The Tragedy of the Commons and Overfishing: Analyzing Global Fisheries Management Policies

Many people complain about government involvement in the economy through regulatory policy, where regulations are placed on private businesses regarding resources they can use, wages they can pay, products they can make, and many other things.  In Economics, a story that is often told in classes to illustrate the need for government regulations is the Tragedy of the Commons.  There are many versions, often created by each teacher or professor, to illustrate the dangers that occur when there are no limits placed on resource consumption.

The Tragedy of the Commons Explained

Most of the time, consumption of a resource can be limited to those who can pay.  In this case, price is easily set correctly by Supply and Demand, and will rise as the Supply of the resource decreases.  This allows the rationing function of prices to efficiently distribute the resource: those who can use it more productively will pay more for it, while those who cannot be as productive with it will forego it at the higher price.

Sometimes, however, consumption of a resource cannot easily be limited.  Firms can easily access the resource and not be blocked by physical limits, such as fences.  Historically, this included open land, known as the commons.  Farmers and ranchers could use this common land without paying.  Over time, this led to overuse as no individual farmer or rancher felt the need to restrict his own consumption.  In fact, noticing the overconsumption of others may influence one to increase his own consumption due to fear of upcoming scarcity.

Eventually, the commons would fail through overuse, with all resources being stripped.  This could be economically devastating to all users, who were now without resources.  To prevent these crises, most societies moved toward privatization of lands so that their access and resources could be protected from overuse.  This could be difficult, as many different laws and customs governed what was considered common land.  Nevertheless, by the end of the 1800s most Western societies had surveyed and parceled out formerly common land.

A Modern Commons: Ocean Fishing

By the end of the 1800s, land was rarely a common resource.  Modern technology like the railroad and barbed wire allowed vast expanses of land to be traversed quickly and fenced in.  Those who crossed fences they were not supposed to cross could be prosecuted, allowing the courts to handle economic disputes like theft of resources.  But waterways were rarely blocked off, as this was infeasible.  Boats could easily cross into waters claimed by others, and it was more difficult to later prove that such trespassing had occurred.

Today, this still occurs on a massive scale in the world’s oceans, where no fences exist and where surveillance can be extremely scarce.  And, even if trespassers can be caught on surveillance, enforcement is difficult.  On the vast ocean, it can be difficult for coast guards or law enforcement agencies to catch trespassers.  And, even if the trespassers can be caught, there are a myriad of semi-plausible excuses, ranging from currents to navigational errors.  On land, it is much tougher to explain away cutting a barbed wire fence to drive logging trucks into someone else’s forest! 

After World War II, commercial fishing became problematic in some areas due to overuse.  Massive trawlers could decimate fish populations in other nations’ coastal waters.  In 1923, the United States and Canada agreed to jointly regulate halibut fishing in the Pacific Ocean near their coastlines, and in 1979 Canada declared that only Canadian vessels could fish for halibut in Canadian waters.  A limit on the number of commercial fishing licenses was established, preventing unchecked expansion of the industry.

United Nations Fish Stocks Agreement

The problem of overfishing common waters was not limited to neighboring states: modern trawlers could travel across oceans and fish virtually anywhere.  Additionally, many fish species are migratory and thus cross from one nation’s waters to others.  This means industrialized nations with massive trawlers can quickly catch all of a migration of commercial fish before it reaches another nation that also relies on those fish, all without leaving their own waters.  On December 10, 1982, the United Nations Fish Stocks Agreement was established.  Its 1995 amendments include requiring member nations to use licenses and permits to limit the number of ships that can fish commercially.

Despite this international agreement being made in good faith, observers consider it only partially successful.  This is due to the difficulty in implementation, especially in regard to limiting illegal fishing.  Many poor nations may face internal political pressure to turn a blind eye to overfishing, which provides much-needed income.  Additionally, poor nations may resist complying with scientific management and ecological biodiversity practices promoted by the Agreement, as these may be expensive and/or income-reducing. For nations seen as noncompliant with the agreement, what punitive actions will be both ethical and effective at gaining compliance?

Potential Solution to Overfishing: Individual Transferable Quotas (ITQs)

The goal of sustainable fishing benefits all nations over the long term, but diplomatic treaties and agreements alone may have little power.  Fishing companies need an economic rationale to not overfish.  One potential solution that has become popular is the use of ITQs, or Individual Transferable Quotas, since the 1970s.  Similar to cap-and-trade regulations for pollution, ITQs allow fishing entities to sell their unfished allotment to other vessels or countries.  This reduces the incentive to catch as many fish as possible, allowing fishers to sell part of their ITQ and devote time to vessel maintenance.

ITQs were seen as allowing flexibility in the global fishing industry and incentivizing fishers to preserve their long-term resource.  For example, those with licenses were granted an annual quota, and could more easily rest assured that there would be enough fish to catch next season.  This reduced the incentive to catch as many fish as possible each season, allowing sustainability.  Older vessels could still make revenue by selling their ITQs and not crowding the waters, leading to overfishing by exceeding the total quotas.

Drawbacks of ITQs: Increased Expense of Fishing

Some argue that ITQs increase competition to catch one’s quota early, forcing increased spending on capital like new fishing vessels.  In Iceland, for example, researchers found that the capital value of fishing equipment increased exponentially faster than the value of fish caught between the end of World War II and the late 1990s.  New Zealand, however, was considered a successful case of ITQ implementation, which it began in 1986.  Proponents argue that New Zealand’s ITQ program was more successful than others due to it being implemented nationwide and being well-explained at the outset.

New Zealand was able to gain considerable support for ITQs from the fishing industry, but not without financial cost.  A buyback program required the government to compensate fishers for unused quota.  Other buyback programs involved fishing vessels themselves, with governments buying unused fishing vessels to prevent their use in overfishing.  Altogether, there appears to be solid support for ITQs and buyback programs, as well as the goal of sustainable fishing worldwide, but there are many individual critics who believe that industrial fishing companies “win” from these policies while smaller firms and local fishers, especially indigenous peoples, “lose”.

Economic Goal: Sustainable Fishing

Ocean fishing has proven difficult to regulate, but governments are hoping that scientific and technological advancements help them better monitor and protect fish populations.  Some specific agreements, focused on specific species of fish like the Pacific salmon and steelhead trout, have been considered highly successful.  New required data management systems on commercial fishing vessels have been praised for limiting excessive, illegal fishing.  Unfortunately, despite some of these successes, observers tend to agree that it will be a long and difficult process to make ocean fishing sustainable.

The tragedy of the commons in regard to ocean fishing highlights the difficulties in long-run economic stability: individuals desire long-term stability, but also short-term profit maximization.  When resources regenerate more slowly than they are consumed, short-term profit maximization conflicts with long-term stability.  Hopefully, economists, government regulators, and biologists continue their efforts to find acceptable solutions for long-term sustainability in the fishing industry.