Property Rights in Fisheries: How Much Can Individual Transferable Quotas Accomplish?

Individual transferable quotas (ITQs) are one of the property rights instruments that have been employed to improve economic efficiency in fisheries. ITQs are not high-quality property rights in the basic fundamental marine resources on which fisheries are based. As a result ITQs cannot be expected to generate full efficiency in the use of these resources. This article examines to what extent ITQs are capable of generating economic efficiency in fisheries. It is shown that ITQs can greatly improve efficiency in fishing. Moreover, by including recreational fishers in the system, ITQs can strike an efficient balance between commercial and recreational fishing. On the negative side, it is shown that on their own, ITQs are not capable of generating full efficiency in fisheries. In particular, ITQs are not sufficient for setting the socially optimal total allowable catch, ensuring the optimal use of the ecosystem, or harmonizing fishing with conflicting uses of marine resources such as marine tourism, mining, and conservation. Potentially counteracting these limitations, ITQ holders as a group have an incentive to manage overall ecosystem use for the long-term benefit of their fishery and negotiate the adjustment of their fishing activity toward the interests of conflicting uses of the marine resources.