NOAA Technical Memorandum NMFS-NE-158

This report series represents a secondary level of scientifiic publishing. All issues employ thorough

internal scientific review; some issues employ external scientific review. By design, reviews are

transparent collegial reviews, not anonymous peer reviews. All issues may be cited in formal

scientific communications.

1Univ. of Rhode Island, Dept. of Environmental & Natural Resource Economics, Kingston, RI 02881

2

National Marine Fisheries Serv., Northeast Fisheries Science Cent., Woods Hole, MA 02543

3

Univ. of Rhode Island, Dept. of Marine Affairs, Kingston, RI 02881

A Framework for Monitoring and Assessing

Socioeconomics and Governance

of Large Marine Ecosystems

Jon G. Sutinen1, Editor,

with contributions (listed alphabetically) by

Patricia Clay2, Christopher L. Dyer3, Steven F. Edwards2, John Gates1,

Tom A. Grigalunas1, Timothy Hennessey3, Lawrence Juda3, Andrew W. Kitts2,

Philip N. Logan2, John J. Poggie, Jr.3, Barbara Pollard Rountree2,

Scott R. Steinback2, Eric M. Thunberg2

, Harold F. Upton1, and John B. Walden2

U. S. DEPARTMENT OF COMMERCE

Norman Y. Mineta, Secretary

National Oceanic and Atmospheric Administration

D. James Baker, Administrator

National Marine Fisheries Service

Penelope D. Dalton, Assistant Administrator for Fisheries

Northeast Region

Northeast Fisheries Science Center

Woods Hole, Massachusetts

August 2000
Page iii

Contents

Preface ................................................................................................................................................................................. v

Introduction ......................................................................................................................................................................... 1

Human Dimensions of LMEs ............................................................................................................................................. 2

Monitoring and Assessment ............................................................................................................................................... 3

Step 1: Identify principal uses of LME resources .................................................................................................... 3

Step 2: Identify LME resource users and their activities ......................................................................................... 4

Step 3: Identify governance mechanisms influencing LME resource use................................................................ 4

Step 4: Assess the level of LME-related activities ................................................................................................... 5

Step 5: Assess the interactions between LME-related activities and LME resources ............................................. 5

Step 6: Assess the impacts of LME-related activities on other users ...................................................................... 8

Step 7: Assess the interactions between governance mechanisms and resource use............................................... 8

Step 8: Assess the socioeconomic importance of LME-related activities and economic and sociocultural

value of key uses and LME resources ......................................................................................................... 10

Step 9: Identify the publicís priorities and willingness to make tradeoffs to protect and restore key natural

resources ..................................................................................................................................................... 13

Step 10: Assess the cost of options to protect or restore key resources ................................................................ 14

Step 11: Compare the benefits with the costs of protection and restoration options .............................................. 14

Step 12: Identify financing alternatives for the preferred options for protecting/restoring key LME

resources ..................................................................................................................................................... 14

Applications of the Monitoring and Assessment Framework .......................................................................................... 15

Example 1: Assessing monetary damages from oil spills and other transboundary marine pollution ...................... 15

Example 2: Economics, science, and policy in estuary management ........................................................................ 16

Example 3: Sustainable financing for pollution prevention and control .................................................................... 17

Property Rights Entitlements and Regimes for LME Management ................................................................................ 18

The Structure of Property Rights Entitlements in an LME ......................................................................................... 19

Property Rights Regimes and Management of LME Resources................................................................................. 22

Conclusions....................................................................................................................................................................... 23

Endnotes ............................................................................................................................................................................ 24

Glossary ............................................................................................................................................................................ 26

References Cited............................................................................................................................................................... 29

Tables

Table 1. Steps for monitoring and assessment of the human dimensions of an LME, and of the use of its resources .. 3

Figures

Figure 1. Governance mechanisms................................................................................................................................... 5

Figure 2. Interactions among LME-related activities and LME resources ..................................................................... 7

Figure 3. Governance-use matrix: Gulf of Maine example ............................................................................................ 9

Figure 4. Program-use and governance matrix............................................................................................................... 10
Page iv

Acronyms

CZMA = Coastal Zone Management Act

ESA = Ecological Society of America

EU = European Union

GEF = Global Environment Facility

GOM = Gulf of Maine

ICGP = Interorganizational Committee on Guidelines and Principles

LME = large marine ecosystem

NAFO = Northwest Atlantic Fisheries Organization

NGO = nongovernmental organization

NMFS = NOAA National Marine Fisheries Service

NRC = natural resource community

NRDA = natural resource damage assessment

NRR = natural resource region

VTIS = vessel traffic information service
Page v

Preface

In September 1997, NOAA awarded a contract (i.e., #40 ENN F7 00378) to researchers at the University of Rhode

Island to develop the conceptual framework for the analysis and monitoring of the large marine ecosystem (LME) modules for socioeconomic activity and governance of LMEs. This report provides a framework for linking the socioeconomic and governance modules with the natural resource science-based LME modules (productivity, fish and fisheries,

and pollution and ecosystem health). This report fulfills the terms of the 12-mo contract.

Questions and comments on the report should be directed to:

Professor Jon G. Sutinen

Department of Environmental and Natural Resource Economics

University of Rhode Island

Kingston Coastal Institute Building, Room 205

1 Greenhouse Road

Kingston, RI 02881-0814

(401) 874-4586

JSutinen@uriacc.uri.edu
Page 1

INTRODUCTION

The ecosystem paradigm is emerging as the dominant approach to managing natural resources in the United States

as well as internationally. The shift away from the management of individual resources to the broader perspective of ecosystems has not been confined to academia and

think tanks where it first began; it also is beginning to take

root in government policy and programs. Since the late

1980s, many federal agency officials, scientists, and policy

analysts have advocated a new, broader approach to managing the nationís natural resources. The approach recognizes that plant and animal communities are interdependent and interact with their physical environment to form

distinct ecological units called ecosystems. These systems contribute to the production of fish, marine birds,

and marine mammals that cross existing jurisdictional

boundaries. The approach also recognizes that many human actions and their consequences, including marine pollution, extend across jurisdictional boundaries.

Emergence of this paradigm is a response to the failure of the single sector/single species approach to achieve

sustainable development of interdependent natural resources and effective protection of the natural environment. There is now a pronounced trend toward more integrated ecosystem management. U.S. administration and

legislation are increasingly requiring an ecosystem approach to natural resource research and management. The

September 1993 ìReport of The National Review: Creating a Government That Works Better and Costs Lessî recommended that the President issue an executive order establishing ecosystem management policies across the federal government.1

To implement an ecosystem approach for environmental management, the White House Office of Environmental Policy established an Interagency Ecosystem Task

Force to implement an ecosystem approach to environmental management. To date, the movement toward ecosystem management is reflected in, for example, the

Magnuson-Stevens Fishery Conservation and Management

Act (as amended through October 11, 1996), NOAAís

Marine Sanctuaries Program, the National Estuary Program, the National Estuarine Research Reserves System,

the 1990 Amendments to the Coastal Zone Management

Act, and also in the actions of federal agencies with resource management responsibilities.2

 Further, NOAAís

1997 strategic plan is based, in large part, on the ecosystem approach to living marine resource management.

Ecosystem management is defined as a system ìdriven

by explicit goals, executed by policies, protocols, and practices, and made adaptable by monitoring and research based

on our best understanding of the ecological interactions

and processes necessary to sustain ecosystem structure

and functionî (Christensen et al. 1996). Ecosystem management necessitates intergovernmental and intersectoral

management. This is why federal agencies will have to

identify barriers to interagency coordination and why they

must develop alliances and partnerships with nonfederal

agencies and private sector stakeholders (Hennessey

1997). Ecosystems management must be able to cope with

the uncertainty associated with the complexity of ecosystems as natural systems, and the organizational and institutional complexity of the implementation environment

(Hennessey 1997; Acheson 1994).

The fit between the spatial and temporal scales of government jurisdictions on the one hand and ecosystems on

the other requires investigation of ways to connect ìnestedî

ecosystems through ìnetworked institutionsî at federal,

state, local, and nongovernmental organization (NGO) levels (Hennessey 1997). How these institutions must adapt

to deal with the complexity of the ecosystem and the complexity of the governance system in order to achieve an

optimal mix of benefits and costs is a fundamental issue

(Creed and McCay 1996).

The need for improved management of living marine

resources is critical. The livelihood of coastal populations and national economies have depended, for many

decades, on coastal and marine resources. As indicated in

NOAAís strategic plan, ìover half of the [U.S.] population

now lives on the coast. Between one-third and one-half of

[U.S.] jobs are located in coastal areas. About one-third

of the nationís GNP [gross national product] is produced

there through fishing, transportation, recreation and other

industries dependent on healthy coastal ecosystems for

growth and development. Rapid population growth and

increasing demand for recreation and economic development in many coastal areas have degraded natural resources

and led to declines in both environmental integrity and

general productivity. Coastal areas provide essential habitats for the majority of commercially valuable marine species. But habitat loss, pollution[,] and overfishing have

reduced populations of coastal fish and other species to

historically low levels of abundance and diversity. Maintaining coastal ecosystems[í] health and biodiversity is essential to the sustainable development of coastal resources

and economies, and to the future welfare of the Nation.î

The complex interplay of socioeconomic, ecological,

political, and legislative processes underscores the need

for an integrated approach to the management of drainage

basins, coastal areas, and linked continental shelves and

dominant current systems. In this report, we develop an

integrated approach to these problems based on the LME

concept.

The concept of LMEs is a science-based method for

dividing the worldís oceans, developed 15 yr ago by Kenneth Sherman and Lewis Alexander. LMEs are geographic

areas of oceans that have distinct bathymetry, hydrography, productivity, and trophically dependent populations.

The geographic limits of most LMEs are defined by the

extent of continental margins and the seaward extent of

coastal currents. Among these are the Northeast U.S.

Continental Shelf, Southeast U.S. Continental Shelf, Gulf
Page 2

of Alaska, Gulf of Mexico, Eastern Bering Sea, and California Current. Some LMEs are semi-enclosed seas, such

as the Caribbean, Mediterranean, and Black Seas. LMEs

can be further divided into subsystems such as the Gulf of

Maine, Georges Bank, Southern New England, and the MidAtlantic Bight in the case of the Northeast U.S. Continental Shelf (Sherman et al. 1988). Approximately 95% of

all fish and other living marine resources produced are

taken from the worldís 49 LMEs. Unfortunately, many

LMEs are currently stressed from overexploitation of

marine resources, habitat degradation, and pollution.

The LME management approach links the management

of drainage basins and coastal areas with continental

shelves and dominant coastal currents. The approach: 1)

addresses the many-faceted problem of sustainable development of marine resources; 2) provides a framework for

research monitoring, assessment, and modeling to allow

for prediction and better management decisions; and 3)

aids in focusing marine assessments and management on

sustaining productivity and conserving the integrity of ecosystems.

The World Bank and the Global Environment Facility

(GEF) have adopted the LME approach to marine ecosystem research and management, viewing it as ìan effective

way to manage and organize scientific research on natural

processes occurring within marine ecosystems [and] to

study how pollutants travel within these marine systems...î

(World Bank 1995).

The World Bankís operational guidelines for LME research require social science as well as natural science

investigations, since many of the problems of the marine

environment are human induced. The GEFís LME initiative has five modules: productivity, fish resources and

fisheries, pollution and ecosystem health,

socioeconomics, and governance.

The first three modules are natural resource sciencebased and well developed. During the past 15 yr, extensive scientific work has resulted in methods for monitoring and assessing the productivity, fish resources and fisheries, and pollution and ecosystem health of LMEs. Sustained, accurate, and efficient assessments of changing

ecosystem states are now feasible because of the advent

of advanced technologies applied to coastal ocean observation and prediction systems. Such systems can now

measure ocean productivity, changes in fish stocks, and

changes in water and sediment quality and general health

of the coastal ocean.

Consideration of the socioeconomic and governance

modules has been more limited,3

 despite the fact that work

on these modules is essential to achieving effective ecosystem management. Management of LMEs requires not

only knowledge of changing states of the system, but also

the effects of change on socioeconomic benefits to be

derived from using the LME resources. To provide sustainable, optimal use of marine resources, the services they

provide must be identified and valued, the sources of market failure must be understood, and policy instruments to

correct market failures and move toward sustainability

must be adopted.

This report presents a methodology for determining

what is known of the socioeconomic and governance aspects -- the human dimensions -- of LME management.

The following sections describe a basic framework for

identifying the salient socioeconomic and governance elements and processes of an LME. Methods for monitoring and assessing the various elements and processes are

also discussed.

HUMAN DIMENSIONS OF LMES

Monitoring and assessment are prerequisites to effective management of LMEs threatened by pollution,

overexploitation and other misuses of these important resources. Furthermore, management involves altering human behavior, especially behavior that threatens, directly

or indirectly, the sustainability of LME resources. Therefore, we need to understand the human system and its relationship to the sustainability of LME resources and their

services.

Human and ecological systems are both composed of

complex webs of interrelated components and processes.

Interactions occur both within each respective system and

between systems. We view the natural environment and

related human dimensions as a set of interrelated components and processes rather than isolated elements that act

independently.

Ecological components of an LME can be viewed as,

among other things, biophysical capital (i.e., stocks of valuable natural resources). The various forms of the biophysical capital generate flows of goods and services, many of

which are directly or indirectly used by humans (e.g., in

fishing and shipping activities). Some ecological goods

and services are transformed into commodities that are

cycled through the economy. These flows also include

outputs of processes that are returned to the environment,

sometimes as wastes.

Traditionally, property rights are poorly defined in the

coastal zone and marine areas.4

 Externalities impact fishermen, recreation, and other activities that rely on the natural system for flows of commodities and opportunities

from these capital assets.5 Human activities that use or

impact the biophysical capital of a typical LME may occur on land, in the coastal zone, or in offshore areas. High

human population densities in the coastal regions and associated manufacturing, transportation, and extractive activities often result in environmental degradation and

overexploitation. Municipal sewage and industrial waste

disposal in coastal waters often overwhelm the assimilative capacity of marine areas. Nutrient pollution may result in large increases in phytoplankton production and

microbial activity -- eutrophication. Fish and shellfish
Page 3

populations that are dependent on estuaries as essential

habitat may be harmed, displaced, or rendered unfit for

human consumption. In virtually all of these examples,

the five LME modules are interdependent -- a change in

one module will have impacts on other modules.

MONITORING AND ASSESSMENT

We anticipate several steps in the process of monitoring and assessing the human dimensions of an LME and

the use of its resources. These steps are summarized in

Table 1.

These steps provide information to management authorities, especially with regards to the efficacy of management policies. Most of these steps should be repeated

periodically to update the information on the status of the

LME. This information is an essential ingredient of the

adaptive management approach, which requires frequent

evaluation and feedback to take full advantage of experience and learning (Hennessey 1994; Lee 1993; Walters

1986).

STEP 1: IDENTIFY PRINCIPAL USES OF LME

RESOURCES

The first step in the monitoring process involves identifying principal uses of LME resources. Management of

LMEs requires comprehension of a variety of relationships within the natural and human environment and also

of the effect of human uses on the environment. That is,

policymakers need to be aware of, and sensitive to, the

pattern of interaction resulting from their policy decisions

if the sustainability of the environment, which supports

human needs, is to be maintained.

Use is an important concept and requires careful definition. We define several types of use as follows:

ï Direct use refers to the physical use of a resource on

site or in situ. Common examples of direct use include commercial and recreational fishing, beach use,

boating, and wildlife viewing. Most direct use is targeted by participants who visit a beach, fish at a particular location, and so forth. Direct use also may be

incidental, for example, when a person traveling by

boat unexpectedly sees whales or marine birds while

en route to a destination (Freeman 1993).

ï Indirect use occurs when, for example, wetlands or

other LME habitats contribute to the abundance of wildlife or fish observed or caught elsewhere in the LME.

In effect, the ecological services of the wetland or

habitat help ìproduceî the wildlife or fish concerned,

although the link between the direct use and the ecological services provided by the wetland or habitat may

not be apparent to the recreational participant.

ï Nonuse (or ìpassive useî) refers to the enjoyment

individuals may receive from knowing that the resources exist (ìexistence valueî) or from knowing that

the resources will be available for use by oneís children or grandchildren (ìbequest valueî) or others even

though the individuals themselves may not actually use

the resources concerned.

Another useful distinction is between consumptive use

and nonconsumptive use:

ï Consumptive use occurs when one personís use of a

resource prevents others from using it. For example,

the shellfish, finfish, or waterfowl one person takes in

the LME are unavailable for others to harvest. Hence,

consumptive use of natural resources in this sense is

Table 1. Steps for monitoring and assessment of the human dimensions of an LME, and of the use of its resources

1. Identify principal uses of LME resources

2. Identify LME resource users and their activities

3. Identify governance mechanisms influencing LME resource use

4. Assess the level of LME-related activities

5. Assess interactions between LME-related activities and LME resources

6. Assess impacts of LME-related activities on other users

7. Assess the interactions between governance mechanisms and resource use

8. Assess the socioeconomic importance of LME-related activities and economic and sociocultural value of key uses and

LME resources

9. Identify the publicís priorities and willingness to make tradeoffs to protect and restore key natural resources

10. Assess the cost of options to protect or restore key resources

11. Compare the benefits with the costs of protection and restoration options

12. Identify financing alternatives for the preferred options for protecting/restoring key LME resources
Page 4

like consumptive use of private goods exchanged on

markets, such as a pizza or a pair of shoes.

ï Nonconsumptive use refers to cases where one

personís enjoyment does not prevent others from enjoying the same resource. For example, my viewing

of marine mammals, other wildlife, or attractive views

in the LME does not prevent you from enjoying the

same resources.6

In this report, the uses include direct consumptive and

nonconsumptive use, such as shipping, commercial and

recreational fishing, mining, boating, beach use, and wildlife viewing. We emphasize that many activities, such as

fishing and viewing of wildlife, rely upon the ecological

productivity of LMEs; hence, these activities also involve

the indirect use of these ecosystems.

STEP 2: IDENTIFY LME RESOURCE USERS AND

THEIR ACTIVITIES

LME-related activities play a major role in the livelihood of coastal state residents who own, operate, or are

employed by thousands of businesses in many sectors.

These sectors engage in, or support, such activities as fisheries, marine transportation, and particularly tourism and

recreation.

Determining use sectors that are LME-related is not

always straightforward, and judgment necessarily plays an

important role in making such decisions (e.g., Rorholm et

al. 1967; King and Story 1974; Grigalunas and Ascari

1982; Crawford 1984). Certain sectors are clearly LMErelated, such as commercial fishing, marinas, ferries, and

specialized retail stores such as bait and tackle shops.

These are primary activities, which by their nature operate

on or around the water; or they supply goods and services

clearly related to consumptive and nonconsumptive uses

of LME resources.

In a broad sense, however, much if not most activity

along a coast is ìLME-related,î at least in part. For example, restaurants, hotels and motels, retail shops, real

estate, and gasoline stations serve seasonal visitors to the

coastal resources of the LME, as well as year-round residents and businesses.7

 Thus, these sectors are also LMErelated to a large extent (although some activity in these

sectors may also be dependent, in part, on the inland, terrestrial resources). Moreover, many residents may view

the quality of the LME environment as an important factor attracting them to the area. In short, the dependence

of human activity on LME resources and their quality is

much broader (and more subtle) than might be suggested

by first impressions.8

We recommend a pragmatic approach by defining two

broad use sectors that are LME-related: directly-related

and indirectly-related use sectors. Both sectors are involved with the consumptive or nonconsumptive uses of

LME resources.

ï Directly-related use sectors are relatively distinct and

include primary activities or those that operate on or

in the LME. These marine-related sectors are considered to be 100% LME-related. Examples include commercial fishing ports, marinas, and ferries that are

physically located along, or that operate within, the

LME.9

ï Indirectly-related use sectors include tourism and

recreation activities such as hotels, motels, restaurants,

and sport facilities (e.g., public golf courses and membership sports clubs) and retail sectors that service

tourists and coastal residents, such as gas stations, bakeries, grocery stores, general merchandise stores, etc.

Other indirectly-related sectors may include landbased agriculture, manufacture, and forestry, which may

indirectly affect the health of the LME via pesticide

runoff, wastewater discharge, or soil erosion upstream.

These use sectors are considered not fully LME-related since the link between the LME and the level of

these activities is weak or less clear.

STEP 3: IDENTIFY GOVERNANCE MECHANISMS

INFLUENCING LME RESOURCE USE

As conflict of use and negative environmental consequences of human use become more obvious, collective

responses at a variety of levels begin to emerge -- in short,

governance efforts evolve. We recommend developing a

ìgovernance profileî for each LME (Juda and Hennessey

2001). It should be noted that in the case of most of the

identified LMEs, governance involves governments and

people of more than one state since political and LME

boundaries typically do not coincide. This reality has significant implications and could provide either a rationale

for interstate cooperation or, alternatively, an abandonment

of national efforts, since if they are undercut by the actions of others they will be rendered ineffective.

Just as natural ecosystems vary from one another, so

too do governance systems. Governance arrangements

already exist in areas encompassed by LMEs; they are not,

however, presently organized around the concept of LMEs.

Institutional, sociocultural, and economic factors are of

substantial significance in the use and management of the

natural environment; like aspects of the natural environment, they are also ìsite specific.î In seeking to move

toward a governance system which is more appropriate for

ecosystem-based management, it is necessary to understand how existing institutional and cultural systems operate, their implications for the natural environment and

its resources, and how needed change may emerge, given

societal structures and norms.

Why is governance important? The answer to this question lies in the fact that attempts to manage resources and

the environment are really about managing human behavior and encouraging patterns of conduct that are in accord

with the operation of the natural world. Governance af-
Page 5

fects human uses of LME resources and may be conceived

of as:

the formal and informal arrangements, institutions,

and mores which determine how resources or an

environment are utilized; how problems and opportunities are evaluated and analyzed, what behavior is deemed acceptable or forbidden, and

what rules and sanctions are applied to affect the

pattern of resource and environmental use. (Juda

1999)

As suggested by this definition, the concept of governance

is not equivalent to government but rather incorporates

other mechanisms and institutions (both formal and informal) that serve to alter and influence human behavior

in particular directions.

Reflecting the notion that governance is not the same

as government, there are three key, general mechanisms

of governance: markets, government, and nongovernmental institutions and arrangements. These mechanisms interact with one another in a pattern of dynamic interrelationships. Through the forces they generate, they individually and collectively impact use behaviors (Figure 1).

Markets generate prices, which structure the incentives faced by firms and households, affecting how environmental resources are utilized. Resources for which

no markets exist in effect have zero prices (e.g., fish in

the sea), artificially deflating the cost of using such resources. That is, users do not face the full social and environmental cost of fishing, habitat destruction, waste disposal, etc., when these resources are not priced. Lower

cost of use, in turn, tends to encourage excessive use and

results in depleted LME fish stocks, too little essential

habitat, and too much pollution.

Government regulations and requirements, whether at

a local, regional, national, or international level, affect

resource use. In general, government sets a wide array of

rules and enforces them, recognizes and protects property rights, and produces goods and services. The rules

regulate the use of environmental resources and affect the

way goods and services are produced. The protective function of government is to maintain security and order by

enforcing a set of rules within which people can interact

peacefully with one another. These include rules against

theft, fraud, and physical harm to person and property.

Without protection, property rights are not secure and

externalities arise. The government also produces goods

and services that cannot be efficiently organized by the

market. These activities and outputs include a system of

jurisprudence (an example of a pure public good), fisheries and oceanographic research (quasi-public goods), fishing license and boat registries (regulatory services), guaranteed loans, and vessel buyback programs (transfer payments to users of the marine environment). These and

other government activities tend to have a profound influence on how LME resources are used.

Social forces that are generated by nongovernmental

institutions and arrangements also influence use patterns.

These forces are shaped by norms, values, and beliefs that

rationalize cognition of self and other members of society (ICGP 1993). They are dependent on the importance

people attach to their community and neighborhoods, traditions, and long-standing social networks. Failure to heed

the pressures from these factors may lead to sanctions

that range from economic loss, to incarceration or monetary penalties, or to expulsion from the community.

The principal task of this step it to identify and describe the salient forces (markets, governmental, and nongovernmental institutions and arrangements) influencing

users and theirs uses of LME resources. Practical, applied

field methods will have to be developed to insure a complete inventory of such forces is compiled.

STEP 4: ASSESS THE LEVEL OF LME-RELATED

ACTIVITIES

This step involves assessing the nature and extent of

all LME-related activities identified in Step 2. The tasks

include measuring the quantity and value10 of the goods

and services produced, the employment and income generated, use rates of LME resources, and other significant

inputs used by these sectors.11 These levels of LME-related activities should be calculated for the LME as a

whole, and disaggregated by appropriate subregions and

user/producer groups. Recent trends and patterns in these

activities should be described in as much detail as the data

allow. Historical uses should also be incorporated in order to provide a context with regard to present activities

and arrangements.

STEP 5: ASSESS THE INTERACTIONS

BETWEEN LME- RELATED ACTIVITIES AND LME

RESOURCES

The notion that human use alters the natural environment is not new; what is relatively new is the degree to

which that environment and its natural processes may be

affected by human actions. If future sustainability is a

Figure 1. Governance mechanisms.
Page 6

matter of concern to decisionmakers, then it is necessary

for them to consider the nature and character of the interactions between human activities and natural systems. That

is, our monitoring and assessment framework must fully

integrate the human and ecological systems related to an

LME.

The need for human-ecological system integration is

readily understandable due to the similarities and interaction between the two systems. This is reflected in many

government and development agency policies, which advocate the use of ecological management and principles.

However, the complexity with respect to the number of

components and relationships makes this a difficult task.

Most ecological studies have not fully integrated human

activities, and most approaches have considered only one

or a few sectors at a time. There is also a broad body of

integrated environmental and ecological economics studies, but relatively few of these attempts have been successful (van den Bergh 1996).

Early attempts to integrate the two systems utilized

input-output models to construct matrices of economic

and ecological components and processes (Cumberland

1966; Daly 1968; Isard 1972; Victor 1972). Although the

format of each attempt varied, the framework generally

followed work by Isard (1972), depicting both ecological

and economic processes. A variety of matrices also have

been used by others in conjunction with generic coastal

or ocean use (Couper 1983; Vallega 1992).

Input-output models have disadvantages that limit their

usefulness. Input-output models are composed of a system of linear equations that are dependent on technical

coefficients which symbolize the amount of an input required for each dollar of output. This assumes constant

proportions with no substitution or economies or

diseconomies of scale. Unfortunately, most socioeconomic and ecological systems involve component relationships which are neither static nor linear. Additional

problems are related to the complexity of ecological systems. Most models of ecosystems consider the transfer

of energy through the food chain. However, ecosystems

resemble a web with multiple connections rather than a

linear chain. Many species are generalists that change diet

according to season, prey availability, or life history stage,

while each prey item has a different energy transfer efficiency. Decomposers that utilize dead organisms and other

unused organic matter also add another layer of complexity to the structure of food webs. In addition, there are

other interactions within the system such as competitive

and mutualistic relationships that are especially difficult

to quantify. Given more realistic, albeit complex, modeling alternatives, input-output models may be too restrictive and simplistic for quantitative assessments of these

systems. However, the input-output framework is a good

foundation for our purposes, especially with respect to

the inventory, organization, and exploration of the myriad

relationships related to an LME.12

We believe it is important to organize data and information about the interplay of human activities with natural

processes in such a manner as to illuminate interrelationships, with the hope that consideration of highlighted interactions will foster behavior appropriate to the goal of

sustainability. The framework that follows seeks to promote understanding of relationships and to encourage the

utilization of adaptive management approaches (Hennessey

1994; Lee 1993; Walters 1986) that take full advantage of

experience and learning. For these purposes, this study

proposes the use of interaction matrices which can serve

as diagnostic tools and provide a framework for analysis

and consideration of management problems and possibilities. These matrices have the capacity to inventory human

uses of the LME and ecological processes that are related

to the LME, to organize human activities, commodities,

and processes within a framework, and to explore linkages and relationships among sectors. The interaction

matrices can be modified to depict different geographic

zones and different industrial or species groupings. The

geographic designation of land and marine can be further

broken down into economic and ecological subgroupings.

Therefore, regions or ecological groups can be subdivided

depending on the desired method of classification, the

desired scale, and the functional relationships that are being investigated. Given the complexity and need for a comprehensive approach, interaction matrices can provide a

description of the current situation and provide a basis for

predicting the consequences of changes to the system. The

matrices also are a useful education and communication

tool for policymakers that readily shows relevant sectors

and linkages.

The study of these systems relies on common descriptive characteristics such as scale, spatial and temporal distribution, linkages, thresholds, resiliency, and diversity.

Ecosystems can be assessed on different levels that include the individual organism, population, community, and

ecosystem. Human systems also include different levels

such as the individual, household and family, community,

business enterprise, use-sector, region, and society. Scale

is essential to understanding both human and ecological

systems. An ecosystem may range in scale from a cubic

foot of soil to thousands of square miles. Human systems

also range from the household to the national and global

economy. Spatial and temporal factors are also important

considerations for both systems. Many socioeconomic

activities and ecological distributions may be seasonal,

patchy, and migratory in nature. Ecosystems with greater

diversity are likely to be the most stable (Caddy and Sharp

1986). This is also likely to be true of a regional economy

with diverse economic sectors compared to one dependent on only one or a few commodities.

Perhaps the most important characteristics are the

linkages and interdependencies between components

within both systems. In both cases, a change in one element has repercussions for other elements within the sys-
Page 7

tem. Figure 2 illustrates a matrix that could be used to

show the potential linkages among land-based and marinebased processes. For example, nutrients from agriculture

can affect productivity in estuaries and nearshore areas.

Land-based processes that affect marine-based processes

potentially involve similar modules that may need to be

taken into account. Figure 2 divides the processes in each

region into ecological and use sectors, and provides a few

examples of such processes (e.g., fishing, aquaculture,

marine transportation). The matrix contains cells wherein

the relationships between, say, aquaculture and ecosystem

health, are described in terms of the degree of compatibility and nature and extent of impact.

This and the other matrices illustrated in this report

are recognized as being general and simplistic. Clearly, it

is necessary that broad categories of activity be subdivided

appropriately. In the case of fishing, operations are conducted in many different ways around the world and even

among fishermen of a particular state. Commercial, industrial, artisanal, recreational, and subsistence fishing,

and the use of different gear and techniques, while all coming under the general rubric of fishing, may have varying

impacts on the biomass and the physical environment, and,

accordingly must be differentially assessed.

Contained in the elements of the matrices is information on the interactions between human use activities and

the LME environment and its resources. It may well be

that the effects of human use are not well understood, or,

fully documented, and a degree of precaution may be called

for to avoid irreversible damage or long-term costs as

decisions are made. Indeed, it would be useful for

decisionmakers if some explicit assessment could be

made as to data availability and the degree of understanding of natural processes, both of which could be factored

into decisions about the application of precaution. Consideration of interplay based on experience may be suggestive of priorities for future study where data or understanding are deemed insufficient.

To a considerable extent, human use of, and effects

on, the ocean/coastal natural environment have been generally described. For instance, water quality has been

monitored and evaluated, wetland loss has been studied,

the introduction of alien species has been noted, and

coastal demographic changes have been documented. But

in addition to studying changing conditions of the environment, greater consideration must be given to the consequences of those changes. The scientific community

needs to highlight, in terms understandable to the lay person, the consequences of those changes for human well

being, a step which goes beyond observing the relationships of the type noted in the interaction matrices.

The finding of depleted oxygen in coastal waters, for

example, needs to be attached to the more practical consequences of fewer opportunities for commercial and recreational fishermen since it is such considerations which

may serve to motivate public concern and appropriate actions. Accordingly, a subsidiary matrix which reflects the

impact of ecosystem effects on outcomes of interest to

stakeholders and the wider public is warranted. A more

sophisticated version would provide for contemplation of

impacts of human uses on the environment and its ecosystem resources.

A ìvulnerability assessmentî of specific environmental conditions is needed for coastal management (Lourens

et al. 1997), since variance in a number of natural conditions may alter the significance of possible threats. InFigure 2. Interactions among LME-related activities and LME resources.
Page 8

deed, the process of International Maritime Organization

special area designation as a result of the Protocol of 1978

of the 1973 International Convention for the Prevention

of Pollution from Ships, the establishment of marine sanctuaries through the 1972 Marine Protection, Research, and

Sanctuaries Act, the inclusion of the concept of essential

fish habitat in the 1996 Sustainable Fisheries Act, and other

special area zones such as those in the 1972 Coastal Zone

Management Act 1972, indicate recognition of vulnerabilities of particular areas.

STEP 6: ASSESS THE IMPACTS OF LMERELATED ACTIVITIES ON OTHER USERS

The lack of strong and complete property rights to all

biotic and abiotic elements of an LME is the fundamental

cause of externalities and threats to the sustainable use of

an LME. (For more on this, see the later section on ìProperty Rights Entitlements and Regimes for LME Management.î) The users of LME resources usually have free

and open access to those resources (e.g., transportation

of goods, harvesting of food and industrial raw material,

use for leisure activities). The resulting negative externalities tend to affect the marine ecosystem in injurious

ways: overharvesting of wild species, destruction of habitat, pollution, etc. These effects are costs (harms) imposed on the environment and other users that are external to those causing the damage. The methods developed

for assessing the damages to natural resources can be

employed to estimate the external costs of pollution, habitat destruction, etc. We explain below (Example 1) how

the monetary damages from oil spills and other

transboundary marine pollution can be assessed.13

This step aims to assess the impacts that activities directly or indirectly have on others, especially the extent

and nature of those impacts. The task is to identify and

measure the benefit or harm imposed and the compatibility or incompatibility of particular uses in relation to other

uses. Contained in the elements of an interaction matrix

is information on the nature and extent of the interactions

among the users of the LME environment and its resources.

The information should characterize the interactions in

terms of: 1) degree of impact, 2) compatibility, and 3)

desirability.

Compatibility implies either that the uses do not interfere with one another, or, possibly, that they may serve

to enhance one or both of the uses through positive externalities. Incompatibility indicates detrimental effects of

one use on another or both on each other through negative

externalities. The compatibility of particular uses in relation to other uses may be measured or described in terms

such as compatible, conditionally compatible, or incompatible. The amount or frequency of activity (e.g., high,

moderate, or low) needs to be considered as it relates to

compatibility. At low levels of use, uses may be compatible, while this might not be the case with high levels of an

activity.

The concept of compatibility and conflict of use is

basic to the fields of coastal zone management (Clark

1996) and land planning; as ocean uses increase and intensify, it has been recognized in sea or ocean use management (Vallega 1992). Some activities are mutually exclusive while others are compatible to varying degrees. Often incompatibility is demonstrated in practice as

sectorally based decisions are implemented and negative

externalities are generated. In the face of such experience, planners and coastal managers, accordingly, have

resorted to devices such as zoning to keep apart activities

which have significant incompatibilities.

Social conflict may take several forms both within

specific sectors and between sectors. Allocation decisions that favor a specific sector may be economically

efficient, but detrimental to a specific user group.14 This

may result in high social costs at the household or community level if alternatives are unavailable. Social costs

may take the form of higher crime rates, poor diet, drug

use, or the breakup of households and families. These

effects include less easily quantified social considerations

such as community stability, maintenance of social networks and traditions, and the distribution of benefits.

The normative characterization (e.g., desirable or undesirable) of the interplay among users and uses is essential to management decisions. We note that normative

characterizations are determined largely in a cultural context, a factor which once more underscores the need for a

site-specific analysis of human interaction with the environment (Juda and Hennessey 2001).

How should these elements be measured, and what

scale should be used? The characterizations suggested

above require operationalization; that is, terms such as

ìcompatible,î ìhigh,î ìsubstantial,î and ìdesirableî need

to be given definition. As suggested by McGlade (1995)

ìfuzzy logicî may be of assistance in this regard. But beyond the matter of assessing each of the four elements,

the question remains as to how the data will be aggregated

(Underdal 1980). Whatever device or procedure is used

to organize and evaluate data, there can be no escape from

a significant element of subjectivity. Moreover, values

and preferences aside, the fact is that decisions will be

made under conditions of imperfect knowledge and uncertainty.

STEP 7: ASSESS THE INTERACTIONS

BETWEEN GOVERNANCE MECHANISMS AND

RESOURCE USE

Traditionally, governance arrangements have developed

along sectoral lines on an ad hoc, piecemeal basis. As

noted in the classic report of the Stratton Commission

(1969), in governmental contexts, a problem is brought to
Page 9

light one way or another and some department or agency

is given the responsibility to address that particular problem. Over time, responsibilities for a host of activities

and areas are spread among levels of government and among

departments. Eventually, interactional problems become

evident since decisions are being taken without due regard to externalities: the lack of coordination leads to

mutual interference, inefficiencies, and uncoordinated

management.

While substantial attention has been given to mapping

ecosystems, the mapping of governance systems, too, deserves attention. The ìmapping of LME governanceî can

be facilitated by filling in the cells of a matrix such as the

Gulf of Maine example in Figure 3. There is no question

but that the governance system affects the pattern of use

of coastal/ocean areas. It is important to know who is

responsible for what, and how the elements of governance,

like those of ecosystems, interrelate and interact. They,

too, are part of the ìworking environmentî and must be

taken into account as efforts are made to provide for effective use and protection of ecosystems.

As noted above, the concept of governance involves

more than government and its dimensions include: 1) levels of governance (e.g., international, national, regional,

local); 2) sectoral areas (e.g., fisheries, offshore mining,

waste disposal, recreation); and 3) stakeholders (e.g., fishermen, corporations, real estate interests, port authorities). As is the case with particular LMEs, governance

arrangements have site-specific characteristics that need

to be recognized and understood.

Relating to levels of governance, one issue which needs

consideration is: At what level should a problem be addressed? The principle of subsidiarity suggests that authority belongs at the lowest level capable of effective

action (von Moltke 1997). In fact, the European Union

(EU), in its Integrated Coastal Zone Management

Programme, has adopted this principle and calls for problems to be addressed in the order of local, regional, national, and EU levels (EU 1998). And, in its consideration of a needed framework for managing activities in

the ocean and coastal areas of the United States, a recent

report of the National Research Council, entitled ìStriking a Balance: Improving Stewardship of Marine Areas,î

emphasizes the need for a federalist approach in which

power is placed at the level appropriate to achieving desired objectives (National Academy of Sciences 1997).

In this context, different levels of governance share responsibility, and coordination is provided at higher levels.

The subsidiarity principle is suggestive, then, of another

matrix, one which relates level of governance to issues,

and ponders what is the appropriate level of governance to

treat identified problems.

Governance Interactions

The manner of organization of governance arrangements can certainly affect resource use and ecosystem

health (Costanza et al. 1992). As long noted by political

scientists and office holders, bureaucratic arrangements

can be instruments of delay, and introduce the element of

ìturfî into all decisions (Downs 1967). But, the interplay

of different elements of government and governance can

also play a positive role by widening perspectives and forcing consideration of externalities.

In looking to the future and considering how ecosystem-based management efforts may be improved, it is necessary to take the current governance system as a given

and the point of departure. Changes will be needed in terms

of institutions, mores, and values if there is to be a shift

away from sectoral approaches to management of natural

systems and their resources. Identification of incremental modifications would be desirable since such changes

are easier to adopt and implement than more radical

changes, and cumulatively may still have substantial effects.

Government Programs and Use Interactions

As the problems associated with sectoral approaches

to problems become increasingly manifest, efforts are

made to overcome them. One approach is through the

adoption of legislation and the development of governFigure 3. Governance-use matrix: Gulf of Maine example.

Governance Units

General Purpose Regional

Intergovernmental

Single Purpose Regional

I t ntergovernmental C s entral Governmen S s tate/Provincial Government Local Authoritie

I l nternational N l ationa I l nternationa N s ationa U a nited State C s anad U a nited State C s anad U a nited State Canad NGOs

GOM Council

Canada

Atlantic

A O ction Plan NAF

Maine, Mass.,

N.H.

Nova

Scotia, New

Brunswick

Halifax Port

Authority

Save

Casco Bay

Use Sectors

Shipping/Ports

Fishing

Aquaculture

Industrial Siting

Military Uses

Recreation

Waste Disposal

Offshore/Gas

Mining

Housing

Agriculture

Mining

Forestry
Page 10

mental programs which reach across sectoral divides, with

crosscutting effects, and force consideration of externalities. The National Environmental Policy Act of 1969 provides one such legislative example (Juda 1993). The requirement for the use of an environmental impact statement, mandates attention to the subject of externalities.

In the United States, major federal, state, and local

programs have the potential to impact LMEs. Such programs now encompass all of the coastal watersheds associated with areas of fisheries and marine habitat. Watershed management emerged through the passage of Section 6217 of the Coastal Zone Management Act (CZMA)

Reauthorization Amendments of 1990 which mandate efforts to control nonpoint-source pollution in coastal waters. Coastal states are required to use a watershed planning and control approach to deal with sources of pollution from agriculture, forestry, urban development, marinas, recreational boating, and hydromodifications. Plans

must address the preservation and restoration of wetlands

and riparian areas. States are to develop enforceable management measures to treat these sources of pollution (Imperial and Hennessey 1993, 1996).

The National Estuary Program, established in 1987,

complements the above efforts by providing funding to

states to develop a comprehensive planning process to

improve water quality and enhance living resources. There

are currently 30 estuary programs in the United States,

including four in the Gulf of Maine watershed (Imperial

and Hennessey 1996).

Coastal habitat issues have recently come to the fore

and have been addressed through the Sustainable Fisheries Act of 1996 which reauthorized and modified the

Magnuson Fishery Conservation and Management Act (now

the Magnuson-Stevens Fishery and Conservation and Management Act, FCMA), and required NMFS to specify ìessential fish habitatî for all managed species and fisheries.

Each regional fishery management council must amend

its fishery management plans to: 1) identify and describe

the essential fish habitat for each managed species, 2) identify the fishing- and nonfishing-related threats to the habitat, and 3) develop management and conservation alternatives for that habitat.

Exploring the legislative or programmatic mandates

relevant to LME management is worthwhile for several

reasons. First, it is important to understand the program

interactions with different LME uses and interaction with

existing governance structures. Second, management

decisionmakers need to understand how they may alter traditional agency activities and how they may serve to contribute to more holistic management approaches. Figure

4 indicates selected programmatic initiatives in the United

States that merit specific attention in this context. Many

other programmatic examples are available which also

merit evaluation.

STEP 8: ASSESS THE SOCIOECONOMIC

IMPORTANCE OF LME-RELATED ACTIVITIES

AND ECONOMIC AND SOCIOCULTURAL VALUE

OF KEY USES AND LME RESOURCES

The coastal and marine natural resources of an LME

are capital assets -- in effect representing wealth embodied in its marine natural resources. Capital assets -- natural or otherwise -- can provide valuable services (ìinterestî) over time if maintained, much like savings in a bank

provides a flow of interest income.

Underlying much of environmental economics is the

notion of resource valuation (i.e., valuing natureís services).

Resource valuation involves the use of concepts and methods to estimate the economic value the public holds for

natural resource services.15 These services may be direct

or indirect; and they may or may not be bought and sold in

the marketplace.

Direct services include onsite use of marine parks,

beaches, commercial fishing, exploitation of marine minerals, or harvesting of fish, shellfish, or wood from mangroves. Indirect services occur offsite, for example, when

fish ìproducedî by a mangrove are harvested many miles

away. Some natural resources services are exchanged in

organized markets, such as commercial fisheries, oil and

other minerals, some coastal property, or tourism. However, a central feature of many, if not most, marine resource issues is that the services provided are not traded

on markets. The services provided, as for example, by

mangroves, corals, and sea grasses, water quality, recreation, scenic amenities and biodiversity, are not bought

and sold on markets -- and as a result, often are given inadequate attention in public policy.

Four types of value are associated with resource services. First, use value is the benefit received from onsite

or physical use, such as harvesting of fish, exploitation of

oil, or beach use. Second, passive use value is the enjoyment one gets from a resource above and beyond any direct use.16 Passive use losses may arise if individuals feel

worse off when they learn of the loss of an endangered

species, closure of beaches, or other adverse impacts on

other natural resources -- even if they do not use these

resources themselves. People might be willing to pay to

Figure 4. Program-use and governance matrix.
Page 11

prevent such losses, much as they might pay to preserve,

say, an historically or culturally significant building or site,

even if they never actually visit it. Third, total value is

the sum of use and passive use value. Fourth, individuals

also may have an option value when supply (e.g., threat of

extinction, the outcome of a policy) or demand is uncertain. Option value may be thought of as what you would

pay to keep the opportunity open to later use a site or resource.

Resource valuation usually is not an end in itself, except in the case of commodities such as oil or other minerals, or of fish, where the government might lease public

resources to private businesses.17 Instead, estimates of

the value of particular resource services normally are more

useful as contributions to policy for improving resource

management. Most policy decisions involve specific proposals affecting resources and their services ìat the marginî; hence, resource valuation most often will involve

assessments of the marginal value of resource services

rather than the aggregate value.

Social and cultural factors correspond to, and reinforce, the need for economic valuation, but their focus

and the use of sociocultural analysis are also quite different. Indicators such as income, employment, and economic

sector performance are elements of both types of investigation. However, sociocultural analysis takes a step away

from strict enumeration of these elements and focuses on

peopleís knowledge and views (norms and values) about

their work, and how this affects their perceptions and actions toward LME resources (Brainerd et al. 1996). Although this is not easily measured on a monetary scale,

these factors are considered significant by those involved

in resource use. Sociocultural analysis has the capacity

to contribute to management by considering the values of

cultural and social elements of the community, and the

potential costs associated with social and economic disruption and dislocation.

Social and cultural factors are closely linked to governance, users, and uses of LME resources. One way to

account for these linkages is to view human action within

the context of natural resource communities (NRCs) (Dyer

et al. 1992). The interface between a regional system of

extractive NRCs, their service flows, and the associated

LME is here defined as a natural resource region (NRR).18

Dyer et al. (1992) define NRCs as populations whose

sustainability depends upon the utilization of renewable

natural resources. By broadening the definition to include

those dependent on nonrenewable aspects of the marine

environment as well, they and their aggregations as NRRs

represent the LME-dependent communities within a

coastal region.

The NRR includes social, cultural, human, economic,

and biophysical capital and their interactions within networks of LME-dependent communities (Dyer and Poggie

1998). These forms of capital are defined as follows:

ï Social capital is the interactive network of humans

that occurs within and between natural resource communities. Social capital is key to the flow of other

forms of capital, as well as central to the dynamics of

governance and resource utilization.

ï Cultural capital is the behaviors, values, knowledge,

and culturally transmitted behavior and ideas of a population, applied to the transformation and utilization of

natural resources.

ï Human capital is the human population and the knowledge and skills it acquires from formal and informal

education associated with the occupational roles of

natural resource extraction.

ï Manufactured capital is long-lasting manufactured

goods (e.g., buildings, machines, tools, fishing vessels

and gear) that enhance the ability to produce other

goods and services.

ï Biophysical capital, as explained above, is used to

denote those natural resources of an LME that directly

or indirectly generate flows of goods and services used

by humans. The value of these natural resources is

derived from the dynamic between human action and

the natural environment. These include potential resources, identified but not actively utilized in extractive processes, or those having primary value in passive recreational activities (e.g., the whale as resource

to the whale watching industry).

Fishing is a good example of the interactions of some

of these forms of capital. A fishing boat out at sea is a

production-extraction unit of the NRR, relying directly

on the productivity of the fish resources of the LME (the

NRR biophysical asset). The fishing boat is thus an extension of the NRC from which it came, carrying with it social, cultural, human, and manufactured capital in its hunt

for fish resources.

The conceptualization of capital interactions within an

NRR network lends understanding to the occupational valuation placed on ìway of life.î For example, Doeringer et

al. (1986) show how kinship support systems -- a form of

social capital in our formulation -- allow fishermen to

maintain labor linkages to the fishing industry in defiance

of seemingly debilitating economic conditions, usually

associated with declines in volume and value of fish catch,

as well as severe management restrictions on fishing.

In the interface with LMEs, primary units of humanenvironment interaction -- individuals, families, households or communities -- are to be viewed as interconnected

within regional networks held together by shared values

and forms of capital. The NRC is a nodal form of human

organizational structures and of regional and capital interactions, and provides for points of spatial reference by

which to study the LME-NRR dynamic.

Networks of NRCs within NRRs act as conduits

through which total capital is exchanged, shared, and trans-
Page 12

formed by human action. For example, we can consider

the NRC19 as a regional contributor to whatever commerce

is stimulated by LME-related activities, and as a means of

providing sustainable support to LME-related households

and families as they contribute products and services to

the region and nation in which they are embedded. While

only a subset of the NRC interact directly with the marine

environment and its resources (e.g., fishermen, shipping

vessel operators), these individuals are nevertheless connected to more differentiated communities and towns, contributing to the economic and food security of those communities and towns, and buffering coastal development in

a way that contributes to social and economic diversity.

Social impact assessment variables point to measurable change in the human population, communities, and

social relationships resulting from policy change (ICGP

1993). The Interorganizational Committee on Guidelines

and Principles (ICGP) identified a list of social variables

under the general headings of: 1) population characteristics, 2) community and institutional structures, 3) political and social resources, 4) individual, household, and family changes, and 5) community resources. Definitions of

each heading considered by the ICGP are as follows:

ï Population characteristics mean present population

and expected change, ethnic and racial diversity, and

influx and outflows of temporary residents as well as

the arrival of seasonal or leisure residents.

ï Community and institutional structures mean the size,

structure, and level of organization of local government to include linkages to the larger political systems. They also include historical and present patterns

of employment and industrial diversification, the size

and level of activity of voluntary organizations and interest groups, and how these institutions relate to each

other.

ï Political and social resources refer to the distribution of power and authority, the identification of interested and affected parties, and the leadership capability and capacity within the community or region.

ï Individual, household, and family changes refer to

factors which influence the daily life of the individuals, households, and families, including attitudes, perceptions, family and household characteristics, and

social networks. These changes range from attitudes

toward the policy to an alteration in family and household relations and social networks to perceptions of

risk, health, and safety.

ï Community resources include patterns of natural resource and land use, notably, the availability of housing and of community services for health, police and

fire protection, and sanitation. Key to the continuity and

survival of human communities are their historical and

archaeological cultural resources. Under this collection

of variables, we also consider possible changes for indigenous, ethnic, and religious subcultures.

Sociocultural elements may also be assessed by performance indicators related to equity issues such as the

distribution of benefits among stakeholders, the nature of

access to LME resources, and the reliance of communities on LME resources (Patricia Clay, NMFS, per. comm.,

1998). The distribution of income is a measure of equity

within NRCs and between NRCs and wider society. Benefits distribution can take other forms such as the pattern

of fish consumption and distribution, and allocation of,

and/or access to, resources. The nature of access to LME

resources considers property rights as well as the local

involvement in resource management. Community reliance on LME resources may take several forms, including employment and other economic factors, food security, and cultural factors. The relative importance of different social variables will vary depending on the specific

NRC and its relationship to the resource in question.

Dyer and Griffith (1996) isolated five variables that help

identify fishing community dependence on an LME. It

will become obvious that the five variables overlap somewhat; thus, they must be considered together. These are:

ï Relative isolation or integration of LME resource users into alternative economic sectors. To what extent

have users (e.g., fishermen, processors) segmented

themselves from other parts of the local political

economy or other fisheries?

ï User types and strategies of users within a port of access to LME resources. What impact does the mix of

types (e.g., fixed fishing gear -- weirs, fish corrals --

versus mobile fishing gear) across ports and states have

on the long-term sustainability of LME resource

stocks?

ï Degree of regional specialization. To what extent have

users from related areas and use-sectors moved into

the region? Clearly, those users who would have difficulty moving into alternative use-sectors are more

dependent on LME resources than those who have histories of moving among several sectors in an opportunistic fashion.

ï Percentage of population involved in LME resource-related industries. Those communities where between 5

and 10% of the population are directly employed in LME

resource-related industries are more dependent on the

LME than those where fewer than 5% are so employed.

ï Competition and conflict within the port, between different components of use sectors. Competition between smaller scale and industrial scale users can create conflict between users within the same port -- as

well as between different actors in a use-sector (such

as boat owners, captains, and processors). Dependence

may have a strong perceptual dimension, with users

perceiving the resources they are extracting to be

scarce and that one user groupís gain (e.g., industrial

trawling, purse seining) is another user groupís loss

(e.g., gill netting).
Page 13

These five variables can be adapted and broadened to

cover the full range of LME-related activities. A fundamental assumption of the NRR model is that there is some

degree of reliance on the natural resources (i.e., biophysical capital) of an LME. In an LME-linked NRC, biophysical capital reliance manifests itself as learned social behaviors of LME-related activities. The combined social,

cultural, and economic interactions arise from the conditions that increase or decrease access to the LME and its

biophysical capital. Furthermore, dependence on natural

resources limits the occupational roles of community

members, and can intensify cultural assimilation for those

immigrating into an NRC.

Disruption of LMEs is occurring more frequently as

NRRs are stressed by human factors that push resources

beyond their ability to renew themselves and permanently

degrade physical structures such as bottom topography.

Such resource degradation patterns in an NRR can be found

in conditions of severe poverty, overpopulation, management which inadequately takes into account local or sitespecific conditions, the practice of destructive extraction

techniques (e.g., blast fishing in Philippine reef systems),

or the development of overcapacity in a fishery [e.g., the

groundfish fisheries of New England (Dyer and Griffith

1996)]. In an idealized condition, an effective state of

environmental awareness is generated among NRC residents and NRR networks that allows for sustainable utilization of biophysical capital in an LME. Less idealized

conditions -- most real world ecosystems and their human actors -- require some form of management appropriate to the political ecology and cultural and environmental history of the region in question. Thus, although a

generic LME/NRR management framework for the Bay

of Bengal and the Gulf of Maine may be conceptually similar, operationalizing the model cannot proceed without considering site-specific human-environmental dynamics.

The interdependence of economic, social, cultural, and

governance elements is readily apparent. They overlap,

complement, and conflict with one another in different

situations. Their relative importance and tradeoffs between different sociocultural and economic values will

depend on the interplay of the community, LME resources,

and larger society.

STEP 9: IDENTIFY THE PUBLICíS PRIORITIES

AND WILLINGNESS TO MAKE TRADEOFFS TO

PROTECT AND RESTORE KEY NATURAL

RESOURCES

An implicit assumption underlying social science research in this document is that what people want -- that is,

their preferences -- matters in public policy decisions

concerning LMEs. In economies where markets work reasonably well, market prices are a good indicator of the

marginal value individuals attach to incremental units of a

good or service. However, widespread market failure in

LMEs makes the connection between market prices and

preferences tenuous or nonexistent for many major problems. An important issue in the absence of reliable market data, then, is how to obtain useful information on public priorities and preferences that can be used in

decisionmaking for LME management.

One possibility is greater use of opinion polls and

general attitude surveys on LME resource issues. However, most members of the public, when asked, will identify ìthe environmentî as an important concern and will

indicate that, at an abstract level, we should ìdo moreî for

the environment. Such general attitudes, however, are not

very informative of actual values people hold for resources

and their services. This is because value is indicated by

what one is willing to give up to keep or get more of something, and general opinion polls do not confront respondents with the costs of their decisions. It is not surprising, for example, that when asked to assign priorities to

management actions to improve coastal environments,

survey respondents will recommend actions that impose

little or no direct costs on themselves, but are less favorably disposed to measures that would require them to bear

costs (Opaluch et al. 1999). Choices, by definition, imply tradeoffs and values. Real policy actions are not free,

and opinion polls and general surveys that do not require

respondents to recognize costs of actions are unlikely to

provide useful information to LME decisionmakers about

public preferences. For this purpose, more structured

surveys are needed that specifically ask respondents to

make tradeoffs.

Stated preference methods, such as contingent choice

and contingent valuation, are potentially valuable frameworks for assessing public priorities, the willingness of

the public to make tradeoffs, and the publicís economic

values. These methods involve the use of carefully developed surveys that are then administered to a random sample

of the population of interest. Stated preference methods

are one way to assess resource priorities for public goods

and to potentially estimate passive use values for LME

resources.

Ethnographic fieldwork can provide in-depth assessment of values and the degree to which they are strongly

or weakly held. This type of research is more labor intensive, but can be especially important when dealing with

site-specific decisions or where a decision must be made

that may go against particular local values and thus require

public education or remediation.

Hence, the development of socioeconomic and governance elements for LMEs may well draw heavily upon

advances in the use of survey and other methods (e.g., ethnographic interviews, focus groups, panels) for obtaining

information on public preferences for resource management decisions, information that otherwise may be unavailable for decisionmakers to consider.
Page 14

STEP 10: ASSESS THE COST OF OPTIONS TO

PROTECT OR RESTORE KEY RESOURCES

Typically, many alternatives will be available for addressing any problem within an LME, and each can be accomplished at different scales. Consider nutrients, for

example, a serious coastal water quality issue in many areas. This issue can be addressed in many ways, including:

expanding or upgrading public wastewater treatment facilities, encouraging measures to reduce application of

fertilizers in agriculture, using buffers for agricultural lands

along water bodies to reduce runoff, introducing measures

to control runoff of animal wastes from farms and roads

into coastal waters, and investing in sewage lines to avoid

use of septic systems for household residences. Pollution trading between sources (e.g., wastewater facilities

and farmers) also is possible.

Each of the above alternatives is technically feasible

and will be effective in varying degrees. However, the investment and recurring costs of the alternatives will vary

substantially. Selecting among them is not straightforward and requires information not only on costs over time,

but also on their relative efficiency in reducing nutrient

discharges -- that is, cost effectiveness. Cost effectiveness involves selecting the alternative(s) with lowest cost

per unit treated. At one level, this can be viewed as a technical, engineering-economic problem. However, effective policy requires implementation, and thus it is critical

that management mechanisms and institutional structures

be in place that will allow alternatives to be considered

with their cost-effectiveness used as an important criterion.

STEP 11: COMPARE THE BENEFITS WITH THE

COSTS OF PROTECTION AND RESTORATION

OPTIONS

As noted often, many technically feasible alternatives

are available to address resource management problems.

Cost effectiveness, outlined above, ensures activities will

be done at least cost. However, cost effectiveness presumes that an activity is a worthwhile investment of

societyís scarce resources. In fact, there are many good

potential societal investments that compete implicitly or

explicitly for limited public resources. An important issue concerns whether a particular proposal is a good investment in the sense that the resulting benefits justify

the costs (i.e., what society must give up in other goods

and services to realize the benefits).

Increasingly, international agencies and others require

benefit-cost analysis be conducted to help decide whether,

and to what extent, to undertake projects. In carrying out

such analyses, agencies are concerned about considering

not only narrow, commercial transactions, but environmental benefits and costs as well.

Benefit-cost analysis can be a valuable decision tool,

for several reasons. First, it puts public investments on

the same footing as private investments in that they must

meet the same standard: the costs of a policy, program, or

activity should be justified by the resulting benefits. Further, a well-done benefit-cost analysis makes all calculations and assumptions explicit, and by that, transparent for

all stakeholders. This may help add legitimacy to a process, an important consideration in many situations.

Of course, benefit-cost analysis raises several issues,

as well. One is whether all-important benefits and costs

can be quantified. Many advances have been made in natural resource valuation, and the opportunities and limitations of resource valuation are becoming increasingly well

understood. But it is also true that many difficulties remain, and data problems are always an issue, especially in

developing countries. Furthermore, equity -- the distribution of the benefits and costs of a proposed policy action -- is an important issue influencing whether or not

actions will be taken and the form they will take (e.g.,

Zeckhauser 1981). However, distributional effects can

always be included in an analysis. For example, different

groups and/or regions can be assigned different weights,

provided one knows the relative importance (weight) assigned to them; indeed evaluation of such issues is a

strength of analytical methods commonly used in economics. Beyond this, even the best benefit-cost analysis is

not a substitute for good policymaking; decisionmakers

as a matter of course take into consideration the distribution of benefits and costs when deciding whether and how

to implement a program or action. Looked at this way, to

the extent good social science data are available on distributions and types of impacts (e.g., through social and economic impact analyses based on the framework established

here), the equity problem in practice is not as serious an

issue for benefit-cost analysis as some may believe.

STEP 12: IDENTIFY FINANCING ALTERNATIVES

FOR THE PREFERRED OPTIONS FOR

PROTECTING/RESTORING KEY LME

RESOURCES

The results of cost-effectiveness analysis, benefit-cost

analysis, and social impact analysis can help select the

preferred option from among several technically feasible

alternatives. To implement the preferred option, however,

sustainable financing must be available. Financing is often viewed as ìmerelyî a distributional issue, but, in fact,

sustainable financing has become an increasingly important issue not just to ensure that revenues cover costs, but

also as a way to affect incentives that encourage favorable

behavior and discourage unfavorable actions.

Many alternative financing approaches are available,

depending upon the issue and area. Broad principles to be

employed may include the user- or beneficiary-pays and
Page 15

polluter-pays principles. The user- or beneficiary-pays

principle has strong appeal on fairness grounds in many if

not most cases, but is less useful and may need modification for cases where a program is provided specifically to

achieve an equity objective. The polluter-pays principle

also has a strong basis in fairness, but additionally -- when

effective -- provides incentives for operators to avoid pollution by internalizing costs. The polluter-pays principle

also works to place at least some of the costs of such actions on the consumer of the polluting good. In sum, the

polluter-pays principle ensures that operators and consumers face the full social costs of producing and using the

good involved.

The user- or beneficiary-pays principle is especially

challenging to invoke in practice for resources that have

widely dispersed and significant nonuse benefits. For example, preservation of unique marine parks (e.g., the Great

Barrier Reef) or marine mammals (e.g., sea manatees or

whales) likely provide major benefits far beyond those who

use these resources and may extend to the public nationally and internationally. A user pays or beneficiary pays

principle obviously is difficult to invoke on nonusers in

such cases. This suggests that for such unique, widely appreciated resources with strong nonuse value, international

donations must play a critical role rather than reliance on

access fees.20

Criteria for selecting the type of financing might include adequacy of revenues, transactions costs, distributional effects, political feasibility, effects on behavior, and

conflicts with other objectives. Examples of the last criterion include actions by some countries to: 1) provide

subsidies to fisheries while at the same time trying to limit

catch, 2) impose taxes on imports of construction materials while trying to protect corals (which are mined in some

countries as a source of construction materials), or 3)

encourage agriculture while at the same time attempting

to protect or restore water quality.

APPLICATIONS OF THE MONITORING

AND ASSESSMENT FRAMEWORK21

EXAMPLE 1: ASSESSING MONETARY DAMAGES

FROM OIL SPILLS AND OTHER

TRANSBOUNDARY MARINE POLLUTION22

Oil spills and other transboundary pollution in an LME

are important concerns due both to: 1) the risk of accidents, and (2) the many important resources, activities,

and ecosystems that are vulnerable to injury from pollution. Managing the risk of spills raises two interrelated

issues. One is the appropriate scale of measures to prevent and control spills. A second issue -- the focus of this

section -- has to do with the institutional framework, methods, and standards that might be used to assess the monetary value of natural-resource-related damages when

spills occur.

When oil spills or other pollution incidents occur, it

is necessary to decide whether to assess damages, which

losses can be compensated for, the best method(s) to be

used to assess damages, and the institutional framework

within which such assessments take place. This is where

natural resource damage assessment (NRDA) becomes important.

NRDA is a method that applies legal, scientific, and

economic principles to assess monetary damages caused

to natural resources by pollution and other human actions.

NRDA provides measures for sustainable financing in the

form of compensating for injuries and lost natural resource

services due, for example, to transboundary pollution.

NRDA, as applied in the United States, consists of a formalized process and an institutional regime within which

allowable losses from covered incidents can be quantified and collection of claims can be undertaken and enforced. NRDA is a relatively new area of research, and

the concepts and approaches being used have been evolving relatively quickly.

The intended outcome of an NRDA is a claim against

a responsible party. The scope of items included by governments as damages has grown, as has the size of settlements. As a result, NRDAs necessarily involve tensions

and adversarial debate between government, which is responsible for implementing and enforcing NRDAs, and

industry, which must respond to and pay legitimate claims.

Critics of NRDA question the reliability and, in some cases,

the appropriateness of NRDA assessments. Supporters

of NRDA make comparisons with the many empirical challenges and imprecisions addressed as a matter of course

when assessing damages such as the value of intellectual

property rights, antitrust issues, and losses from personal

injury in work-related accidents.

In spite of controversies surrounding NRDA throughout its evolution, establishing liability for damages due to

oil and hazardous substance marine pollution is of increasing interest. This interest stems from its important role

as a practical method based on economic incentives (i.e.,

the polluter-pays principle) in environmental policy. Improvements in the understanding of the scientific, economic, and legal concepts used in NRDA facilitate its

implementation. NRDA is of interest to many parties, because:

ï Littoral states must decide the adequacy of NRDA

measures for compensation for losses due to spills.

Particularly important are losses to publicly controlled

or managed resources, such as open-sea fisheries, wildlife, and ecosystems.

ï Owners and operators of mariculture, fishing, tourism,

and other coastal businesses at risk from spills are concerned about recovering lost earnings.

ï Industry is concerned about the legitimacy of claims

against them for losses, about transactions costs for

legal and expert reports and proceedings, and about

avoiding double counting of losses (paying twice -- or
Page 16

more -- for the same loss). They are especially

troubled about the potential for damage claims based

on speculative losses or losses based on unreliable or

ìtheoreticalî methods. Of particular worry is the potential for major claims, if damages are expanded to

include nonmarket and other, hard-to-quantify losses,

especially passive use value23, as they have in the United

States, for example (e.g., USDOC/NOAA 1993;

Hanemann 1994).

ï Insurance companies are concerned about the nature

and size of claims they will face for response, cleanup,

assessment, and damages. In many respects, their concerns are similar to those of industry.

Interest in NRDA by public bodies stems from the

promise of NRDA in helping to achieve two important

environmental policy goals. First, it provides an organized

framework for pursuing compensation for the many costs

that can result when natural resources, coastal activities,

and property are adversely affected by oil and other marine pollution. Many types of pollution damages currently

are not compensated for, and as a result, these costs are

borne by coastal states. Second, polluter liability under

NRDA requires the responsible party to bear the costs of

marine pollution (i.e., polluter-pays principle). Liability

provides built-in incentives for polluters to avoid incidents,

and by that, plays to their self interest as a matter of course

(e.g., Opaluch and Grigalunas 1984; Grigalunas and

Opaluch 1988). This is consistent with worldwide trends

toward the use of market mechanisms to address environmental issues as recommended, for example, in Agenda

21 of the 1992 Rio Convention. At the same time damage

assessment raises several issues, including the:

ï Nature of liability

ï Scope of incidents covered

ï Scope of impacts (ìinjuriesî) for which damages can

be assessed

ï Allowable damages

ï Allowable methods for estimating damages

ï Standards to apply in weighing the results of such methods

ï Means for limiting transactions costs

A recent survey paper by Grigalunas et al. (1998) presents concepts and issues in NRDAs and summarizes several case studies to illustrate different types of losses and

efforts to estimate these losses. Any attempt to develop

an LME-wide approach for NRDA in an LME would need

to address these (and other) issues in great detail.

EXAMPLE 2: ECONOMICS, SCIENCE, AND

POLICY IN ESTUARY MANAGEMENT

This example is based on a series of economic studies

for the Peconic (New York) Estuary System as part of the

National Estuary Program in the United States. The estuary and surrounding watershed are very attractive and used

intensively, particularly during the peak summer season.

The estuary itself has generally good water quality. However, pollution exists and threatens some uses; for example, extensive shellfishing grounds have been lost due

to pollution. Also, development has caused the loss of

important habitats/ecosystems, and threatens the scenic

amenities of the area. Thus, many market- and nonmarketvalued resource services are at issue in this case -- as is

true in most other coastal and marine cases.

By close work among program mangers, scientists, and

citizen advisory groups, a series of studies have been carried out, or are ongoing (Grigalunas and Diamantides 1996;

Opaluch et al. 1999), to:

ï Estimate the economic importance of estuary-related

activities

ï Identify coastal users, their activities, and concerns,

using a carefully prepared survey

ï Identify the publicís priorities and willingness to make

tradeoffs to protect and restore key natural resources

using a second carefully developed survey

ï Estimate the economic value (benefits) of key recreational uses and coastal amenities

ï Assess wetland productivity and habitat services

ï Assess the cost of options to preserve or restore key

resources

ï Compare the benefits with the costs of preservation

and restoration options

ï Help select financing alternatives for the preferred

options for preserving/restoring key natural resources

Preliminary results indicate that estuarine-related activities play a major role in the livelihood of several thousand residents who own, operate, or are employed by more

than 1,000 businesses in some 24 identified sectors. These

sectors engage in, or support, such activities as fisheries,

marine transportation, and particularly tourism and recreation.

It was also found that more than 100,000 people annually engage in millions of days of recreational activities,

and preliminary estimates of the value of key recreational

activities range from $8.59 per trip for beach use to $38

for a recreational fishing trip. The total annual value across

the three recreation activities studied to date is more than

$50 million per year, again based on preliminary results.

These are economic benefits to users above the costs they

incur (i.e., ìunpaid-for benefitsî).

An interesting and potentially very important part of

this work is how users of coastal areas are affected by

water quality. A link between objective water quality measures and subjective measures of quality, as perceived by

recreationists, has been estimated. This allows joint work

with scientists who estimate the changes in various measures of water quality due to policies being considered to

control pollution. Given the cost of such control mea-
Page 17

sures and of preservation and protection measures, the

benefits will be able to be compared with the costs of these

policies.

Preliminary survey results also suggest that the public holds strong values for preserving key area natural resources. These results are supported by preliminary results from a separate, housing value study. This study suggests that residents are willing to pay more for property

located near coastal waters, parks, and open space.

A wetland productivity study of the value of eelgrass,

intertidal salt marsh and mud flats yielded preliminary results for the marginal value (asset value) ranging from

$12,700 per acre for eel grass to $4,400 per acre for mud

flats. These estimates include the estimated market value

of fish and shellfish ìproducedî by, and harvested from,

these ecosystems, and the value of waterfowl hunted and

birds viewed. The value estimates include only food web

effects and habitat values, and hence are conservative in

that such services as shoreline erosion protection and

storm protection services provided by salt marshes, for

example, were not considered. The estimates of economic

value (benefits) of these three types of wetlands will be

used in benefit-cost studies of management proposals for

restoration of habitats.

As noted, ongoing work will examine the cost of options for preserving and restoring resources, compare the

benefits with the costs for different options, and help select financing alternatives for the preferred options. Again,

an important aspect of this work is the willingness and

commitment among the program managers and participants

to work together to link socioeconomics, natural resource

science, and policy.

EXAMPLE 3: SUSTAINABLE FINANCING FOR

POLLUTION PREVENTION AND CONTROL24

Environmental programs to prevent or control pollution may require major investments. Benefit-cost analyses of public projects often do not consider how projects

will be financed, nor do they usually present the implications of different financing and institutional alternatives.25

Yet, to be successfully implemented and maintained, attention must be given to financing, to important institutional measures, and to the distribution of benefits and

costs in general. Financing in particular is important for

several obvious and perhaps less apparent reasons:

ï Inadequate funding will limit the implementation of

effective pollution prevention measures.

ï Mechanisms used to finance projects (e.g., user fees

versus general revenues, different formulae for costsharing) have important distributional effects which

often are a major factor influencing how -- and even

whether -- a policy is adopted (Zeckhauser 1981).

ï Financing options can affect usersí incentives, thus influencing behavior and the resulting size of benefits.

ï Financing options may differ with respect to ease of

administration (transactions costs), political feasibility, stability of revenues, or in other important respects,

all of which influence whether and how measures are

adopted, as well as their effectiveness.

For all of these reasons, sustainable financing of pollution management actions is a significant issue for LMEs.

Sustainable financing mechanisms include: 1) user

fees and related, cooperative mechanisms, when available

and appropriate (and allowed under the United Nations

Convention on the Law of the Sea); 2) NRDA; 3) potentially attractive investments in private-public partnerships,

including potential investments under the Buy-TransferOperate and related public-private programs; 4) international donors; and 5) international trusts.

User fees and, more generally, mechanisms employing incentive-based approaches, have considerable appeal.

They are based on the user-pays and polluter-pays principles, and reflect commonly shared notions of fairness.

They also can work to harness the power of the market to

sustain pollution prevention and control measures, in an

efficient manner, in effect using private interest to serve

the broader public interest (Schultz 1975; Grigalunas and

Opaluch 1988).

To be effective, however, markets must work, or appropriate institutional arrangements must exist to allow

markets to function. Major problems may arise in devising mechanisms to prevent and control pollution, because

of market failure and ìinstitutional failure.î For example,

many navigational aids and safety measures are public

goods; other safety measures (e.g., use of pilots and vessel transit systems) may create important external benefits not captured in the market; and in still other cases,

institutional problems prevent effective reliance on user

fees. As a result, developing methods to promote greater

reliance on user fees for sustainable financing of antipollution measures often is not a straightforward exercise.

Many measures are available to prevent or control seabased transboundary pollution:

ï Best management practices to control agricultural

wastes

ï Sewerage treatment facilities in critical areas

ï Compulsory pilotage

ï Salvage operation

ï Vessel traffic information service (VTIS)

ï Navigational aids/services

ï Electronic charts (ìmarine electronic highwayî)

ï Shore reception facilities

ï Contingency planning and oil spill response

These measures are, or can be, taken by private parties

(e.g., vessel and cargo salvage, shore reception facilities,

sewerage facilities), governments (e.g., navigational aids),

or a combination of the two (e.g., VTIS), to prevent or

control spills or promote port efficiency. The above list
Page 18

is not exhaustive and omits some measures (e.g., efforts

for further cooperation and training among the coast guards

of littoral states).

Mechanisms currently used to finance programs in

most areas rely primarily on national sources, but also include user fees, international donations, and other support through international organizations, notably the International Maritime Organization, in the case of pollution from shipping. Liability used to compensate for response, control, and cleanup of spills, as well as for payment for certain economic losses and for restoration actions, is another funding source for managing pollution by

restoring the environment. Individual companies also spend

considerable (but unknown) amounts on pollution prevention and response training, as well as on purchase of equipment to prevent and control spills and avoid other sources

of marine pollution.

Financing mechanisms to prevent transboundary pollution include:

ï Penalties, fines, and taxes

ï Subsidies

ï User fees

ï Port dues

ï Revolving funds

ï Public-private partnerships

ï Privatization

ï NRDA

Briefly, the revolving fund is a source of money that

the littoral countries can draw upon (i.e., borrow from) to

finance response and cleanup activities in the event of a

spill. NRDA is a process to: 1) identify categories of

costs and losses due to oil spills for which compensation

would be paid, and 2) provide appropriate methods and standards to be used to quantify losses in monetary terms.26

Port dues are self explanatory. Public-private partnerships

involve various cooperative approaches the private and

public sectors might take to jointly address pollution from

shipping or other pollution.

Measures can be evaluated using several criteria or

factors, such as administrative efficiency, effectiveness

as a regionwide instrument, revenue-generating potential,

behavioral change potential, fairness and equity among

users and beneficiaries, and political acceptability among

the littoral states.

PROPERTY RIGHTS ENTITLEMENTS

AND REGIMES FOR LME MANAGEMENT

Marine resource management is fragmented in many

coastal states by policies that pay little attention to environmental, institutional, social, and economic scale, or to

interactions and tradeoffs. In fisheries in particular, the

single-species (stock) approach to management does not

adequately account for ecological interactions (Larkin

1996) or for what factors influence harvesting and investment decisions (Hanna 1998). Recent research on environmental management is attempting to integrate natural

and human systems in order to sustain benefits that humans derive from fishery and other natural resources

(Costanza et al. 1997; Larkin 1996; McGlade 1989;

Sherman et al. 1996).

This section investigates the implications of ecology,

technology, and what are known as transactions costs for

the structure of property rights entitlements in LMEs; and

it comments on the characteristics of concordant property rights regimes that structure human behavior vis-‡-

vÏs an LME. This line of inquiry has received serious attention recently in the ecological economics literature

(Costanza and Folke 1996; Hanna 1998; Hanna et al.

1996), but it was introduced mid-century by economist

H. Scott Gordon who explained why the absence of property rights to fishing ìgroundsî caused fishery resources

to be overfished and their value dissipated through investment in too much fishing capital. Although the subsequent

literature developed around disaggregated fish stocks, by

ìgroundsî Gordon (1954) actually referred to ìshallow

continental shelvesî where upwelling waters support ìmarine-food chainsî of resident demersal and migratory pelagic species. He emphasized that ìit is necessary to treat

the [collective] resource of the entire geographic region

as one.î In another, later seminal work, Steven N. Cheung

(1970) asked: ìWhat resource in marine fisheries is nonexclusive [accessible with little or no effective restriction] -- the ocean bed, the water, or the fish? The answer is

that any productive resource is multi-dimensional, and the

term ëfishing groundí is chosen to include all of them.î

Related anthropological literature on common property regimes (e.g., McCay and Acheson 1987) and territorial use rights fisheries, or ìTURFsî [e.g., Pollnac

(1984)] describes the frequency of geographically based

folk management [e.g., McGoodwin (1990)] and the applicability of such approaches to modern management [e.g.,

Cordell (1984), Dyer and McGoodwin (1994)], as well as

discusses the implications and benefits of property held

under group versus individual tenure [e.g., Hunt (1997)].

Although shrouded by confusion, bias, and emotion,

property rights and their institutional context are the foundation of economic activity and are therefore essential to

sustainable management of the goods and services supplied by marine ecosystems. LME management will be

improved by scientific research, but we risk repeating the

mistakes of single-species fishery management in particular if humans continue to be regarded as exogenous agents

of regulatory regimes. Ecosystem management also requires structures of property rights that reflect environ-
Page 19

mental and economic principles, and it requires governance

institutions that reflect the goals and values of a society.

THE STRUCTURE OF PROPERTY RIGHTS

ENTITLEMENTS IN AN LME

Property Rights

In his book on the evolution of property rights in natural resource sectors, Gary Libecap explained that ì[b]y

defining the parameters for the use of scarce resources

and assigning the associated rewards and costs, the prevailing system of property rights establishes incentives

and time horizons for investment, production and exchangeî

(Libecap 1989). Different property rights structures lead

to different rewards (or penalties) and thereby create incentives that influence how people use the natural environment. For clarityís sake, we adopt the definitions of

property and property rights used by Bromley (1992):

Property is a benefit (or income) stream, and a property right is a claim to the benefit stream that some

higher body -- usually a government -- will agree

to protect through the assignment of duty to others

who may covet, or somehow interfere with, the benefit stream.

It is useful to identify five dimensions of property

rights which affect the size and duration of benefits that

owners can expect to receive from economic resources:

1) entitlements, 2) divisibility, 3) exclusion, 4) right to

transfer entitlements, and 5) enforceability.

Entitlements are the ways that owners -- government,

commons, or private entities -- are allowed to use and derive benefits from assets, including attributes of the environment. For example, the U.S. federal and state governments own marine resources on behalf of the public. In

contrast, fishermen own vessels and fishing permits, energy companies own leases to outer continental shelf lands

above pools of petroleum and natural gas, and shipping

companies own access rights to shipping lanes, to name a

few. Virtually all entitlements are attenuated, however.

Thus, it is against the law for fishermen to use their vessels to smuggle contraband into the United States, and their

fishing activities tend to be regulated by a host of gear

restrictions and time and area closures.

Divisibility involves the richness of entitlements to

complex resources with multiple attributes. The scope of

this property right is suggested in a quote from Alchian

(1977) who wrote about partitioning land: ì[A]t the same

time several people may each possess some portion of

the rights to use the land. A may possess the right to grow

wheat on it. B may possess the right to walk across it. C

may possess the right to dump ashes and smoke on it. D

may possess the right to fly an airplane over it. E may

have the right to subject it to vibrations consequent to the

use of some neighboring equipment.î We can obviously

substitute fishing ground or a marine environment such as

Georges Bank or the Gulf of Maine in the Northeast U.S.

Shelf Ecosystem for ìlandî and illustrate with separate

entitlements to harvest (or preserve) populations of Atlantic cod, sea scallop, and American lobster, to extract

minerals such as sand, gravel, and petroleum from the seabed, to sail a boat or to ride a personal watercraft, to transport cargo in shipping corridors, to patrol using military

craft, to conduct scientific research on benthic communities and habitat requirements, to dump sewage, and so on.

The ecology and economics of divisibility will be a major

consideration in designing property rights structures for

multi-attribute LMEs as discussed later.

The remaining three dimensions of property rights are

mentioned here, but they are most relevant to the discussion of regimes in the next section. Exclusion concerns

whether others are prevented from using or damaging your

entitlements. In the papers by Gordon and Cheung that

were quoted earlier, nonexclusiveness, or even extreme

attenuation of this right, shortens time horizons, giving

rise to short-term profit motives. In fisheries, harvesters

invest in technologies that facilitate rapid catches of target species independent of the technologiesí impacts on

discards or habitat. Sustainability is further undermined

by the absence of investment in resource productivity, including the enhancing of the survival of prey and the controlling of predator populations.

The right to transfer entitlements to other entities

increases the time horizon beyond the ownerís lifetime

or generation. Transfer increases property value by making it available to others who value it more highly, and by

implicitly including demands of future generations.

Finally, without enforcement, the other rights have no

practical value. In addition to being a property right, enforcement must also be affordable, otherwise it wonít be

practiced. Enforcement is the bane of fisheries management by governments, and it is infeasible for resource

claimants when resources are nonexclusive.

Virtually all property rights are attenuated by private

contracts, laws, or government regulations that protect

public safety and social values. For example, you are entitled to drive your car to work if you are licensed and

your car is registered; however, you may not exceed speed

limits or violate other motor vehicle laws. Likewise, fishermen are entitled to use their vessels to harvest fish

stocks, but their landings might be restricted in terms of

overall weight or fish size, or time or area closures might

be imposed to protect marine mammals and endangered

species, or their gear might be restricted to configurations that reduce discarding of uneconomic species. At-
Page 20

tenuations reduce the value of a property right to the

owner, but they are justified to protect public welfare.

Bundled Entitlements

The remainder of this section attempts an objective

analysis of the implications of ecology, technology, and

transactions costs for partitioning LME resources into

bundles of entitlements. Transactions costs are a collection of costs involved with gathering information on, and

otherwise delineating, a resource, establishing contracts

(formal or informal) that define the entitlement(s), and

monitoring and enforcing the entitlement(s). The three

other property rights reflect societyís preferences for an

environmental property rights regime and are therefore

normative.

From an economics perspective, an ecosystem such

as an LME can be viewed as a matrix of environmental and

biological attributes, some of which either yield or contribute to as ìinputsî (e.g., prey, habitat) a variety of goods,

such as food, and services, such as assimilation of waste,

over time that benefit humankind (Costanza et al. 1997).

The variety of resources in an LME stems from heterogeneity in biological (e.g., fish populations), physical (e.g.,

sediments, currents, space), and chemical (e.g., dissolved

nutrients and salts) attributes and their structure (e.g.,

trophic relationships, current systems) and function (e.g.,

regulate prey populations, recycle nutrients). From this

perspective, an LME is a differentiated capital asset that

provides humans with flows of environmental goods and

services not unlike what Rosen (1974) described for

humanmade capital assets (e.g., houses, automobiles, vessels, docks).

In theory, each LME attribute is potentially a resource

when it contributes to goods and services valued by humans, sometimes indirectly. For example, the megafaunal

prey (e.g., polychaetes and shrimps) of commercially important Atlantic cod stocks across the Northeast U.S. Shelf

Ecosystem and the biogenic (e.g., bryozoan colonies,

sponges) and sedimentary (e.g., sand waves, glacial gravel

deposits) habitats of those prey are not themselves in demand by seafood consumers, but they do contribute to

Atlantic cod production. Likewise, microorganisms in

sediments are essential to primary productivity because

they recycle nutrients in detritus.

However, there are several reasons why not all resources are candidates for property right entitlements at a

point in time. First, there is no need to conserve resources

that are not scarce because there is more than enough to

satisfy demand at zero price. For example, salinity and

the concentration of dissolved carbon in the open ocean

do not limit photosynthesis. In other cases, the cost of

gathering information on a resource may be too great (e.g.,

population dynamics of deepsea fishes), or there may be

relatively cheaper substitutes (e.g., production of manganese from deepsea nodules or of energy from temperature gradients). Finally, where resource attributes can be

delineated, it might cost too much to monitor and enforce

entitlements, or the institutions that govern use might preclude ownership. Many resource attributes thereby remain in the public domain until such time that technological innovations or changes in peopleís preferences make

them economical (Barzel 1989; Cheung 1970).

We can contemplate which of an LMEís many resource

attributes are not viable candidates for property rights at

this time. Diffuse and fluid resources, such as water temperature, concentrations of dissolved nutrients (e.g., nitrogen, phosphorus, trace metals) and currents and related

oceanographic phenomena such as warm-core rings and

El NiÒo all limit the survival or transport of fish larvae

and, therefore, eventual recruitment to harvestable stocks,

but they are indivisible and nonexclusive. Such resources

are sometimes classified as public goods (or public bads).27

Plankton communities -- phytoplankton, copepods, microorganisms, fish larvae -- are similarly off limits at this

time.

We can also nominate a class of LME resources that

is suitable for property rights definitions given todayís

information, technology, and demand. These include the

measurable stocks of renewable fishery resources, mineral deposits, ocean space, and, conceivably, highly migratory species such as herring, tunas, salmon, marine

mammals, and sea turtles. The migratory species present

problems due to relatively high transactions costs, but recall the 1911 Pacific Fur Seal Treaty in which Russia, Japan, and Canada contracted harvest rights to the United

States in return for annual compensation.

Finally -- and importantly -- entitlements to resource

attributes can be bundled using geographical coordinates

as implied by Gordon (1954), Cheung (1970), and Pollnac

(1984). Doing so will include many of the resource attributes that currently defy divisibility/partitioning, but

which are known to contribute to a good or service in demand. A spatial orientation is critical to LME property

rights structures because it moves benefits out of the public domain where they will be dissipated by too rapid use

and depletion into the calculus of a government, commons,

or private owner. Of special importance to fisheries is

management of discards and habitat, but interactions -- and

tradeoffs -- with other resource attributes, including marine mammals, minerals deposits, and ocean space are

important too.

Design Principles for Property Rights Structures

Bundling LME resource attributes within spatial

boundaries raises several questions regarding geographical scale and what logically belongs in a bundle from the

perspectives of ecology, economics, and sociocultural

theory. Coexistence and coevolution of marine species

and the chemical and physical surroundings are important

considerations so as to control losses from ìexternali-
Page 21

ties,î or ìspillover effects.î By externalities, economists

are referring to situations where interdependence between

production practices and peopleís welfare (ìutilityî) are

exogenous to the decisionmakers.28 In other words, entitlements intermingle owing to an inability to completely

delineate property rights because it is too costly or because of institutional constraints (Cheung 1970; Russell

1994). Although positive externalities are equally germane, externalities that damage the property interests of

others receive the most attention. For example, otter trawl

and dredge fishing tear up lobster pots and other types of

fixed gear. However, groundfish and scallop fishermen

have no incentive to restrict their fishing practices or to

invest in different technologies (hook-and-line fishing for

cod or cage culture of scallops) when fishing grounds and/

or lobster stocks are nonexclusive.

The Coase Theorem (Coase 1960) teaches us that externalities do not result in a misallocation of resources

(aside from wealth effects) in a utopian world of perfect

knowledge, zero transactions costs, and complete property rights assignments to all resources. Where externalities crop up due to changes in technology or peoplesí

preferences, property rights are exchanged in order to

maximize total net value. In reality -- and this is certainly

the case for the nascent assignment of property rights in

an LME -- the transactions costs of delineating resources

(e.g., costs of information) and negotiating and enforcing

new contracts can preclude exchange. Thus, it is prudent

to consider ways to bundle LME resources that are consonant with todayís ecological and socioeconomic information, but are also flexible to change.

First, the 50 vast LMEs probably can be subdivided

into smaller areas in order to incorporate principal interactions among attributes and reduce externalities. The

division could be based on physical features that ìencloseî

enduring species assemblages of marine species (marine

communities) over time, and that largely entrain energy

flow and nutrient recycling across trophic levels. The

physical features may be geologic, such as trenches or

deepwater slopes that limit seasonal migrations, or

oceanographic, such as areas where upwelling or eddies

occur. For example, scientists divide the Northeast U.S.

Shelf Ecosystem into four subsystems: Georges Bank,

the Gulf of Maine, Southern New England, and the MidAtlantic Bight (Sherman et al. 1996). Competitive or

mutually exclusive uses of the same areas -- potentially,

minerals extraction, transportation, and/or endangered

species protection -- could be accommodated through

contracts, litigation or ìcombination salesî (Demsetz

1967). For example, the National Audubon Society has

managed bird sanctuaries, cattle grazing, and oil production at its Rainey Wildlife Sanctuary in Louisiana where

the public is excluded (Baden and Stroup 1981).

Moving in the other direction on the spatial scale,

whole subsystems might be subdivided into parcels of

same uses or zoned for different uses based on smaller

landscape or seascape features, but geopolitical lines (e.g.,

state waters in the United States) probably are arbitrary

criteria, and fragmentation of communities and habitat requirements would be counterproductive if it substantially

interfered with the basic ecosystem functions of energy

flow and nutrient cycling (Costanza and Folke 1996).

Scale also has socioeconomic and geopolitical determinants that will affect design. The cost of monitoring

and enforcing property rights will be a function of scale,

and monopoly power in markets for LME goods and services would be illegal. Dividing LMEís into smaller units

might help resolve or minimize transboundary disputes with

other countries where resource attributes are mostly fixed

in their location and can be zoned or otherwise allocated

among users.29

Coexistence is only a necessary -- not a sufficient --

condition for bundling LME resource attributes. Strong

complementarity and separability should also be guides

when deciding what resources to bundle in a geographic

area. User groupsí local classifications (e.g., commonly

known fishing grounds) also need to be taken into consideration. Joint ecologic relationships that have coevolved

to a high degree of specificity over time, such as speciesspecific predation, commensalism, and habitat dependence,

are strongly complementary and, therefore, should justify

inclusion in a bundle. Special attention should be given to

possible cascade effects (see Christensen et al. 1996).

Unions made on the basis of joint ecological relationships should be overlaid by technology to see where joint

production by fishing gear or interactions with other technologies (e.g., sand and gravel mining) might combine

ecological bundles. For example, in their study of the New

England multispecies trawl fishery, Kirkley and Strand

(1988) rejected the hypothesis of nonjoint production of

several groundfish species, including Atlantic cod and haddock, and concluded that ì[m]anagement of one species

independent of other species or of an aggregate output

will not prevent overfishing or economic waste.î

In contrast to jointness, strong separability implies

ecologic independence among resources and, in economics, an ability to substitute environmental inputs in order

to produce different outputs. Ecological separation of

species populations with closely related niches -- i.e.,

competitive exclusion -- is a criterion for separate bundles

provided technologic interactions are minimal. In stark

contrast, ìregulatory bycatchî -- a political economy artifact of single-species thinking (e.g., groundfish and lobster caught in sea scallop dredge gear) -- defies any ecologic-economic rationale for separability.

The rationale for using observed technology to determine resource bundles needs to be qualified. The technologies we observe in fisheries reflect the mostly nonexclusive history of marine resources that created incentives for rapid capture of target species. Institutional

change that includes property rights will change investment decisions, conceivably to technologies that are more

selective and less destructive of habitat. For example, production of the Japanese scallop increased over 30-fold
Page 22

after fisheries cooperatives in Japan substituted fixed-gear

culture technology for dredging.

PROPERTY RIGHTS REGIMES AND

MANAGEMENT OF LME RESOURCES

Institutions

North (1992) succinctly defines institutions as ìthe

rules of the game in a society,î or ìthe humanly devised

constraints that shape human interaction.î We are especially interested in how property rights regimes influence

use of the natural environment (Hanna et al. 1996).

Hanna (1998) appears to have been the first to discuss

at length the role of institutions in marine ecosystem management. Economic development and sustainability depend on an institutional environment that promotes the

following management functions: integrate multiple objectives, control transactions costs, promote socially appropriate time horizons, engender legitimacy among users, and be flexible to change. No specific type of property right regime is endorsed (state, common, private),

but decentralized decisionmaking is favored over centralized economic planning on these grounds. The Conference of the Parties to the Convention on Biological Diversity has likewise recommended ìdecentralized systemsî among its dozen principles of ecosystem management (UNEP 1998).

A discussion of institutions addresses how a societyís

ìrulesî for exclusion, transfer, and enforcement rights influence use of entitlements and affect long-run economic

performance and resource sustainability. Such a discussion has several considerations.

First is the notion of sustainability itself. Nobel laureate economist, Robert Solow, expressed a perspective

that is likely shared by most economists when he remarked

that preservation of an individual species or habitat is ìfundamentally the wrong way to go in thinking about

[sustainability]î (Solow 1992). Instead, he emphasizes the

important fact that people substitute goods and services

for one another: ìIf you donít eat one species of fish, you

can eat another species of fish,î and thereby defines

sustainability as, ìan obligation to conduct ourselves so

that we leave the future the option or capacity to be as

well off as we areî (Solow 1992).

The Ecological Society of American (ESA) also embraced ìlong-term sustainabilityî when it defined ecosystem management as follows:

Ecosystem management is management driven by

explicit goals, executed by policies, protocols, and

practices, and made adaptable by monitoring and

research based on our best understanding of the

ecological interactions and processes necessary to

sustain ecosystem composition, structure, and function. Ecosystem management does not focus primarily on ëdeliverablesí but rather on

sustainability of ecosystem structures and processes necessary to deliver goods and services

(Christensen et al. 1996).

Although one wonders about its view on substitution,

the ESA did downplay notions of constancy when it endorsed homeorhesis (i.e., tendency of a system to return

to its previous trajectory) over homeostasis (return to a

predisturbed state), and cautiously suggested

ìbiomanipulationî as a means to enhance ìdeliverables.î

Biomanipulation includes predator control and the selective removal of close competitors, artificial habitats that

enhance survivorship or productivity, and ìfertilizingî waters with inorganic or organic nutrients (e.g., sewage) to

increase primary productivity or the growth of detritovores

that are prey for target species.

Economists, anthropologists, sociologists, and ecologists are likely to agree about many of the ecosystem structures and functions that need to be sustained, if not about

specific components. For example, instead of maximum

sustainable yields being determined for individual species

(stocks), the aggregate biomass yields from species in a

community that are in demand by consumers (whether for

food, ritual, or other uses) might be sustained, although

not necessarily at the natural maximal level. Predator control and culture could increase yields beyond that observed

for conventional fisheries. On the other hand, alternative

uses of the same area -- recreation, preservation, minerals extraction -- may prove more valuable than only commercial fishing in some areas.

At a higher level of ecologic organization, biological

diversity as it relates to ecosystem functions (photosynthesis, nutrient recycling, energy flow) and responses to

disturbance (resistance and resilience) probably should be

maintained. This is not an endorsement of communitytype diversity indices that would maintain a constant number or kind of species or their abundance (e.g., the Shannon-Wiener index). It concerns ecosystem ìhealth.î Systems require redundancy to be homeorhesically stable;

therefore, entitlements to harvest functionally similar

competitors might be attenuated. Likewise, predator control should not proceed to the point of trophic cascades.

ìFishing down food websî -- i.e., depleting long-lived, high

trophic level fish and then transitioning to low trophic level

invertebrates and planktivorous fish -- is not a sustainable

fisheries policy because piscivore populations do not recover (Pally et al. 1998).

A second consideration with direct ties to institutions

is uncertainty and variability. The environmental influences

of temperature, currents, and food supply on commercially

and recreationally valuable fish populations are poorly understood and highly variable year-to-year and over longer

periods of time (McGlade 1989). Fishing technologies
Page 23

and markets are also difficult to predict. Institutions that

are able to adapt quickly to change and to experiment and

innovate to gain new knowledge -- i.e., adaptive management (Walters 1986; McGlade 1989; Larkin 1996) --

would be consonant with LME management.

The mention of commercial and recreational fishing

in one sentence raises a third important function of institutions, namely resolving multiple-use or goal conflicts

cost effectively. The myriad resources of an LME -- renewable, nonrenewable, space -- have scores of uses and

values that can be competitive or mutually exclusive. In

addition to seafood and recreation, a short list includes

energy, waste disposal, transportation, and preservation of

marine mammals. Addressing conflicts through the political process by rent-seeking is costly for a society because it uses scarce productive resources to transfer or

otherwise alter the distribution of benefits, not to increase

economic growth (Rowley et al. 1988). Market exchange

or direct negotiations among affected parties (Coase

1960; Demsetz 1964; Pollnac 1992), or resorting to

courts to settle liability claims (compensation), will resolve problems with minimum transaction costs. Divisibility, exclusion, and transfer rights are important here.

Related to multiple-use conflicts are a host of

transboundary problems that most LME property rights

regimes will confront. To be of any value, an LME, such

as the Northeast continental shelf (Sherman et al. 1996),

will be large enough to subsume the principal ecosystem

and human dynamics. Yet, no LME is insulated from the

rest of the world, and vice versa. Surface currents pass

through LMEs and carry with them nutrients, plankton, and

pollutants. Many species of marine finfish (e.g., tunas),

mammals, and sea turtles migrate through several LMEs

in a year. Fishing effort is derived from consumer demand for fish products -- including foreign demand -- and,

therefore, from peopleís preferences and incomes. Technological advances in power, food processing, transportation, and electronics eventually find uses in marine fisheries. Development and other economic activities within

coastal watersheds impact nursery grounds and generate

pollutants that are carried to LMEs. LMEs straddle geopolitical boundaries.

Accountability for management decisions is widely

cited as a principle of ecosystem management (Christensen

et al. 1996; Hanna 1998; UNEP 1998). Here, the theory

of agency, which is a branch of the economics of transactions costs and, therefore, involves property rights regimes

(Eggertsson 1990), is germane. In an agency relationship,

an owner delegates or transfers some rights to an agent

for their mutual benefit. Such relationships exist in all

types of human organizations, including those involving

natural resource management. Accountability is weakened

by the costs of gathering information to monitor the agent.

The scope of agency problems might be a function of the

scale of an LME holding if resource management is centralized.

Scale has other economic and social ramifications.

Economic ramifications relate to competition in markets

for goods and services and to the transaction costs of exclusion and enforcement. Monopoly power is not in

societyís best interest when compared to competition because too little is produced. Regarding transactions costs,

it is unclear whether there are scale economies to owning

large parcels (Demsetz 1967). Scale -- along with degree

of social and cultural diversity within any given stratum --

also has a strong influence on factors such as enforcement and mutual monitoring (Ostrom 1990).

Finally, there is the issue of temporal scale. Much of

the misguided criticism about sacrificing the environment

for short-term profits stems from situations where resource attributes are nonexclusive (Cheung 1970) or property rights are ìincomplete, inconsistent, or unenforcedî

(Hanna et al. 1996), including the right to transfer entitlements to others. Coupled with exclusivity, transferability allows entitlements to move into the hands of

people who value the resources more highly, and it also

increases the value of property entitlements in the present

by factoring in demands by future generations.

CONCLUSIONS

This report has described a framework for assessing

and monitoring the salient socioeconomic and governance

elements of LMEs. The assessment and monitoring framework consists of 12 steps that, if applied, are expected to

produce the essential information required for adaptive

ecosystem management (Christensen et al. 1996). The

12 steps are:

ï Identify principal uses of LME resources

ï Identify LME resource users and their activities

ï Identify governance mechanisms influencing LME resource use

ï Assess the level of LME-related activities

ï Assess interactions between LME-related activities

and LME resources

ï Assess impacts of LME-related activities on other users

ï Assess the interactions between governance mechanisms and resource use

ï Assess the socioeconomic importance of LME-related

activities and economic and sociocultural value of key

uses and LME resources

ï Identify the publicís priorities and willingness to make

tradeoffs to protect and restore key natural resources

ï Assess the cost of options to protect or restore key

resources

ï Compare the benefits with the costs of protection and

restoration options

ï Identify financing alternatives for the preferred options

for protecting/restoring key LME resources
Page 24

One of the most challenging aspects of ecosystem

management, especially for LMEs, is ì[t]he mismatch between the spatial and temporal scales at which people make

resource management decisions and the scales at which

ecosystem processes operateî (Christensen et al. 1996).

Christensen and his coauthors, writing for ESA, went on

to lament that ìwe have identified few mechanisms to translate the actions occurring within individual forest ownership or local fishing communities into strategies to reconcile competing demands for resources or promote a

regional vision for sustainability.î

We have argued in this report that the property rights

paradigm could very well be the framework necessary to

design LME resource management policies for long-term

economic growth and resource sustainability. Property

rights establish the incentives and time horizons for resource use and investment (Libecap 1989). Property rights

structures could be designed using ecological, economic,

and sociocultural principles related to jointness and separability on spatial scales that bundle resource attributes

instead of leaving them exposed to overexploitation in the

public domain. Property rights regimes need to translate

a societyís legitimate goals for use of its LMEs into concordant rules for exclusion, transfer, and enforcement.

ENDNOTES

1. The policies are based on the following principles:

1) managing along ecological boundaries; 2) ensuring coordination among federal agencies and increased collaboration with state, local, and tribal governments, with the public, and with Congress; 3) using monitoring, assessment, and the best science

available; and 4) considering all natural and human

components and their interactions.

2. Since 1992, all four of the primary land management

agencies (National Park Service, Bureau of Land Management, U.S. Fish and Wildlife Service, and Forest

Service) have independently announced that they are

implementing or will implement an ecosystem approach to managing their natural resources, and each

has been working to develop its own strategy (GAO

1994). Several other agencies, including the Natural

Resource Conservation Service, Department of Defense, Department of Energy, Bureau of Indian Affairs, Bureau of Mines, Bureau of Reclamation, Minerals Management Service, U.S. Geological Survey,

Environmental Protection Agency, and National

Aeronautics and Space Administration, have engaged

in significant ecosystem management activities

(CRS 1994).

3. The only work on this is a brief sketch by Broadus

(Sherman 1997; Sherman et al. 1993) and an unpublished white paper, ìLME Socioeconomic Module

(Sociocultural Submodule),î prepared for the NMFS

Office of Science and Technology (1315 East-West

Hwy., Silver Spring, MD 20910).

4. As explained below, we define property as a benefit

(or income) stream, and a property right is a claim to

the benefit stream that government agrees to protect

from those who may covet, or somehow interfere

with, the benefit stream (Bromley 1992).

5. Externalities are unintended harmful or beneficial effects incurred by a party that is not directly involved

with exchange, production or consumption of the

commodity in question.

6. Some recreational uses, for example beaches, are intermediate cases. An individualís use of a beach may

not interfere with others, at least up to a point, after

which beach (or parking) congestion would make use

of a beach like a consumptive use in that my use may

prevent you from gaining access to the resource.

7. Input-output studies could be used to identify linkages among sectors within an area. See, e.g., Rorholm

et al. (1967), Grigalunas and Ascari (1982), King and

Story (1974), and Tyrrell et al. (1982), for examples

of such studies for other marine areas.

8. Property value studies also give general support for

the relatively high residential demand for, and the correspondingly relatively high value of, shoreline proximity (e.g., Edwards and Anderson 1984).

9. Other LME-related sectors, such as retail or wholesale seafood, may also be somewhat dependent on

activities in the LME.

10. These values should include market and nonmarket

values, gross and net values, and net benefits to consumers and producers.

11. Excellent guidelines on fisheries data needs are

Brainerd et al. (1996), Kitts and Steinback (1999),

and FAO (1999).

12. It appears certain that further work in this area will

require incorporation of a great deal of complexity,

nonlinear relationships, and dynamics. Previous work

using general equilibrium models (Ayres and Kneese

1969) and systems approaches may be productive.

13. Also see Dyer et al. (1992) for an examination of

sociocultural considerations in assessing oil spills.

14. Public policies are also shaped by political expediency that may favor the minority that is composed of

a specific user group over society. Special interest
Page 25

effects occur when an issue is important to a specific group, while most members of society are unaware of, or disinterested in, its outcome. In these

cases, it becomes politically expedient for politicians

and policy makers to agree with the minority -- even

when the decision is detrimental to society or economically inefficient. Often these conflicts take the

form of a tug-of-war between stakeholders -- each

of which claim to represent what is best for society -

- and between stakeholders and the actual interests

of society.

15. A succinct explanation of these methods is provided

by the National Academy of Sciences (1997).

16. Many improvements in methods have been made, but

reliable quantification and acceptability of passive use

value as a measure of damages are still a subject of

lively debate (e.g., Portney 1994; Diamond and

Hausman 1994; Hanemann 1994).

17. Common examples of resource valuation involve determining the value of oil and gas leases, tradable fishing licenses, and government concessions. These

cases are relatively straightforward in that they involve the use of market information on anticipated

revenues and costs over time. An important issue,

discussed further later, concerns estimating the

change in the value of a marine asset due to changes

in pollution or fishery regulations, for example.

18. An NRR is thus formally defined as a network of

NRCs whose existence is defined by the interactions

among the social, cultural, human, economic, and biophysical capital that are part of, or closely linked to,

the resources of an LME (Dyer and Poggie 1998).

19. The NRC may encompass more than one port.

20. Of course, this argument, in part, provides the justification for international donors and programs including the GEF.

21. The following examples are excerpted from

Grigalunas (1998).

22. This section draws heavily from a recent report prepared for the Regional Programme for Preventing

Pollution in East Asia Seas (Grigalunas and Opaluch

1998).

23. As note earlier, passive use losses may arise if individuals feel worse off when they learn of the adverse

effects of a spill on wildlife, beaches, and other natural resources -- even if they do not use these resources themselves. People might be willing to pay

to prevent such losses, much as they might pay to

preserve, say, an historically or culturally significant

building or site, even if they never actually visit it.

Many improvements in methods have been made, but

reliable quantification and acceptability of passive use

value as a measure of damages are still a subject of

lively debate (e.g., Portney 1994; Diamond and

Hausman 1994; Hanemann 1994).

24. This section is drawn from Grigalunas and Opaluch

(1998).

25. See Musgrave (1969) for further discussion of benefit-cost analysis and financing when capital markets

are not perfect, when social and private discount rates

differ, and when the distribution of benefits and costs

are important.

26. Note, however, that NRDA can also be considered a

pollution prevention measure, to the extent that it provides an incentive for vessel operators to exercise

more care (Grigalunas and Opaluch 1988; Grigalunas

1997).

27. Pure public goods are nonrival and nonexcludable; and

pure private goods are rival and excludable. Examples

of pure public goods include national defense, where

food and clothing are examples of private goods.

28. Anthropological theory can be especially helpful in

teasing out the different utility functions that may be

held by different stakeholder groups due to social or

cultural variances in preferences.

29. The basic idea here involves zoning certain resource

attributes the way that real estate is zoned on land.

For example, does a timber stand that stretches

across the U.S.-Canadian border have to be jointly

managed? Probably not if lumber production is the

only commodity -- but maybe so if the most valuable

use of the forest is habitat for a wandering endangered species. Likewise, does the Hague Line across

Georges Bank present a problem for sustainable use

of sea scallop resources? Probably not, since scallop resources are relatively sedentary. The line does

present a problem for migratory groundfish. However, zoning or some other means of allocating shares

even in the migratory-type cases may or may not result in larger authorities (government or private),

depending on scale efficiencies and other things.

Small authority A could purchase small authority B

(or be joined by Congress or an international management authority). Or A and B may be able to negotiate contracts (treaties) that specify levels/locations

of activities -- e.g., unitization of common-pool oil

fields.
Page 26

GLOSSARY

Abiotic -- reference to the nonliving portion of the environment.

Adaptive management -- regulation or control of resource

use that adapts in response to the results of management

actions. It is also a learning process as managers observe environmental responses to actions and learn how

the system reacts to a given set of measures.

Alien species (a.k.a. introduced, exotic, or nonindigenous

species) -- a species that has been transported by human

activity, intentional or accidental, into a region where it

does not naturally occur.

Asset (a.k.a. capital asset) -- a physical entity with embodied wealth (such as a house or fishing vessel) that provides a flow of valuable services over time.

Assimilative capacity -- capacity of the ocean to dilute,

absorb, or modify wastes such as sewage or heat.

Bathymetry -- the measurement of the depths of oceans,

seas, or other large bodies of water.

Beliefs -- opinions or convictions that shape social relationships or perceptions.

Benefit-cost analysis -- a comparison of the economic benefits of using a productive resource with the opportunity

cost of using the resource. Projects or regulations are

evaluated based on how they change net economic value.

Biodiversity (biological diversity) -- the diversity of life

that occurs at several hierarchical levels of biological

organization. Usually defined by three levels: genetic,

species, and ecosystem.

Biotic -- the living portion of the environment.

Commensalism -- having benefit for one member of a twospecies association, but having neither positive nor negative effect on the other.

Complementarity -- LME resources that are closely linked

such as organisms that have mutualistic relationships.

Consumptive use -- occurs when one personís use of a resource prevents others from using it. For example, the

shellfish, finfish, or waterfowl I take in the LME are unavailable for others to catch. Hence, consumptive use

of natural resources in this sense is like consumptive

use of common private goods exchanged on markets,

such as a pizza or a pair of shoes.

Contingent choice -- a direct economic valuation technique

that is dependent on choices that respondents make in

response to hypothetical questions or situations such as

the ranking of environmental options.

Contingent valuation -- a direct economic valuation technique that ascertains value by asking people their willingness to pay for a change in environmental quality. The

information that is sought from respondents is conditional on some hypothetical market context such as the

nature of the change, how it will be implemented, and

what it will cost.

Cost effectiveness -- minimization of costs in order to

achieve a given end, such as the selection of the

alternative(s) with the lowest cost per unit.

Direct use -- refers to the physical use of a resource onsite

or in situ. Common examples of direct use include commercial and recreational fishing, beach use, boating, and

wildlife viewing. Most direct use is targeted by participants who set out to visit a beach, to fish at a particular

location, and so forth. Direct use also may be incidental, for example, when a person traveling by boat unexpectedly sees whales or marine birds while en route to a

destination.

Ecology -- the branch of biology that involves the study of

the relationships among organisms and the interaction

between organisms and the physical environment

Economics -- is the study of the choices people make to

allocate scarce resources among alternative uses to satisfy human needs and desires.

Economic value -- the most people are willing to pay to use

a given quantity of a good or service; or, the smallest

amount people are willing to accept to forego the use of

a given quantity of a good or service.

Ecosystem -- the biotic components of a community, and

the abiotic elements of the environment that interact with

these components.

Ecosystem health -- the state of ecosystem metabolic activity levels, internal structure and organization, and ability to resist external stress over time and space.

Environmental resources -- in the most general sense, all

renewable and nonrenewable resources of the LME.

Sometimes used to refer to water and air resources as

opposed to natural resources such as fisheries or oil.

Estuary -- a semienclosed body of water that has a free connection with the open sea, and within which seawater is

diluted measurably with freshwater that is derived from

land drainage.

Eutrophication -- enrichment of a waterbody with nutrients,

resulting in excessive growth of phytoplankton,

seaweeds, or vascular plants, and often in oxygen depletion from decomposition of plant material.

Externalities -- unintended harmful or beneficial effects

incurred by a party that is not directly involved with production or consumption of the commodity in question.

Fishery -- commonly, the actions by, and the interactions

among, fishermen using certain gear to catch certain fish

in a certain area at a certain time. Also, the stock(s) of

fish being fished for.

Fuzzy logic -- mathematic technique capable of using qualitative, linguistic, and imprecise information. Relationships are based on a linguistic implication between an

antecedent and its corresponding consequent.

Goods and services -- any commodities or nonmaterial

goods (services) such as assistance or accommodations

that yield positive utility.
Page 27

Governance -- the formal and informal arrangements, institutions, and mores which determine how resources or

an environment are utilized, how problems and opportunities are evaluated and analyzed, what behavior is deemed

acceptable or forbidden, and what rules and sanctions

are applied to affect the pattern of resource and environmental use.

Governance module -- considers the formal and informal

efforts to manage human behaviors that affect the LME,

and encourages patterns of conduct which are in accord

with the natural world.

Government -- the political direction and control exercised

over actions of the members, citizens, or inhabitants of

communities, societies, and states.

Government or institutional failure -- inefficient delivery or use of scarce resources by the public sector.

Habitat -- the place where an animal or plant lives.

Homeorhesically stable -- tendency of a system to return

to its previous trajectory or a return to normal dynamics

rather than some undisturbed state.

Hydrography -- measurement of waterbody arrangement and

movements, such as currents and water masses.

Hydromodifications -- modification of ocean, estuarine,

and riparian areas and features such as currents, depth,

or the configuration of the coastline and adjacent waters.

Indirect use -- occurs when, for example, wetlands or other

LME habitats contribute to the abundance of wildlife or

fish observed or caught elsewhere in the LME. In effect, the ecological services of the wetland or habitat

help ìproduceî the wildlife or fish concerned, although

the link between the direct use and the ecological services provided by the wetland or habitat may not be apparent to the recreational participant.

Input-output models -- a systematic method that both describes the financial linkages and network of input supplies and production which connect industries in a regional economy, and predicts the changes in regional

output, income, and employment. Input-output analysis

generally focuses on economic activity and the self-sufficiency of an economy, unlike cost-benefit analysis

which focuses on changes in net national benefits from

use of a productive resource.

Institutions -- the humanly devised constraints that shape

human interaction, or the rules that govern human behavior.

Integrity of ecosystems -- when subjected to disturbance,

an ecosystem sustains an organizing, self-correcting capability to recover toward an end-state that is normal and

ìgoodî for that system.

Interaction matrices -- the use of matrices to organize LME

activities and resources by listing them on each axis.

Matrix cells represent potential interactions or linkages

between the components listed in a particular column

and row of the matrix. These matrices have the capacity

to inventory, organize, and explore relationships or linkages among human uses, ecological components, and processes of the LME.

Jointness -- interdependence among a systemís components,

such as spatially or temporally related species of an LME.

Large marine ecosystem -- a geographic area of an ocean

that has distinct bathymetry, hydrography, productivity,

and trophically dependent populations.

Legitimacy -- perception of conforming to established social rules or standards.

Management -- the act of influencing, directing, or controlling use of a resource.

Market failure -- the inability of the market to allocate resources efficiently. The major causes of market failure

include: 1) imperfect competition (monopoly), 2) imperfect information, 3) public goods, 4) inappropriate

government intervention, and 5) externalities.

Markets -- a collection of buyers and sellers who interact,

resulting in the exchange of goods and services.

Modeling -- a simple representation or abstraction of a feature of the real world that reveals important relationships, processes, or elements of the feature.

Monitoring -- to observe and record changes with regard to

physical, biological, or social conditions related to an

LME.

Maximum sustainable yield -- largest long-term average

yield or catch from a stock under prevailing ecological

and environmental conditions.

Nonconsumptive use -- refers to cases where one personís

enjoyment does not prevent others from enjoying the

same resource. For example, my viewing of marine

mammals in the LME, other wildlife, or attractive views

does not prevent you from enjoying the same resources.

Nongovernmental institutions and arrangements -- informal norms and rules of behavior embodied in social

arrangements and organizations such as nongovernmental organizations (NGOs)

Nonjoint production -- production of a single or few elements of an LME without regard to relationships to other

elements.

Nonuse (passive use) -- refers to the enjoyment individuals

may receive from knowing that the resources exist (ìexistence valueî) or from knowing that the resources will

be available for use by oneís children or grandchildren

(ìbequest valueî) or others even though the individuals

themselves may not actually use the resources concerned.

Normative -- analysis leading to a recommendation or prescription that is based on value judgements or that reflects societyís preferences.

Norms -- the ìunderstoodî rules for appropriate behavior.

This is broader than social organization and includes

nonsocial behavior.

Nutrient pollution -- pollution such as sewage, agricultural

runoff, or atmospheric deposition which increases nu-
Page 28

trients available for primary production. Increased nutrient levels may lead to eutrophication.

Open access -- access to the resource is free to anyone who

wants to use or harvest it because there is no ownership

of the resource.

Overexploitation -- level of exploitation where the resource

level has been drawn down below the level that on average would support the long-term maximum yield of the

fishery.

Passive use -- see ìNonuse.î

Phytoplankton -- passively drifting or weakly swimming

usually microscopic plant organisms. They are the most

important community of primary producers in the ocean.

Productivity -- usually in reference to primary productivity, the rate of assimilation of energy and nutrients by

green plants (photosynthesis) and other autotrophs

(chemosynthesis). Usually expressed as grams of carbon per square meter per year.

Property -- is a benefit (or income) stream associated with

a property right.

Property right -- a claim to the benefit stream that some

higher body -- usually government -- will agree to protect through the assignment of duty to others who may

covet, or somehow interfere with, the benefit stream.

Property rights structures -- various types of property

rights arrangements, all of which exhibit attributes of

the five dimensions of property rights. For example,

private and common property each exhibit the following

dimensions to varying degrees: 1) the goods and services that owners can derive benefits from; 2) divisibility, the richness of entitlements to complex resources

with multiple attributes; 3) exclusion of others from using or damaging the ownerís entitlements; 4) the right to

transfer ownership of entitlements; and 5) enforcement

of property rights.

Public good -- a good that can be used by anyone and for

which one personís use does not diminish the goodís

value for others.

Rent seeking -- actions by individuals and interest groups

designed to restructure public policy in a manner that

will either directly or indirectly redistribute more benefits to themselves.

Resources -- anything that has value; living and nonliving

components of nature such as fish, oil, water, and air.

Resource valuation -- calculation or estimation of the economic value of a natural resource.

Separability -- independence among resources and in economics, an ability to substitute environmental inputs in

order to produce outputs. Therefore, these resources

may be managed or utilized separately due to the lack of

strong linkages to other LME components.

Social and cultural factors -- in addition to factors related

to economics such as benefits, capital, and labor, considerations such as social structure and social organization, peopleís knowledge and views (norms and values)

about their work, and how this relates to the resource.

Social conflict -- when the existing order is perceived as

oppressive or unfair, parties try to meet their needs by

destroying their opposition and by replacing those who

make the rules.

Social costs -- costs associated with the disruption of communities, households, and related social structures resulting in the loss of human potential.

Social forces -- factors related to human behavior as shaped

by group life, including both collective forces (group

construction) and the ways in which people give meaning to their experiences (self-reflection).

Social impact assessment -- an evaluation of the likely outcomes and impacts of a specific policy or regulation on

a designated target group or groups, as well as likely

ripple effects to other groups.

Social networks -- comprises the sum total of oneís group

membership and relationships.

Social systems -- represents an arrangement of statuses and

roles that exist apart from the people occupying them.

Socioeconomic -- pertaining to the combination or interaction of social and economic factors and involves topics

such as distributional issues, labor market structure, social and opportunity costs, community dynamics, and

decisionmaking processes.

Socioeconomic benefits -- benefits to humans gained

through utilization of resources, including both economic

and social benefits.

Socioeconomic module -- application of economic and

social science analysis to LME management. Six major

elements of analysis include: human forcing functions

(i.e., ways in which human activities affect the natural

marine system); assessing impacts; feedback of impacts

to human forcing functions; the value of ecosystem services/biodiversity; estimation of nonmarket values; and

integration of economic and social science and natural

science assessments.

Spillover effects -- sometimes referred to as externalities,

an unintended effect (positive or negative, benefit or cost)

imposed on others and not borne by the party responsible for the effect.

Stated preference methods -- general category of indirect

valuation methods that includes contingent choice or

contingent valuation methods. Individuals are asked to

makes choices regarding their willingness to pay or to

rank environmental options.

Stocks -- generally referred to as LME assets since such

natural resources can be utilized as inputs for economic

processes. In fisheries science, a fish stock is used as a

unit for fisheries management.

Subsidiarity principle -- as related to levels of governance,

suggests that authority belongs at the lowest level capable of effective action.
Page 29

Sustainability -- resources are managed so that the natural

capital stock is nondeclining through time, while production opportunities are maintained for the future.

Sustainable development -- development that recognizes

the need to maintain capital stock and future production

opportunities.

Tradeoffs -- compromises among resource uses that are required because some bundles of entitlements defy divisibility/separability.

Transaction costs -- a collection of costs involved with gathering information on, and otherwise delineating, a resource; establishing contracts (formal or informal) that

define the entitlement; monitoring and enforcing the entitlement.

Transboundary -- resources or economic impacts such as

pollution that straddle political boundaries, usually national borders. For example, transboundary stocks occur on both sides of a given national border.

Trophic (trophic level) -- position in food chain determined

by the number of energy-transfer steps to that level. Plant

producers constitute the lowest level, followed by herbivores and a series of carnivores at the higher levels.

User group -- a group of individuals that utilize a resource in

a specific manner such as inshore lobster fishermen.

Utility -- the level of satisfaction that a person gets from

consuming a good or undertaking an activity.

Value -- market and nonmarket values, gross and net values,

and net benefits to consumers or goods and services.

Values -- ideals, customs and beliefs of a given society.

Welfare -- the prosperity or, more broadly, the well being of

a person or group.

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