Private Property and the Power of Magical Thinking

Now here’s a case lesson in how modern industrialized societies are so besotted by the powers of private property that they can’t help but attribute near-magical powers to them. Last week, Science magazine published a study (unfortunately locked behind a paywall) that claimed that fisheries “are much less likely to collapse if fishers own rights to fish them, called ‘catch shares.’ If implemented worldwide, they say, this kind of market-based management could reverse a destructive global trend.” The Science headline (September 19) read: “Privatization Prevents Collapse of Fish Stocks, Global Analysis Shows.”

In the study, UC Santa Barbara professor Christopher Costello and his colleagues looked at more than 11,000 fisheries worldwide. They found that those fisheries that assigned catch shares to individual fishers through “individual transferable quotas,” or ITQs [which are sometimes known as IFQs, or “individual fishing quotas”], were far less likely to be over-exploited. Essentially, ITQs set limits on what any individual fisher may take. Because the fisher “owns” a specific share of the total fish harvest, each has incentives not to over-fish. In fact, they have incentives to actively protect the fish stock because it would increase the value of their individual catch shares.

Of the 121 fisheries using ITQs or similar schemes, Costello et al. found that only 14% were over-fished to the point of exhaustion. By contrast, those fisheries without ITQs suffered twice the rate of collapse (28%). The New York Times faithfully trumpeted the news: “Privately Owned Fisheries May Help Shore Up Stocks.”

But are ITQs truly effective because they rely upon a “market-based system”? Or do they work because they set overall fishing limits, a commons-based solution? I asked fisheries expert Professor Daniel Pauly, Director of the Fisheries Centre at the University of British Columbia, who pointed me to the work of Seth Macinko and Daniel W. Bromley, authors of Who Owns America’s Fisheries? (Island Press). Macinko and Bromley have written:

All the talk about rights-based fishing and IFQs is a red herring that throws all of us off the track of what is important. IFQs do not work because they are rights, or because they are property rights…. IFQs work because they involve an assigned catch, as opposed to having catch be determined competitively. (Vermont Law Review, Spring 2004, p. 659)

It is apparently irresistible for people, even trained scientists, to misunderstand ITQs as a triumph of the market and privatization. ITQs play into the grand narrative that private property rights promote good stewardship of a resource. Remember the so-called “tragedy of the commons” story? That parable holds that if you give people private property rights in the commons — if only your privatize the collective resource! — people won’t over-exploit it. “Tragedy” can be averted. The mythology insists that the commons can be responsibly managed only if it is duly privatized.

Of course, the very reason that fisheries are over-fished in the first place is not because there is a tragedy of the commons, but because there is a tragedy of the market. Anyone can rig up a fishing vessel, sail off and take whatever they can. This isn’t a commons. This is an open-access resource being plundered by a free market.

While ITQs may resemble private property and markets (they are worth money; they can be traded; etc.), the germane point, as Macinko and Bromley point out, is not the exclusive property-like rights that ITQs confer. The germane point is that the overall catch has been limited and individual catch shares assigned. This is a far cry from “privatization” of the sort that free-marketeers celebrate. (When was the last time that free-market economists extolled limits on individual or collective usage of resources? To economists, greater market activity means greater “value” generated, no matter the dysfunctional side-effects.)

It appears to be true, based on the Costello study results, that ITQs do limit the free-for-all that would otherwise prevail in fisheries. This is good. It is also good that ITQs can stabilize if not increase the profits of individual fishers. But these are mostly economic matters that may or may not address ecological sustainability.

Here’s a question that ITQs don’t address: Why must public property-like rights in fisheries be given away in perpetuity?

If property rights are important in preserving fisheries, why, such rights already exist! The federal government “owns” them on behalf of the American people. The U.S. Government asserted this sovereign right when it declared that the nation’s “exclusive economic zone” (EEZ) extends 200 nautical miles from shore. The EEZ includes fisheries.

So if there are already property rights in fisheries — and thus the implicit powers to manage them sustainably — why is a scheme of private rights a superior or necessary alternative? Costello et al. do not say.

Why can’t “catch share” systems work just as well if they are merely short-term leases instead of perpetual private property rights? Macinko and Bromley point out that the empirical evidence shows that leases work just as well as permanent assignments of property rights.

Professor Pauly explains the advantage of leases over privatization:

“A scheme wherein fishermen or enterprises would bid for the privilege to exploit the resource for a set time would give society all the advantages of ITQ, without the public property being given away to the biggest catcher (as is now the case in all fisheries that are ITQ’ed).”

The government, as owner, could generate revenues from a common asset (fisheries) for common purposes, while still retaining sovereign control to manage it for long-term economic and ecological purposes. Reserving this power for future options would be arguably more valuable to all of us than forfeiting rights in perpetuity to an array of private actors with fairly parochial interests. But this commons scenario, alas, does not conform to the magical story of markets and private property!

Let’s give Macinko and Bromley the last word:

….The American public and its fisheries decisionmakers have been profoundly misled about the possible menu of policy choices. Recall the question: “Why would you talk about permanently conveying public fishery resources into private ownership if you did not have to?” We suggested that such conversions are being contemplated precisely because the fisheries policy community has been persuaded — misled — that there is no choice if the current failures in fisheries management are to be fixed. But, there are indeed choices. All it takes to see these choices is to open our eyes and to move beyond a monochromatic vision of property rights and fisheries. Better yet, let’s wean ourselves off the obsessive focus on property rights altogether, and start thinking about management and governance.