New Angle of Property Rights
Reviews by Gary L. Sturgess
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Overfishing and the Icelandic Solution by Hannes H. Gissurarson
Fishing for Solutions by Michael de Alessi
Saving Our Streams by Roger Bate

And the thousands of fishes moved as a huge beast, piercing the water. They appeared united, inexorably bound to a common fate. How comes this unity? ÑAnonymous, 17th century

cientists used to think that birds synchronised their flight patterns by following a leader. In recent years, we have come to realise that this order arises not from the dominance of a lead bird but from each bird in the flock following a few simple rulesÑstay close to other birds, avoid collisions, match the velocity and direction of nearby flockmates. Organised group behaviour emerges out of millions of local interactions.1

Massive parallelism in computing has enabled scientists to experiment with emergent order so that we now recognise this same kind of Ôdistributed cognitionÕ in schools of fish, colonies of ants and herds of cattle, in congested traffic, crowded footpaths, and the competition and cooperation of markets.

Science writer Mitch Resnick has created a computer programme, StarLogo, to assist high school students in understanding self-organising systems. Students are able to create virtual communities in which simulated life-forms communicate with one another directly and through their surrounding environment, unintentionally creating higher-level order.2

But as an instruction tool, StarLogo contains an internal contradictionÑhow can a computer that has been deliberately programmed demonstrate truly self-organising behaviour? ResnickÕs answer to this challenge is that in StarLogo, the programmer controls the actions of the individual ants but not the colony as a whole: ÔYou are acting as a designer, but the resulting patterns are not designed.Õ This is true, but Resnick himself is the Ôsuper-programmerÕ, having created the environment and specified the meta-rules within which the students and the ants interact. Has he demonstrated a significant form of self-organisation after all?

ResnickÕs Dilemma is a challenge for liberal policymakersÑwhat role should the state play in constructing (or deconstructing) self-organising systems? It is a dilemma that has faced every policymaker who has ever had the opportunity (and the responsibility) of meddling with the basic coding of a physical, economic or social system.

In the real world, it is sometimes necessary to intervene in this wayÑangry mobs and heroin markets are self-organising, but they are not socially constructive. And when major ecological systems fail, rescue by government (or groups of governments) may be the only solution. But how deeply should we intrudeÑand having done so, how prescriptive should our recoding be? For a policymaker with any respect for the sovereignty of the human will and the complexity of social, economic and ecological systems, the responsibility is sobering.

Policymakers are confronted by ResnickÕs Dilemma whenever they re-engineer the regulatory regimes governing a natural resource. As a result of pollution, demand pressures and technological innovation, certain fish populations have come under severe stress in recent decades. As I write, the European Union is cutting back fishing quotas yet again, in an attempt to save cod, haddock, sole and blue whiting in the North Atlantic.

Liberals are uncomfortable with bureaucratic solutions that would involve them in deep and ongoing intervention and detailed regulatory recoding, not unlike central planning in a socialist economy. But liberal economists have been quick to embrace bureaucratically (and politically) designed market solutionsÑartificial markets where the rights to harvest fish are exchangedÑon the basis that some self-organisation is better than none.

In most cases, these markets are not themselves self-organising. They have been created by government fiat and they bear the imprint of the politicians and planners who called them into existence. They are a real world version of StarLogo, a game in which policymakers make up the coding of an artificially-constructed community.

Built markets of this kind are not entirely without merit. They possess some capacity for self-organisation, and society gets some order for free. And where government has no alternative but to intervene in a failing system, or where the regulatory regime has become too complex for command-and-control, then artificial markets may be preferable.

But there is nothing inherently virtuous about markets. All that an economist needs to create a market is for government to create property rights and allow exchanges to occur. In the 18th century, England helped to create an international trade in human beings. China could make its one-child policy more efficient by creating TBRs (Ôtradeable baby rightsÕ), but that would make it neither liberal nor just.3 New Zealand and Iceland have created ITQs (Ôindividual transferable quotasÕ) in certain fish species, but only by failing to respect the collective rights of traditional fishing communities.

All of this may seem highly abstract, but the issues have been brought down to earth in three monographs on fisheries management, recently published by the Institute of Economic Affairs (although the authors and editors of these books are almost certainly unaware that they have illuminated ResnickÕs Dilemma).

Solutions to overfishing

Hannes Gissurarson has documented the construction of an ITQ system in the Icelandic fisheries from the mid-1970s (Hannes H. Gissurarson, Overfishing: The Icelandic Solution, London: IEA, 2000). In the pelagic fisheries* in the 1970s, and then in the demersal fisheries+ in the 1980s and 1990s, quotas based on allowable fishing daysÑwhich failed to reduce overfishing because of improvements in technologyÑwere replaced with quotas based on a total allowable catch for each vessel, entitlements that were subsequently bought and sold. In spite of political compromises along the way, Gissurarson concludes that, Ôsince the introduction of the ITQ system, slowly most stocks in Icelandic waters have become stronger, in particular the valuable cod stockÕ.

But it is unclear from his account whether it was markets (that is, transferability) or enforceable property rights (that is, exclusivity) that made the difference. In the decades following the Second World War, Iceland fought a series of so-called ÔCod WarsÕ with Britain. These incidents sometimes involved collisions and gunfire between trawlers but on one famous occasion, a handful of small Icelandic patrol boats faced down six British frigates seeking to enforce the claims of their fleet to fish in international waters.

Much of this tension was resolved in 1976 when the North Atlantic nations, including Iceland and Britain, extended their exclusive economic zones out to 200 miles. Until these ÔenclosuresÕ, the nations of the North Atlantic had relied on intergovernmental agreements in an attempt to regulate the rate of exploitation. But the compromises associated with unanimous voting, high monitoring costs and weak incentives meant that diplomatic solutions failed to arrest the tragedy of the commons. The nations of the North Atlantic were only able to reduce the scope of this tragedy by agreeing to treat parts of the ocean as their private property.4

In 1977, the Icelandic government sought to cap effort within the domestic cod fishery by restricting the number of days the grounds could be fished, but little was done to limit the entry of new boats, and nothing was done to counteract the increasing efficiency of fishing trawlers. Unsurprisingly, in 1983 the Icelandic Marine Research Institute discovered that the cod stock was still in decline.

Later that year, the government amended the law to limit the total catch each fishing boat could take, a system that had been introduced successfully in the herring fisheries a decade before. For political reasons, the new quotas did not become universal until seven years later, but by allowing these quotas to be bought and sold, the government created a de facto market in fishing rights. (In reality, an ITQ is a share-right, a share in the total allowable catch allocated each year by the government, based on the recommendations of marine scientists.)

In order to get this system accepted, a number of political compromises had to be made. Certain small fishing boats were excluded from the quota system, with the unsurprising result that the number of small boats increased significantly. ITQs were based on past catch history, and because of averaging (upwards), the activation of latent capacity and downright dishonesty, there was potential for a huge increase in effort. This was overcome in part by setting quotas well below historic levels, but this made transferability essential since it provided a politically less painful means of rationalisation.

IcelandÕs fisheries market relies on a political process for setting the allowable catch each year. Throughout the 1980s and 1990s, there was a substantial downwards revision in the catch recommended for the cod fishery by the governmentÕs marine biologists (in 1995, less than half that of a decade before), suggesting that the early estimates were wildly optimistic. At no time did the Ministry of Fisheries set a catch limit lower than that recommended, and in most cases significantly more. And in no year did the fishing industry catch less than the allocated quota, and in some cases substantially more.

This system depends heavily on scientists in a government research institute understanding the complexity of the marine environment and the way in which the fishing community interacts with it. I do not have access to literature on IcelandÕs Marine Research Institute, but I do have a study made of the Science Branch of CanadaÕs Department of Fisheries and Oceans, which has been playing an identical role in setting total allowable catch on the other side of the Atlantic. And it is evident from this study that government scientists setting catch limits are often playing Resnick with fish populations.5

Encouraged by optimistic forecasts of fish stocks, the Canadian government allowed the number of licensed fishers to increase three-fold throughout the 1980s. This rapid escalation in activity was fuelled by government subsidies for new and upgraded vessels, particularly in the inshore fisheries. When large fishing companies emerged in the offshore fisheries and then ran into serious financial difficulties, the federal government stepped in and rescued them.

In a 1989 review, Canadian scientists concluded that they had over-estimated the cod stock by as much as 100%, and under-estimated fish mortality by half. Inshore fishermen had been trying to explain this for some years as the weight of their catches and the size of the fish caught had fallen. The isolation of the scientists from fishers involved in working the resource meant that CanadaÕs fishery managers played a central role in the near-extinction of the northern cod population. In 1992, the government declared a moratorium on all fishing for northern cod in Canadian waters, affecting some 35,000 fishers and their families.

My concern is that the policy solution endorsed by Gissurarson (and many other economic liberals) requires radical state intervention for implemention, and centralised planning by scientists and politicians to manage it year on year. One wonders whether a liberal philosopher might not be suspicious of an institution that relies so heavily upon the state.

Gissurarson also ignores the fate of the traditional owners of these fishing rights. The Ôold lawÕ, which dates back beyond the 12th century, did not recognise fishing rights in offshore resources, but there was a de facto system of property rights based around the control of landing sites. And a system of unofficial law grew up among fishers regulating catch limits and preventing conflict in popular locations. These rules were enforced by the local fishing community through ÔshunningÕ and traditional (but extra-legal) enforce-ment. Because fishing families passed on their craft from generation to generation (and thus had a long time horizon) and because they lived in nearby villages (and thus depended on each other in numerous ways for social support), these de facto regulatory regimes had helped to husband the resource over many generations.

By the middle of the 20th century, however, the bays and their improvements had become public property and access to the fisheries was thrown open to any Icelander with a boat. At the same time, technological innovation allowed the construction of larger boats with more powerful engines, and with the arrival of international trawlers equipped with freezing facilities, the fishing grounds turned into a commons characterised by unrestrained competition. While the government did strive to exclude new entrants from outside the nationÕs borders, within those national boundaries, it set about to undermine the traditional fishing communities. In part this was because of a nationalist ideology regarding the sea that made it difficult to exclude any Icelander who wanted to fish.6

In a paper written in 1983, Gissurarson had argued for the formal recognition of traditional and existing fishing rights. The result, he wrote, would be that Ôthe market is not constructed. It is developed out of existing institutions. It simply consists in handing over responsibility to the fishermen themselves.Õ But the traditional fishing communities were strongly opposed to GissurarsonÕs proposal since the rights he proposed were not traditional, but an entirely new kind of individual rights that would be divisible and freely transferable. Gissurarson acknowledges that their strong opp-osition delayed the imple-mentation of ITQs for many years.

Collective property rights

There is now a significant literature on community-based resource manage-ment, much of it concern-ed with traditional soc-ieties. In most industrialised societies, these communal property rights have been deliberately extinguished in the process of state-building, but in many places, such as the estuarine and coastal fisheries of New South Wales, the campaign of organised theft continues to this day.

Even in advanced economies with substantial bureaucratic regulation, much of day-to-day fisheries management has been undertaken by local fishing communities quietly enforcing informal rules and conventions. In the early 1990s, I interviewed a fisherman from an estuarine fishery in southern NSW, who gave me a powerful illustration of the difference between centralised and local enforcement of fishing rules. He explained that the governmentÕs fishing inspectors monitored the taking of undersized fish by measuring the size of the catch in a boat or coolroom. As long as the bream were of legal size, their job was done.

But if the fisherman saw a tray of bream in a coolroom, he knew from the colour of their skins and the length of their teeth what estuary they had come from, what net size was used to catch them and how many undersized fish were killed in the process. Regardless of whether the fish complied with the letter of the law, if too many of next yearÕs catch had been killed as by-catch, he would speak to the fisher concerned, and if the behaviour continued, some kind of informal enforcement (ÔeducationÕ he called it) would be applied.

With few exceptions, these fishers have a deep sense of commitment to their craft and to the environment, having inherited their skills and their capital from their fathers and grandfathers. I interviewed one fisherman in southern NSW who had been taken onto the water by his grandfather and who had recently taken out his grandson for the first time. These men have long time horizons and low discount rates. They are ideal custodians of the natural environment, and in NSW, they are being driven from the water by politicians hungry for the votes of recreational fishers.

What the traditional fishing communities lacked was the power to exclude new entrants. There are physical difficulties associated with enforcing harvesting rights at sea, but the state was not even prepared to protect these communal rights in the coastal fisheries. Not only did the state fail to recognise these conventional usages, but in their pursuit of the modern ideologies of nationalism, egalitarianism and individualism, politicians have encouraged more entrants and deliberately undermined the capacity of local institutions to enforce their rules.

In Fishing for Solutions, published by the IEA two years before GissurarsonÕs monograph, Michael De Alessi paid considerable attention to these communal fishing institutions (Michael De Alessi, Fishing for Solutions, London: IEA, 1998). This book is a degustation of the alternatives to bureaucratic management, savouring common property rights, individual property rights and even the possibility of homesteading the oceans, and De Alessi acknowledges that Ôunder a host of scenarios, common property may be optimalÕ.

This is not the place to revisit the case for and against collective property rights. In the end, the argument for local management comes down to HayekÕs insight about the importance of contextual versus abstract knowledge. From the heights of central government, the ocean looks like a blank page upon which the scientist, the policymaker and the politician can write whatever rules they like. But down on the water, among those who have Ôpeed in salty seaÕ (to borrow a term from the fishermen of Iceland), the commons looks remarkably different.7 De Alessi quotes John Cordell, writing in 1989:

It is one thing to contemplate the inshore sea from landÕs end as a stranger, to observe an apparently empty, featureless, open accessed expanse of water. The image in a fishermanÕs mind is something very different. Seascapes are blanketed with history and imbued with names, myths, and legends, and elaborate territories that sometimes become exclusive provinces partitioned with traditional rights and owners very much like property on land.8

Tales of voluntary organisation

The third IEA publication, Saving Our Streams, looks at yet another kind of collective institution concerned with preserving the exclusivity of fishing rightsÑthe AnglersÕ Conservation Association, established in England in the 1940s (Roger Bate, Saving Our Streams, London: IEA, 2001). This is an important book. Students of rights-based approaches to environmental problems have known of the AnglersÕ Conservation Association for several decades, but until Bate we have had to be content with passing references in textbooks and journal articles.

The ACA was formed in 1948 by an English barrister, John Eastwood, as a means of sharing the costs associated with suing the polluters of rivers frequented by anglers. In England and Wales, anglers are able to purchase leases from the owners of the riparian rights (the rights possessed by the owners of the land bordering the river to a certain quality and quantity of water). At a time when the environmental movement was as yet unborn and government agencies were reluctant to stand up to industrial and municipal polluters, the ACA clarified the law and in some cases won significant damages (which have invariably been used to rehabilitate the rivers).

One of the many interesting insights from BateÕs study is the number of times the ACA was obliged to take action against government instrumentalities, both municipal and statutory, to defend the riverine environment. Its most famous case, known in the law books as the Pride of Derby, was taken jointly against a private corporation (British Celanese Ltd), a municipality (the Corporation of Derby), and a statutory corporation (the British Electricity Authority). British Celanese withdrew its defence before the trial started and ceased the worst of its pollution fairly quickly. But the two government bodies fought on, insisting that they were not responsible for the effluents, that heated water was good for the fish, and that in any case, they possessed special statutory powers which made them immune from the common law. And having lost the case, they sought repeated suspensions of the injunctions to allow them time to comply.

The AnglersÕ Conservation Association is serious business. At the end of 1999, the ACA had 42 legal actions underway. Five actions had been won or settled throughout the year and damages of £366,890 had been recovered. In mid-2000, the ACA settled another case for £415,000, half of which was placed in a trust fund for environmental improvement.

It is a stirring tale of voluntary organisation, but the ACA is by no means alone. The Hudson River FishermenÕs Association (in New York) was a coalition of recreational and commercial fishermen brought together in the 1960s to track down and prosecute industrial polluters. In 1983 they teamed up with environmental lawyers (most famously, Robert F. Kennedy Jr) to establish the nationÕs first ÔriverkeeperÕ, a private water marshall whose job it is to gather evidence of pollution and prepare the ground for legal action. And again, the Hudson fishermen have found themselves taking action against governmental bodies that, in principle at least, should have been protecting the public interest. Today there are more than 20 riverkeepers, baykeepers and soundkeepers in North America and the concept has even spread (albeit in a variant form) to Australia.

Angling clubs and fishing syndicates have been around in England for hundreds of years. Riparian rights date back to medieval law and beyond. Commercial fishers have been working the Hudson River for 350 years. These are mature institutions that have been able to use to common law to protect their rights against the indifference and hostility of government. Three times throughout its history, the ACA has had to fight attempts in government to abolish riparian rights. At one level, these social institutions were forced to rely on the state for protection, whilst at another level they were threatened by the state with extinction.

There are some challenging questions for liberals here. Can the decision-making entitlements to a resource be privatised without breaking them into individual pieces? Is the joint stock corporation always the most effective or legitimate form of collective ownership in the non-state sector? Is there a place for collective property rights in a modern market economy? Is the state capable of allowing competition with itself?

When liberal economists speak of Ôthe marketÕ, they usually refer to national and international markets, with widely dispersed property rights. But this world was only brought into existence through state-sponsored violenceÑthe enclosure laws in 19th century England which destroyed the village commons; the settlement of new lands, in North America and Australia, which overturned the traditional rights of native peoples; the gradual encroachment of national markets on local governance and community-based institutions right around the world.

Concluding remarks

I suspect that ITQs cannot come into existence without the nationalisation of natural resources. In the case of offshore fisheries, nationalisation has meant the enclosure or ÔprivatisationÕ of a true commons through the extension of Ôexclusive economic zonesÕ. In the case of coastal, estuarine and riverine fisheries, nationalisation has involved the same kind of process identified by Sidney and Beatrice Webb in the 1920sÑthe take-over of private institutions by the state, and the replacement of local institutions by the national government. In a very real sense, ResnickÕs Dilemma raises the question, At what level is society to be organised?

Is the state able to allow competition with itself? At the highest level, the constitutional level, the answer to this question must be, no. At this level, Hobbes was right. Paradoxical though it may be, there cannot be liberty without Leviathan. Ethnic, religious and professional communities can discipline their own members through alternative dispute resolution, but in an open society, the rule of law means that the final right of appeal must lie to courts established by the state.9

At the institutional level, however, there can be competition with the state and in a free society, there must. Church schools compete with state schools, not merely because competition produces better educational outcomes, but because Catholics, Muslims and fundamentalist Christians have never trusted the state to be sensitive to their values.

Charitable organisations compete with tax-funded programmes to deliver significant social, environmental and cultural goods. Tax deductions for donations to third sector organisations are partial recognition that the Smith Family, the Bush Heritage Fund and the National Opera represent a competing (and earlier) form of social organisation to the state.

As a state newly-formed in the late 18th century, Australia has fewer of these institutional alternatives. In England, I find myself surrounded by themÑmedieval universities, bridge trusts, almshouses, private zoos, private squares, private rivers. A road system originally built by turnpike trusts. Art galleries founded by private individuals. Lighthouses constructed by a gentlemenÕs club of shipowners. I suspect that it is one of the reasons why the English have found it so much easier than Australians to experiment with public-private partnerships in recent years.

(Some liberal thinkers have written of these alternative social organisations as Ômediating institutionsÕ. That may be true at the constitutional level. But I would argue that at the institutional level, they are not merely mediating, but rather competing institutions).

This distinction between the constitutional and the institutional used to be well understood in liberal theory. One of the primary responsibilities of the constitutional state in a liberal society is to preserve diversity at the institutional levelÑthat is why bills of rights address such matters as freedom of speech, freedom of assembly and freedom of religion. It is the reason why liberals have held the common law in such high esteemÑto classical liberals, the institutional state was itself subject to the rule of law.

But with the expansion of the state over the course of the 20th century, this distinction has been largely forgotten. Politicians have repeatedly used LeviathanÕs monopoly on the legitimate use of coercion to destroy its competition at the institutional level. We still rely on judge-made law, and increasingly on bills of rights and administrative law, but these are a poor defence against the pervasive influence of the state. In a democratic society, the best protection for these alternative forms of social organisation perhaps lies in political debate, but when the concept of competition in social organisation has itself been forgotten, of what value are these rights of open debate?

We need a new language to enable us to take issue with the state. In speaking to economists and policymakers, I would use the language of competition and competitive neutrality. Under National Competition Policy, the Federal government and each of the States has established a Competitive Neutrality Complaints Office. Where is the equivalent mechanism for protecting institutions outside the marketplace against unfair competition?

In speaking to environmentalists, I have argued for institutional diversity, drawing on the language of biological diversity. Institutions such as the ACA and the Hudson Riverkeeper have proved to be essential to the rehabilitation of these rivers from industrial pollution. In both cases, it would have been foolish to have relied exclusively on the state to protect these natural environments.

James C. Scott offered four rules of thumb to help policymakers avoid Ôseeing like a stateÕ: take small steps, favour reversibility, plan on surprises, and plan on human inventiveness.10 To this I would add a fifth: donÕt drive away the competition.

Endnotes

1 On Craig ReynoldsÕ computer simulations of ÔboidsÕ, see www.red3d/cwr/boids.
2 StarLogo can be downloaded at www.media.mit.edu/starlogo. See also Mitchel Resnick, Turtles, Termites, and Traffic Jams (Massachusetts Institute of Technology, 1994); Vanessa Stevens Colella, Eric Klopfer and Mitchel Resnick, Adventures in Modeling: Exploring Complex, Dynamic Systems with StarLogo (New York: Teachers College Press, Columbia University, 2001).
3 I am indebted to an American economist, Bob Hahn, for this example, which he gave at a 1990 conference in Sydney on the use of economic instruments in natural resource management.
4 On the Law of the Sea as a system of national property rights, see Ross D. Eckert, The Enclosure of Ocean Resources: Economics and the Law of the Sea (Stanford: Hoover Institution Press, 1979).
5 Christopher Finlayson and Bonnie J. McCay, ÔCrossing the Threshold of Ecosystem Resilience: the Commercial Extinction of Northern CodÕ, in Fikret Berkes and Carl Folke (eds), Linking Social and Ecological Systems: Management Practices and Social Mechanisms for Building Resilience (Cambridge: Cambridge University Press, 1998), pp.311-337.
6 E. Paul Durrenberger and Gisl’ P‡lsson, ÔThe Grass Roots and the State: Resource Management in Icelandic FishingÕ, in Bonnie J. McCay and James M. Acheson (eds), The Question of the Commons: The Culture and Ecology of Communal Resources (Tucson: University of Arizona Press, 1987), pp.370-392.
7 For an Icelandic version of this practical knowledge argument, see Gisl’ P‡lsson, ÔLearning by Fishing: Practical Engagement and Environmental ConcernsÕ, in Berkes and Folke (eds), Linking Social and Ecological Systems, pp.48-66.
8 John Cordell, A Sea of Small Boats (Cambridge, MA: Cultural Survival, Inc, 1989), p.1.
9 Jerold S. Auerbach, Justice Without Law? Resolving Disputes Without Lawyers (Oxford: Oxford University Press, 1983).
10 James C. Scott, Seeing Like a State (New Haven: Yale University Press, 1998), p. 345.

Author
Gary L. Sturgess is Group Policy Adviser to Serco Group, an international public service provider based in London. He was Director-General of the NSW Cabinet Office under Premier Nick Greiner and has been involved in public sector reform for more than two decades.

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