open·access exploitation for the first time since the Alaska

purchase. For several years. Canada's pelagic sealers incorporated into a single company which, by retiring vessels, increased

profits by one-third (Wilen 1976). However, by the early 1900s

the open..access conditions depleted the Pribilof herd once again.

By 1911, the United St.ates convinced Canada, Japan, and

Russia to sign the North Pacific Fur Seal Treaty, which has been

extended by a llunlber of interim agreements (National Advi"

soryCommittee in Oceans and Atmosphere 1984). In return for

ending pelagic sealing. the United States agreed to payJapan and

Canada each 15 percentofthe total gross earnings annually from

the harvest of fur seal pelts. However, unlike during the

preceding leases, it was the U.S" govemmentwho hired Aleuts

to harvest, and an auctioning company to process and sell, the

pelts. The UtS. government transferred ownership of pelts at

auctions.

Between 1911 and 1980, Alaska and the u.s. Treasury

profited from tens ofmUlions of dollars of resource rents from

the harvest of fur sea.l pelts. State ownership by the U.s.

government, carried out by NMFS and its predecessors, achieved

a level ofresource conservationand economic efficiencythatwas

impossible under earlier periods of open access.

In retrospect, though, mistakes were made. In particular,

managing on the basis of sustainable biological yield caused

NMFS to miss the slump in the global market for furs in the

19805. By then, environmentalists opposed to killing marine

mammals achieved political power, and consumers revaluated

their preferences, causing the demand for fur coatsto crash. Yet,

NMFS continued to harvest at sustained yield targets, resulting

in thousands of pelts being inventoried (National Advisory

Committee in Oceans and Atmosphere 1984). In addition, there

is evidence that]apan, which believesthat fur seals compete with

fishermen, pressured the United States to reduce the size ofthe

Pribilof herd. As a result, during the 19505 and 19605, the

United States reversed its policy of not harvesting females.

Although it is not clear what else might have been done to

appease the Japanese, this event illustrates how politics can

undercut attempts to achieve optimum yield.

Common Property

For centuries, coastal comlnunities and groups offishermen

throughout the world controlled access to nearby fish resources

by establishing territorial use rights, or "TURF" (Christy 1982).

A TURF is most easily established for sedentary resources, such

as oysters, mussels, and seaweed, and in closed bodies of water,

such as ponds and lagoons. However, TURFs have also existed

along beaches, on coral reefs, and in open water above areas

where fish aggregate.

Like area licensing, a TURF is based on rights to intertidal

or submerged land. HoweverJ when growth of the resource is

not significantly affected by activities outside the TURF, the

situation is tantamount to private ownership. Accordingly,

leased shellfish beds, raft cultures, and penned fish cultures are

examples of private ownership of wild fish populations.

Agnello and Donnelley (1975, 1979) compared production

from open·access and private leasehold oyster beds along the

coasts of the Atlantic Ocean and Gulf of Mexico. Unlike

oystermen in private leasehold areas, oystermen working the

open beds did not replace cultch or seed the beds because they

alone would not benefit from such husbanding activities. As a

result, oysters were harvested before they grew to an optimum

size, and landingswere unbalanced seasonallybecause fishermen

"raced" to get their share ofthe beds. The overall effect ofthese

differences in the Chesapeake Bay was a 60-percent-larger catch

per unit effort (CPUE) from private leaseholds, even though

thes.e grounds were ecologically less productive than their public

counterparts (Agnello and Donnelley 1975). Also, in the Gulf

ofMexico, average income was four times greater for fishermen

working private bedst other things held constant (Agnello and

Donnelley 1979).

Finally, the lobster "fiefs" in Maine (where fishermen from

certain harbors exclude outsiders from their historical territory

and self.·regulate their effort) can be compared to production

elsewhere in Maine where lobsters are harvested under open·

access conditions. Wilson (1977) reported CPUE to be 60·

percent greater and gross income to be 40-percent greater for

fishermen harvesting lobsters from strictly controlled areas.

Acheson (1987), ina more carefully controlled analysis, corrolxr

rated Wilson's findings and further reported that fishermen

from strictly controlled areas used fewer traps and caught larger

lobsters, bringing the fishermen a higher price per pound.5

S Not aU factors could-be controlled, though, as one might do in an experiment. It is ~sible, therefore. that the greater productivity of lobster fiefs is due to the

habitat. Yet, even if this was true~ it is also conceivable that lobstermen defend only the most productive areas.
POLITICAL ECONOMY OF

NATURAL RESOURCE

MANAGEMENT

Bymovingtoward politicalallocation andalvay From the

rule ofwi/ling consent, we have moved from a society that

rewards productive activity and willing exchange to one

where manyofa person's bestinvestment opportunitieslie

in influencing transfer activities.

(Stroup and Baden 1983, p. 2)

Scott (1979) observed that managelnent of marine fish

resources has not benefited from the broader experiences and

knowledge of natural resources management in the United

States. Although a thorough review and synthesis of the vast

natural resource management literatures was infeasible. our

preliminary findings help to place the management of fish

resources into a broader picture.

HARD MINERALS

Libecap explains why the establishment of private rights to

hard minerals on federal lands took place rapidly and COIn..

pletely-..more so than for any other natural resource in the

United States, Beginning with the CalifomiaGold Rush of

1848, rich deposits of gold and silver were discovered on

unclaimed and unsettled federal land, particularly in California

and Nevada (Libecap 1989).6 In order to avoid imminent open..

access losses from a rush of miners, regional mining camps

quickly arose and outlined procedures for claiming. enforcing,

and exchanging private mineral rights to the gold and silver

deposits. Later, the camps' regulations were incorporated into

state legislation and judicial rulings throughout the West.

Moreovert the regulations were specifically recognized in the

federal mining laws of 1866 and 1872~ which allowed for the

private patenting of federal mineral land. Within this legal

framework~ private property rights were codified.

Private rightsto hard minerals were completely and rapidly

institutionalized for a variety of reasons, setting hard minerals

apart from federal holdings of forests, grazing lands, and water

resources at the time. First, the contracting parties reasonably

expected to share in the large potential mineral value without

disruptive distributional conflicts.

Second, the contracting parties were small in number and

relatively homogeneous with regard to race, culture, skill, and

technology. Most miners had similar experiences and expecta..

nons regarding legal institutions and private ownership. Also.

there generally were no significant, competing interests in the

mining regions, except in parts of California where agriculture

also spread rapidly. Commonalities eased the way for politicians

in state and federal governments to establish property rights.

Page 11

Finally, the contracting parties had equal information on

the valuation and marketing ofindividual claims; therefore, the

risk andsuspicion that can elnerge from asymtnetric information

was not a problem.

Except for certain sand, gravel, and tin deposits, n011fuel

seabed minerals in U"S. waters are of uncertain magnitude and

are too costly to produce when compared to other mineral

sources on land (Broadus 1987). Nevertheless, access by private

parties to explore and develop mineral sites is available through

an auction leasing procedure provided for by the Outer Conti~

nental Shelf Lands Act and administered by the Department of

Interior.

PETROLEUM

In striking contrast to hard minerals, production of petro·

leum resources itl the United States has been plagued by open·

access losses eversince oil was first discovered in 1859 (Libecap

1989). Although federal and state governments lease the

overlying land to private parties, ownership of a shared oil or

natural gas reservoir often dissipatesmuch ofthe resource value.

Oil fields are inefficiently capitalized with too many wells and

with storage tanks that hold vast amounts of oil which could

otherwise be stored in the ground. The too rapid extraction also

increases production costs because subsurface pressures are

inefficiently vented andbecause large quantities ofthe resources

becometrapped in geologic formations. For example, in 1926 the

Federal Oil Conservation Board reported oil recovery rates of

only 20..25 percent under competitive conditions~ versus an

estimated 85-90 percent under controlled withdrawal. Much of

the residual pools are now accessible to advanced oil and gas

extraction technologiest but only at added social costs.

Fieldwide unitization has long been regarded as a solution

to competitive extraction of a shared pool of oil or gas. Under

unitization, production rights are delegated through negotia..

dons among lessees to a single firm·..the unit operator..·with net

'revenues apportioned among all parties on the field (Libecap

1989). In addition to yielding a more efficient time..stream of

production, fleldwide unitization eliminates the incentive to

overcapitalize production, and it increases the amount of oil or

gas that is recovered from a reservoir. For example, early

unitization ofoil fields in the western United States would have

increased recovery with existing technologies by up to a factor

of five (Libecap 1989).

The obvious aggregate gains to society of recovering more

oil and natural gas over time and at lower costs resulted in the

Mineral Leasing Act of 1920, which promoted unitization on

federal lands. At presentl in statessuch as Wyoming, theBureau

of Land Management in the Department of Interior facilitates

unitization immediately after a field has been discovered when

lessees are still inclined to prorate future net revenues according

to their acreage. In contrast, on nonfederal1and, such as in

6 Prior to the California Gold Rush, Congress experimented with leasing mineral lands when copper and lead deposits were discovered in the Midwest. However,

by 1846, high enforcement costs caused Congress to abandon leasing and to sell land with lead and copper deposits..
Page 12

Oklah()mn and Texas, unltization is disatlow(.~ by laY«' Ul'ltil after

lessees accumulate private information about their parcels..

Asymmetric inforrnntion and stratt,1I1c behavior usually under..

mine a consensus on the value of each Ill1totiator's I:t..~se until

after n1uch of the resourc::cls value is dissipated {Uhe."Cap and

Wiggins 1985; Wiggins and Lilx.~np 1985}.

The diff(.~rent approaches ust~ un federal and state lal1ds is

due to the political power of sn1l11l product~rs (Libecap and

Wiggins 1985). ()ilresource legislation in Oklahc)nlQ anti Texas

awards the most productive leases to small conlpatlj.es WJ10

further benefit from individual well quotas that are prop<:>rtion..

ally greater than the appart~nt pr{,xluctive capacity ()f their

holdings. When negotiating unitizattont small producers generany refuse to surrender this advantllgc.

The I)epartnlcnt uf Interior lllsll encourages fieJdwide

unitization on the continental shelf, but here, too, n \'t'ell quota

JKllicy called ~fl'naXimUnl L~fficient ratc" is usually ad(')ptl.~ (Mead

etaJ. 1985), Hilving nothing to do with economic efficicIICY.t the

mnximunl efficient rate is that physical production Wllicll,if

exceededt resultsilla significantloss ofrecovery ()foil. li()weverJ

many of the ()I~n"acccss problculS listed here characterize tl1e

Hmaxitnum efficient ratc/' although to nlesser degree. Shllilar to

ITQs in fisheries) uwners of \veU qu(}tas 111aximize the net value

oftheir quota, not ofthe reservoir. Tc> achieve social benefits for

society, Mead ct s1+ (1985) rccomnlcnded that the Secretary of

the Interior either exercise his statutory authority to cOlnpel

unitization, as provided by the Outer Continental Shelf Lands

Act of 1953 as revised, or that oil tracts enCOJnpass ct'ltire o·il

fields, thus avoiding the social transactions costs ()f the ltnitiza..

don procedure.

FORESTS

America's early forest policy 1s best characterized by effort

controls in an otherwis·e open-access systenl..-not unlike fisl"lery

management. However, the apparent wasteful harvest of the

Great Lakes pineries, plus a desire to promote settlement of the

West, ledCongressto grantorsell millions ofacres offorestland

to railroad companies and thousands ofstnall businesses by the

turn of the 20th century (Deacon and Johnson 1985).

Intending to settle the West, Congress objected to wide..

spread speculation in timber futures and consolidation of

forestlands into large timber corporations. These events led to

the General Reform Act of 1891 which granted U.S. presidents

the authority to retain the remaining federal holdings for public

management.

Under Gifford Pinchot's leadership, the Forest Service

initially dedicated 'itselfto using scientific principles ofsustained

yield for the strictly utilitarian purpose of efficient timber

productionfor the benefit of the nation. However, Pinchot d'id

notsee that the {Ilooting" ofthe Great Lakes pineries was due to

a lack of property rights to the resource, not necessarily to any

shortsighted greed of private companies (Deacon and Johnson

1985). Indeed, by 1950, silviculture on millions of acres of

private timberlands had surpassed the Forest Service's ability to

manage the public domain ffscientifically."

The Forest Service's current }Xllicy of an invariant sus·

tained yield year after yearhor what it calls "nondeclining even

tlow"··has been criticized.7 Long-term production oftimber from

public lands could be much greater if appropriate mature,

unproductive stands were harvested and the areas replanted.

Also, in order to achieve its biological goals, the Forest Service

subsidizes private companies to harvest from uneconomical

areasthat often are not replanted. This policy is defended 011the

grounds ofstabilizing income and employment in local commu"

nities; however, because Forest Service operations actually

destabilize timber markets, the timber industry and jobs' have

been moving to the southeastern United States (Deacon and

Johnson 1985).

Other uses of forestlands, particularly recreation, wildlife

protection, and minerals production, are not being met by the

Forest Service either. For example, Clawson (1976) estimated

that during the 1970s a more efficient forestland policy could

have simultaneously increased timber production by a factor of

two or three; expanded wilderness areas three· or fourfold; and

more than doubled recreational opportunities. Multiple use

conflicts in forestlands have increased greatly since the 19708,

RANGE

By the 1880s, millions of acres of federal land had been

transferred to private ownership underthe Homestead, Preemp"

tion, and Desert landActs, and through grantsto transcontinen·

tal railroad companies (Libecap 1981). In order to maximize

profits, ranchers who owned their land adjusted stocking levels

in response to range and market conditions, invested in wellsfor

irrigation, and built fences to retain cattle. In contrast. the

overstocking of public range depleted palpable plants and

precluded ranchers from husbanding their stocks of cattle and

sheep.

As consumer demand for meat increased, ranchers on

public lands attempted to resolve the open-access problems by

forming cooperatives and imposingextralegal regulations. When

the cooperatives weakened and the technology to produce

affordable barbed wire becanle available, ranchers fenced lands

which they perceived theirs.

The Taylor Grazing Act of 1934 recognized existing land

use arrangements and provided ranchers with a formal defini"

tion of their land claims (Libecap 1981). Although title to the

land remained with the government, grazing permits, which

were leased for up to 1O~year periods, were automatically

renewed, and they ·were transferable. Advisory boards of

ranchersrecommendedgrazing privileges, carryingcapacity, and

stocking levels that were widely accepted by the Grazing Service

and, later, bythe Bureau ofLand Management. In addition, the

Grazing Service subsidized ranching by building roads, fences,

1 The Bureau of Land Management, which holds large tracts of forestland in Oregon and California, has a similar harvest policy and is subject to the same

criticisms.
and wells. All things considered, the market value of grazing

permits during this period reflected the extant property rights

and productivity of the grazing lands.

Much of the waste associated with open access to federal

rangeland subsided until the Federall..and Policy and Management was passed in 1976, finally empowering the Bureau of

land Management to pursue its goal of dismantling property

rights on public rangelands (Kremp 1981; Libecap 1981). Long..

run management for sustained yield and multiple uses currently

is determined politically in allotment managenlent plans. Security of tenure has been eroded by short term permits. At the

extreme,some areas,suchastheRioPuereo in NewMexico, have

reverted to open access.

WATER

Much of the federal government's involvement in water

resource management concerns use of surface waters in the

West.

During the 18005, farmers, ranchers, and miners vied for

use of streams and lakes in the arid West. Private irrigation

projects characterized this period, but by 1900 most companies

were in debt (Anderson and I..ealI9'91).

Despite clear signals from private water markets that

irrigation ofthe arid lands was too costly, Congressrealized that

irrigation was required for settlement. Thus, the Reclamation

Act of 1902 was passed. establishing a fund from the sale of

public land that was used by the newly created Bureau of

Reclamation to survey the West's topography and to construct

and maintainirrigationworks, particularlydams(Andersonand

Leal 1991; Wahl 1989).. Settlers who benefited from the

irrigation projects were supposed to repay the na.interest loans

within 10 years,

What began as a modestfederal assistance program in 1902

has mushroomed into a classic "porkbarrel" for wealthy farmers

and ranchers (Wahl 1989), Throughout the past 80 years,

numerous irrigation and other water projects were constructed.

However, the Bureau of Reclamation and Congress have deferred, extended, reduced, and, in some cases, forgiven repayments in resIX>nse to constituents' pressures. Interest is charged

on municipal and industrial projects, but interest rates are well

below market levels. Recently, Congress attempted to recover

more ofits loans through the Reclamation Reform Act of 1982,

but constituents convinced the Bureau of Reclamation and the

Interior Department to repeal the act and to write rules that

weaken its enforcement.

In addition to financial costs to taxpayers, the social

economic costs of federally subsidized water projects are great.

Vast subsidies of inefficient water projects and of water (and

hydroelectric) prices waste capital, laborI land, and water that

could be put to more productive uses in the economy. Produc"

tion by some large corporate farms competes with output from

farms in the Midwest and South that are not subsidized. Also,

Page 13

other valuable uses of surface waters, particularly commercial

fishing, recreational fishing, wildlife protection, and industrial

inputs, are not adequately taken into account (Anderson and

Leal 1991; Huffman 1983). Subsidies also induce farmers to

cultivate unproductive land, resulting in erosion, wetlands loss,

and pollution with herbicides and pesticides.

Water districts that regulate use of groundwater and

surface water have removed part of the waste associated with

open access.. Howeveri in most cases, a morass of laws and

regulations restricts surface waters (and groundwater) to their

original uses, resulting in misallocations on a grand scale (Wahl

1989).

WILDLIFE

Lessons from open"access exploitation ofterrestrial wildlife

resources are relevantto thisinvestigation ofsole ownership, but

a literature review must await future work. Suffice it to say (for

now) that the earlier extirpation of many species (e..g., bison,

mountain lion, grizzly bear) from 'much of their original range,

and the earlier extinction of other species (e'~j passenger

pigeon), have some parallels to exploitation of marine fish

resources.s Also important to learn is whether state ownership

of fish and game is optimal, and whether rent seeking by

sportsmenlwomen and conservationists has dissipated the

resource rental value of wildlife.

LESSONS FROM PUBLIC-CHOICE

LITERATURE

Ownership ofnatural resourcesin the United States covers

the gamut of possibilities. Prior to the 1900s, the U.S. govemment sold thousands of acres of mineral lands in the West,

particularly in California and Nevada (Libecap 1989). Over a

billion acres of forest, rangeJ and farmland were also sold or

granted during the 18th and 19th centuries, but by 1900 the

remaining federal holdings of such lands were retained for

management by the Forest Service and the Bureau of Land

Management (Anderson and Leal 1991). Water districts own

or control access to much ofthe watersuppliesin the West, but

federal and stategovernments playa strong oversightrole (Wahl

1989). The right to extract energy resources or hard minerals

from public lands are auctioned by the federal government,

including rights on the continentalshelf(Libecap 1989;Meadet

aL 1985). It appears, then, that federal holdings of only living

marine resources and, to an extent, grazing'lands are stillsubject

to open"access exploitation..

Not aU'forms of sole ownership are equally. effective at

allocating resource use over space and time, however. Political

economists who have studied the management of natural

resources emphasize the scope for "government failures" that

accompanies state ownership (Anderson 1983; Anderson and

8 Lund (1980) has reviewed open-access exploitation of wildlife in the United States.
Page 14

Leal 1991; Deacon and Johnson 1985; Libecap 1981, 1989).

Natural resource agencies, such as the Forest Service and the

Bureau of Land Management, are vulnerable to pressures

brought to bear by competitive lobbyists who work hard to

sequesterresource rents atthe expense oftaxpayers and production elsewhere in the economy. As a result, resource rents that

were once dissipated by open-access exploitation are now dissi·

pated in the political arena.

Also, public-choice economists argue that despite a commit..

ment to public service, politicians and regulators often lack

incentives to optimize national benefits (Anderson and Leal

1991;Deacon andJohnson 1985;StroupandBaden 1983;Wahl

1989). That is, politicians and regulators do not benefit from

efficient resource harvest, nor do they incur the costs of

inefficiency, Instead, rewards often come in the fonn ofJX>wer,

prestige, and perquisites (Anderson and Leal 1991). Accord"

ingly, rentseeking probably also characterizesstate ownership of

marine fish resources. For example, claimants in New Zealand

are working hard to redistribute the abalone ITQs (ScottI993.

This expenditure of time and effort adds nothing to New

Zealand's gross national product. And in the United States, the

federal government has used antitrust legislation to break up

fishermen's unions and associations in the Gulf of Mexico

shrimp flShery, even though vast imports of shrimp make it

unlikely that these organizations enjoyed monopoly power

,(Lihecap 1989).

SOLE OWNERSHIP

OF NORTHEAST

GROUNDFISH RESOURCES

The codfishery, thehemngfishet')'J thepilchardfishery, the

mackerelfishery, andprobablyallthegreatsea fisheries, are

inexhaustible: that is to say that nothing we do seriously

affects the number of fish. And any attempt to regulate

these fisheries seems consequently, from the nature ofthe

case; to be useless.

(T.H. Huxley, writing in 1883; see Gordon 1954, p. 126)

To promote a serious discussion of sole ownership, a

strawman for the multispecies groundftsh resources in the U.S.

portion ofthe Northwest Atlantic is begun here, Keep in mind

the exploratory nature of this exercise, however. The

utility and feasibility of sole ownership should not be

hastUy discarded because ofweaknessesin ourstrawman.

The Northeast groundfish resource and fiShery present a

number ofchallengesto sole ownership. First isthemultispecies

natureofthe resourcewith species associationsthatvary inspace

and time. Second, the tx>pulations ofseveral species are already

depleted, including,Atlantic cod, haddock, and yellowtailfloun..

der that form the mainstay of the fishery. Third, the fishery

suffersfrom excessive .mounts ofcapital and laborpmuch more

than are necessary to achieve maximum economic efficiency (or

maximum sustainable yield, for that matter)j therefore, the

problem of how to retire vessels and gainfully employ hundreds

of fishermen must be dealt with, Fourth, multiple uses of the

groundfish resources and environment in.volve recreation, rna..

rine mammal protection, and,potentially, oil and gas explora"

doniextraction. Finally, groundfishes range throughout fed"

eral, Canadian, and, to an extent,state and international waters.

NORTH,EAST GROUNDFISH

RESOURCES AND FISHERY

The current Northeast Multispecies Fishery Management

Plan lists 13 species for management, including Atlantic cod,

haddock, and yellowtail flounder (New England Fishery Man"

agement Council 1991). Groundfishes are caught primarily by

the otter trawl fleet, although recreational fishermen reportedly

take about 10 percent of total landings (Conservation and

Utilization Division, Northeast Fisheries Center 1991). Other

species associated with commercially important groundfishes

include the spiny dogfish, skates (Raja spp.), and sand lances

(Ammodytesspp.), an importantfood source for some whales as

well as other fish. The otter trawl fishery involves about 1100

vessels and employs an estimated 5300 fishermen.

Northeast groundfish species migrate seasonally and inter..

act with each other and pelagic species depending on the stage

of their life cycle and the time of year. The trophic structure is

complex, including predation.by elasmobranchs, mackerels (on

postlarval fish), and seals, although to an unknown degree.

The Northeast groundfish resource is even more depleted

today than before the Magnuson Act took effect in 1977

(Conservation and Utilization Division, Northeast Fisheries

Center 1991), Effort on Atlantic cod, haddock, and yellowtail

flounderuspecies preferred byconsumers....is atrecordhigh levels,

and landings and stock abundance are near their historical lows

(Anthony 1990). The fishery now survives on small adults of

these species and on landings ofpreviously underutilized stocks,

some of which, including pollock, American plaice, and witch

flounder, are now depleted,

Recently, Edwards and Murawski (in press) estimated a

simple bioeconomic model of the New England otter trawl

fishery in order to begin to answer questions about losses in

seafood and economic value resulting from open access to the

resource. They reported that in order to achieve an estimated

increase'in net economic value of about $150 million annually

in the United States (90 percent in resource rents and·the

remainderinconsumersurplus),stocksize shouldbeseven times

larger and fishing effortshould be reduced by 70 percent. Under

these circumstances, harVest is predicted to increase by 40

percent over 1989.landings, or by three times what could be

sustained by the 1989 stock size. 'This latter comparison

translates into an additional six pounds of fresh fish per capita

to the diets of New Englanders.
SOLE OWNERSHIP OF

NORTHEAST GROUNDFISH

RESOURCES

The Edwards and Murawski (in press) study begs the

question of what policy could replace open access in order to

achieve maximum economic efficiency in the Northeast ground..

fish fisheries. Certainly, limited entry would be ineffectual in

a fishery with substantial amounts of excess effort and capacity.

The use of ITQs for landings or fishing effort eventually

could lead to an increase in stock size and yield, and possibly to

a net return to the nation for its investment in fishery manage·

ment, depending on the social costs ofmonitoring and enforcing

quota, on rent seeking, and on X-inefficiencies in the govern..

ment. In light of the evidence against state ownership, an ITQ

system may not give rise to efficiency in the long run, though.

Fishermen probablywould not husband the groundfish resource

because they would not have exclusive propertyrightsfor its use.

Given rights only to a share ofthe totalfishery quota, individual

fishermen would discard bycatch and would highgrade catches

because of price differentials that vary sixfold depending on the

species and size of groundfish. Furthermore, resource rents

would be dissipated by a wide variety of claimants without

making a net contribution to the gross national product. And,

as reported by Button and Weyman-Jones (1992), government

agencies tend to be more X..inefficient than the private sector.

The remaining possibilities are common property or indi..

vidual private ownership.

What Species and Area Would

Constitute Private Property?

Sufficient information to partition the Northwest Atlantic

into ecologically and technologically coherent sole ownership

resources may not exist. For example, the relative abundance of

elasmobranchs and gadids on Georges Bank flip"flopped since

the Magnuson Act took effect, but the nature of the ecological

interactions betweenthese groups ofspeciesis unclear. Also, the

impact of trawls and dredges on benthos is poorly understood.

Because of such unknowns, the sale ownership of groundfish

resources initially would be defined in terms of major oceanic

and geographic features along with what is known aboutspecies

associations.

Overholtz and Tyler (1985) and Gabriel (1989) used

cluster analysis to define Northwest Atlantic demersal fish

assemblages and to investigate their persistence overtime.. Their

analyses used data from 10· to I5-year tiple series ofotter trawl

catches from a stratified random survey. Therefore, the species

and site clusters may reflect more a technological than ecological

basis, although a positive correlation is apparent.

Regarding Georges Bank, Overholtz and Tyler (1985)

identified five assemblages with relatively stable geographic

boundaries and little overlap. Some assemblages showed

Page 15

seasonal shifts in location between spring and fall; howevert

others remained stable. The assemblages consisted of ubiqui..

tOllS species, resident species that were present ill only one or

two assemblages, and periodic species (seasonal migrants). In

addition, some species were present in different assemblages at

different life history stages. This study suggests' that species

associations persist in definable locations which might be arne·

nable to defining resources for sole ownership.

A similar study by Gabriel (1989) examined assemblage

structure in the larger area between the Scotian Shelf and Cape

Hatteras during the autumn. In general, groupings coincided

with major geographical features, for instance, the Scotian Shelf,

the Gulf of Maine, and Georges Bank. Southerly groups varied

spatially from year to year, reflecting the generally more migratory nature ofMid..Atlantic and Southern New England stocks.

If the groupings in Gabriel's (1989) study encompass

autonomous assemblages of species, then the Gulf of Maine,

Georges Bank, and Southern New England . Middle Atlantic

Bight could qualify as three areas for sole ownership. However,

if groundfishes migrate among these areas to a degree that catch

by the owner in one area would affect catch and recruitment to

the area whose rights are owned by a different entity, then the

entire Northeast U.S. Shelf Ecosystem may be the appropriate

areal extent of sole ownership.

Geographic coverage also raises jurisdictional questions.

Harvest ofgroundfishes from international waters appears to be

negligible. Also, less than 5 perc·ent of total U.S. landings of

groundfishes are harvested within state waters. Therefore,

states' rights would not appear to be a barrier to establishing

common property or individual private property. in ground·

fishes, with the possible exception of winter flounder. In

contrast, though, Canada harvests considerable quantities of

groundfish from the northeast peak ofGeorges Bank, including

Atlantic cod, pollock, and haddock. Forsole ownership to work,

the United States would have to negotiate harvest agreements

with Canada. Negotiation would also be a requirement for any

successful controlled-access policyt however.

Should Northeast Groundtlsh

Resources be Publicly or Privately

Owned?

With the virtual eviction offoreign fleets and the creation

of regional councils, the Magnuson Act established a state

ownershipsystemoffishery management However, thissystem

is vulnerable to the same type of "government failures" that

undermined rational use of other natural resources in the

United States as discussed earlier, particularly renewable re·

sources~ Ratherthan pursue economic efficiency, whichbenefits

regional fishermen, seafood producers, and consumers, the

regional councils have attended to the.short-term financial and

distributive impacts of their decisions.

Experience from other natural resource agencies casts

doubt on whether even NMFS could efAciently manage the
Page 16

Northeast groundfish resources with such a large tlumber of

hetero,geneous fishermen and other claimants. The previously

successful management of PribiIof fur seals by NMFS and its

predecessors \vas not plagued, until the 19808, by competing

interestsin the resource. In contrast, many conlpeting groups of

"rent.seeking'l commercial fishermen (identified by gear types

and states), recreational fishermen, and conservationists would

lobby NMFS and Congressfor favorable shares ofthe limited fish

resources. Libecap (1.989) also argues that politicians and

governnlcnt officials have vested interests in maintaining con.

trol over fish harvests:~

Alternatively, there is common property or individual

private property. Eliminating the tax burden required to support

research. management, and enforcement by NMFS, the regional

councils, and the U.S. Const Guard ill the Northeast would be

a financial boon to taxpayers and, conceivably, the ecol10my. In

addition, private parties would be presented with strong finan·

cial incentivesto husband groundfish resourcesfor long-run use,

and to investin .nore efficlent and conservation..oriented fishing

technology.

Private ownership could take on various forms, including

the obvious one-owner, one·resource configuration with, for

exaulplc. a fishing corporation. a cOl1servation organization, or

an oil company. Alternatively, there is common property. One

possibility is nunification" similar to that used in oil and gas

extraction frool a shared pool, including on continental shelf

lands as described above.. A consortium of ~fstockholdersnmight

pool their shares of the groundfish resource (or, possibly, shares

of landings or effort quota) to make cooperative harvesting

decisions. Each fisherman might undertake his harvest, or a unit

manager might harvest the resource with profits being shared

proportionally. Unification of Northeast groundfish resources

would differ from an ITQ policyt though, because only one

entity would harvest the resource and because shares are to the

stock. not to yield.

Despite its advantages over the likely "'rent-seeking" and

"government failures" associated witll state ownership, many

people express reservations about the actual performance of

private ownership ofNortheastgroundflsh resources. Foremost

is the question of ffmonoJX)lytl powert but this issue was already

addressed earlier.

What Would be Terms of

Ownership?

As stated previously, the full economic value of a good or

service requires property Tlghts to be well-defined, divisible,

transferable, exclusive, and enforceablet Any attenuation of

private property rights would influence owners, although some

restrictions, for example, against biological extinction, are likely.

Exclusive use, transferability, and. enforcement are essential,

though, particularly for Northeast groundfishes. which could

take up to a decade or two to recover from their depleted status.

The subject of royalties should also be made clear, including, possibly, a formula for collecting part of the moneyequh'alent of resource rents, which still allows the owner to

make a COJupetitive return on investment and to invest in

research and development. The resource rental value may be

capitalized in a single lump"sum payment as for oil and gas, or

the fee may be collected annually as for use of timber, grazing

lands, and water. At present. the Magnuson Act precludes

charging fishermen for other than administrative costs. how..

ever.

Property rights must also be transferable before a lessee or

private owner of Northeast groundfishes will consider the full

opportunity costs of its harvesting policy. For example, if

transfer was precluded, a private owner might "mine" the

groundfish resource throughout the period under his control.

Limiting the time horizon of the property rights would only

accelerate the mining.

How Would Alternate Uses of

Resources and Environment be

Factored In?

As mentioned earlier, recreational fishermen harvest 10

percent of total groundfish landings in the Northeast. In

addition, seals prey on groundfishes, humpback whales share

sand lances with commercially and recreationally important

species, and other marine mammals, particularly harbor POI""

poises, are entangled in nets. Finally, Georges Bank and the

Baltimore Canyon are areas suspected to contain oil and gas

resources.

Under any form ofstateownership, the federal government

would be responsible for allocating the groundfish resources

overspace and time amongthese competinginterests. Incontrast

to such a "planned economy," the marketplace would readily

allocate resources if rights are privately owned. However,

transferability is essentialfor the market mechanismto function

properly,

With transferable property rights to the Northeast ground.

fish resources, the owner could lease or sell rights in time and

spaceto commercialfishermen, recreationalfishennen, charterboat

associations, conservation organizations, oil and gas companies,

or other claimants. Conditions could also be stipulated. For

example (and as mentioned earlier), until the Audubon Society

obtained what is now called the Rainey Wildlife' Sanctuary in

Florida, conservationists and capitalistsfought in political arenas

to determine use of the area. However, now that the Audubon

Society is the sole owner, it leases parts of its sanctuary to cattle

ranchers and oil companies~ The areas and times of year for

9 Although we could not explore the possibility of an apolitical fish management agency, the existence ofthe U.s. Postal Service. the Federal ReserveBank (which

determines monetary policy), public education, and police and fire protection indicate the possibilities when matters of vital national interest are at stake.
grazing and extracting oil are chosen by the Audubon Society so

as not to affect the breeding and migratory behavior of birds.

What Would be Responsibilities of

Public Sector?

The responsibilities ofthe public sector would be shaped by

the form of ownership. Full management and research responsibilities would continue to be the government's responsibility

under state ownership. In contrast, private ownership implies

the dissolution of the regional councils and the fishery assessment and management responsibilities ofNMFS. However, the

state would still be called upon to enforce private rights.

Without enforcement, property rights would revert to open

access.

Also, a number oflegal and policymatters would remain the

responsibility of the federal government, including negotiating

trade issues, settling boundary disputes with Canada and,

possibly, the states, and antitrust activities if a private owner

managed to develop monopoly power by integrating vertically

with the seafood sector of the economy.

How Would Transition from Open

Access to Sole Ownership be

Accomplished?

Transfer, or udisposal," offederal lands to farmers, miners,

railroad companies, and lumber companies. occurred on a grand

scale during the 18th and 19th centuries. There is also much

research on whether and how the governmentshould privatize

many ofits currentservices (see Fitzgerald 1988)t Lessonsfrom

these transfers and research must be deferred to future study,

although several practical issues are apparent.

It may be necessary to dissolve the regional council system,

even iffish resources remain owned by the state. Congress may

have recently moved in the direction of eliminating the regional

councils by assigning NMFS the full responsibility to manage

large pelagic species. NMFS already has the responsibility to

protect marine habitat and protected species, neither of which

can be divorced from fishery management.

The possibility of a depoIiticized government corporation

that hires independent operators to harvest Northeast groundfishes requires further study, beginning, perhaps, with the

legislation that created the U.S. Postal Service and the Federal

Reserve System. .

If fish resources are to be owned privately, then a mecha·

nism for selecting private owners would be needed. Private

owners could be chosen atrandom ina lottery, or property rights

couldbe transferred tothe highestbidder(s) in an auction, which

is how oil, natural gas, and hard minerals are allocated on

continental shelf lands.

Page 17

A third, and nlore likely, mechanism for fostering private

ownership of Northeast groundfish resources recognizes the

historical path dependence of change in property rights institu...

dons as discussed by Scott (1988) and Libecap (1989~ t IfITQs

were established, and ifmarket exchanges were not encumbered,

then private property might emerge. Impediments to such

contracting should not be underestimated, though, particularly

in such a heterogenous fishery a.s that· for New England

groundfishes.

Whether private owners lease rights from a public agency

or own the rights, there is also the issue of whether and how to

collect resource rents. Rightsto extract hard minerals or oil and

gas from federal lands, including on the continental shelf, are

auctioned and royalties are collected on production. In addition,

the private sector pays the federal government for use ofgrazing

land, forests, and water supplies. At present, fish resources are

the only publicly-owned natural resources that are given to

harvesters. On the other hand, siphoning resource rents might

inhibit investment in the resource and in new, more efficient

fishing technology.

Finally, financing the removal of excess labor and capital

from the Northeast groundfish fishery could be problematical,

particularly if it is not possible to collect resource rents. As

argued above, private ownership is not necessarily precluded by

the u.s. Constitution. Nevertheless, language in the Magnuson

Act...including the prohibition· of fees for resource rents··and

subsidies for vessel construction have given fishermen the

impression ofhaving a ffrlghf' to catch fish, Also, preventing use

of their capital wilt be perceived as an illegal taking by vessel

owners.

Allowing sole ownership to evolve from an ITQ system

would avoid the financing problem. However, direct implemenor

tation of sole ownership may require compensation for idled

capital and short-term unemployment. As stated above, it may

take 5..20 years for Northeast groundfishesto recoverfrom their

depleted status, but some initial rents would come from extant

prerecruited fish and from reversing production inefficiencies

imposed by the New England Fishery Management Council.

Private owners might use these rents to compensate others.

SUMMARY AND

CONCLUSIONS

The tendencyofcarefuleconomic study istobase the rights

ofprivate propertynot on anyabstractprinciple, buton the

observation thatin the pasttheyhavebeen inseparable ftom

economic progress.

(Marshall 1920, P4 48)

This report explored the meaning and application ofsole

ownership of living marine resources. Its purpose was to

promote an informed and timely discussion of the utility and

feasibility of instituting common property or individual private
Page 18

property in marine waters. Accordingly, why open accessresults

in the depletion of fish resources was explained; both public and

private forms ofsole ownership \vere characterized; sole owner..

ship was contrasted with other forms of controlled access,

particularly Ibnited entry and ITQs under a state ownership

regime; the political economy of natural resource management

was surveyed; and a sole ownership strawman of the Northwest

Atlantic groundfish resource in U.S. waters was begun.

Our major findings nnd conclusions are as follows:

1. The overfished status of open-access marine

fish resources in U.S. waters stems from

open-access exploitation, and resu.lts in profligate waste of the nation's fish resources

that has been estimated at two-billion dollars

a year. Of all natural resources owned by the

United States government, only living marine

resources and. to an extent, grazing lands are

subject to open access. Fishery quotas and effort

restrictions address only the symptoms of open

access, not the fundamental problem of a lack of

property rights to the resource and its productiv..

ity. The waste translates into lost income for the

fishing industry and seaf<XXlsectorofthe economy,

a lesser contribution to gross national product,

and probably less benefits for consumers.

2. Incentives are fundamental to the presence

of both "market failure" and "government

failure." Underopen*8ccessconditions, markets

"fair" to allocate resources to their highest.valued

usc. The resultant distrust of markets has led to

management by the public sector. However,

regulators and politicians do not share the eco~

nomic benefits of maximum economic efficiency,

nor do they incurthe costs ofinefficient manage..

ment.

3. It appears that private ownership is the only

form of controlled access that provides fish..

ermen the necessary incentives to husband

fish resources. Neither limited entry nor indi..

vidual quotas provide fishermen resource rights.

Furthermore, privateownership islesssusceptible

to the political pressures that have undermined

management ofNew Zealand's ITQ fisheries and

ofotherrenewable resources by public agencies in

the United States. Also, alternative uses of fish

resources and the environment, including recre..

ation for the public and food for marine mammals, would be more efficiently allocated by

markets than by the political system,

It would be unreasonable to expect us to have answered,,·or

even asked·..all pertinent questions regarding sole ownership of

living marine resources in this initial investigation. To our

knowledge, only the geographer Elmer Keen (1983, 1988) and

a few economistsin New Zealand (AckroydetaI, 1990;Hide and

Ackroyd 1990) have seriously considered sole ownership as a

workable fishery management policy. Much work needs to be

done, including the following:

1. Fishery management in the United States should

not develop in isolation from experiences world·

wide. The review of fishery management pro..

grams by Muse and Schelle (1989) should be

expanded to include TURFs and additional controlled-access fisheries. The historical manage..

ment of other publicly-owned natural resources

in the United States and the world should be

reviewed, too.

2.. Sole ownership should be more thoroughly evalu..

ated~ The various forms of public and private

ownership need tobe critically contrasted in more

detail than presented here.. In addition, one might

consider whether other forms of controlled ac..

cess, particularly ITQs, can be designed to facili..

tate the evolution of sole ownership.

3. The property"rights, contracting, social-cost, and

public·choice literatures in political economy

should be studied and related to ownership of

living marine resources.

4. Some of the needs, pitfalls, and benefits of a "real

world" sole ownership fishery could be learned by

further developing and reviewing the strawman

for Northeast groundfishes.

Given the deficiencies of limited entry and ITQs for

achieving optimum yield as directed by the Magnuson Act, the

authors recommend that the Northeast Fisheries Science Center

and NMFS soon evaluate common property and individual

private ownership of living marine resources.
Page 19

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