Christopher Pang
Finless sharks left to die
Many shark activist groups have been set up all over the world and laws have been passed in UK and US over the years to prevent finning of sharks. However these anti shark finning campaigns have seen little success in curbing the finning activities as they are not addressing the root cause of the problem. Finning is an effect from the cause that has depleting the shark population. The root cause is the demand for shark fins, a delicacy served in Chinese cuisine, also seen consumed as a symbol of status and wealth. The inverse correlation of the shark population with Chinese middle class affluence is extremely high. As the Chinese middle class gets more affluent, demand for shark fins has reach a stage where it is unsustainable for the shark population as the rate sharks are being finned is way higher than their reproduction rate. The result is a depleted population today that stands more than 90% lower as compared to 1970s.
Today our oceans and seas are “freely used”, though controlled by government to some extent. Firms do not own the resource(ocean) but can use the resource through some form of licensing for the purpose of fishing or for oil drilling. Like most licenses, it is only valid for a period of time. Therefore, there is every incentive to maximize the usage of the resource during this period to satisfy the market demand as quickly as they can, with absolutely no incentive to maintain the value of the ocean because they do not own it. The same applies for any finner as it is rational in his perspective to fin as many sharks as he can before the sharks are finned by others.
My solution to both whaling and finning activities is to privatize oceans. Instead of passing laws to prevent finning of sharks, we establish property/ownership rights of oceans and seas. If a private enterprise owns the ocean, we can trust the private owner to take a longer term perspective than the government. If he abuses his ownership right by overfishing or leases it to people that overfish in his ocean, the value of his asset(ocean) will fall. The decline in value is sometimes irreversible; especially in the case of endangered species like sharks and whales as their reproduction cycle is extremely long. Would shark finners care if the ecology has been affected because of their finning activities? Would a private owner be affected by it? He would definitely as he has every incentive to maintain the asset value, highly dependent on the ecology and the balance between the predators and preys. Ocean owners profit most by making sure the valuable species do not reach a point of extinction through hunting. They have a compelling interest in protecting the environment if they own it.
Under a private ownership, three possible situations might develop. First possibility is that supply of shark fins will then be reduced because there is an incentive to maintain the long term sustainability of the shark population. Sharks will not be finned as quickly because the owner does not want to deplete the entire shark population in his ocean due to the low reproduction cycle and create an imbalance in the ecology. This is because sharks are at the top of their food chain with few predators. With a controlled supply, prices will then elevate to a level where demand will be reduced and consumers will seek substitutes for shark fins.
Second possibility is that demand for sharks fins is still very high despite the increase in prices. On observing the willingness of consumers to pay (inelastic demand), the owner will then assess the feasibility of breeding sharks in his ocean on a larger scale and the impact on the ecology of the ocean. He might even segment the ocean into different zones with boundaries to identify the specific age groups of each school of sharks. Those sharks with maturity level for “harvesting” would then be finned after their reproduction cycle has been completed. This would ensure there is sustainability of the shark population over the long run. If the owner chose to harvest all the sharks at once, his short term income would no doubt be maximized but his long term profitability is unsustainable.
This third possibility is likely to take substantial amount of time before success. This possibility assumes the successful breeding of sharks and population of sharks would have increased such that eventually there is a overpopulation of sharks in the future. The end result is that the owners will then allow finning of the overpopulated sharks so that other fish populations will not be depleting because of sharks preying on them. Supply of shark fins would increase, reducing prices of shark fins and population of sharks is still maintained. People would then get to enjoy the delicacy and sharks will not go extinct. This process is somewhat slow but still possible under a private ownership.
The world has accepted private agriculture and the amazing results of private ownership over land is better cultivation and transformation of the land to more productive use than jungles and wasteland. The productivity growth in agriculture has significantly improved our standards of living in the last 30 years. Today we should seek to expand property rights over the waters, rivers, seas and parts of the oceans, which would not only reduce these inhuman massacre of sharks and whales but also ensure oil drilling activities are safer. Most importantly, it will ensure our children and their children will still be able to witness the wonders of the ocean. For now, all we can do is to stop our consumption of shark fins soup as individuals and await the day when private ownership of oceans can be exercised similarly as land ownership.
This article is written in support of the “Ministry of Sharks” event held at Backstage HK on 19th and 26th November 2010.
Sources:
http://www.stopsharkfinning.net/
http://www.hksharkfoundation.org/
http://www.sharkwater.com/education.htm
http://planetgreen.discovery.com/travel-outdoors/shark-finning-the-big-picture-of-a-bg-problem.html
http://green.blogs.nytimes.com/2009/10/08/sanctuary-to-counter-shark-fin-soup-market/
“Making Economic Sense” by Murray Rothbard (Chapter 24 & 25)
“Environmental Takings of Private Water Rights – The Case for Water Privatization” by Roy Whitehead Jr and Walter Block
There are several problems with this privatisation idea.
To begin with, sharks require a large territory and a spatially-extensive ecosystem. Therefore, the plan is akin to selling a huge patch of forest to a private company so as to harvest one animal. Painted in this picture, the problems immediately surface.
One, there may be disregard for other animals, especially those not directly related to the survival of the targeted species. For example, a private company may eliminate octopuses (or whatever animals that may kill sharks) since they are negative to its profits on sharks. Furthermore, it may flood the ocean with “shark feed” regardless of its impact on the ecosystem as a whole. Taking it to the extreme, the company may clear out the ocean, leaving just sharks and using artificial imported feed to raise them; in the above analogy, it’s akin to clearing the forest to raise cattle.
Two, this idea hinges critically on how asset is considered. If regulated wrongly, for example, a company may find it more worthwhile to purchase a small plot of ocean where sharks congregate, kill all of them, and then leave it at that. This is somewhat like commercial slash-and-burn. On the same issue, looking at how Wall Street companies operate, I find it quite plausible that a CEO may decide to maximise immediate profit at the cost of long-term asset value because it gives him a higher bonus.
Three, there are large scale circulations or interactions in the oceans that, if interrupted, may have drastic consequences elsewhere. For example, if a company decides to build a huge fence to prevent its assets from swimming away, it may reduce the oceanic overturning circulation that regulates latitudinal climates.
Granted, something urgent needs to be done about shark fishing, but I am highly doubtful that this idea will work.
On a side note, is there a checkbox option to subscribe to comments of a particular thread, or did I miss it?
Hi Jackson, we are looking into it now. I disabled the subscription checkbox a long time ago. Now I have to figure out how to reactivate it.
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Hi Jackson, the comment notifier has been re-enabled. Thank you for your timely feedback.
@ Jackson
Acknowledge that sharks require a large territory and a spatially-extensive ecosystem. That was why I suggested privatizing oceans. Because from what I have researched, sharks do not survive very long in an aquarium. Sharks being salt water in nature have to live in sea water to survive.
As I was focusing on a particular species because of the narrowing of scope, it might seem that I am ignoring the rest of the marine life. The whole debate applies for the rest of the species. Demand is always the key to how entrepreneurs react. If there is a demand for octopus (to predict world cup scores) or for consumption, prices will reach a point where owners will act to protect the species. I am not saying that a species existence is dependent on its value to human. But if left to privatization, it might be a better option than what is being done today.
I thought laws would not suffice firstly because the demand for such goods will only shift the supply into the black market. The price would elevate to a level where profiteers will still risk being caught just for trading. And laws that were set did not work because it takes an international effort for such a legislation to work and China, HK would never agree to it. Thus the only way I could think of is to use privatization to either cut the supply or to breed and increase the supply. Either way it conserves the population.
“Taking it to the extreme, the company may clear out the ocean, leaving just sharks and using artificial imported feed to raise them; in the above analogy, it’s akin to clearing the forest to raise cattle.”
Firstly sharks feed on other fishes. If you do not maintain the ocean as a whole, there will be no other fishes to feed on. I don’t think sharks eat beef or lambs. I cannot verify that point on artificial feed. Secondly, the reproduction cycle of other types of fishes is much higher than sharks which would allow the owner to generate consistent income instead of “extraordinary income” from each “shark harvesting”. Sharks will then be some sort of population check.
“this idea hinges critically on how asset is considered. If regulated wrongly, for example, a company may find it more worthwhile to purchase a small plot of ocean where sharks congregate, kill all of them, and then leave it at that. This is somewhat like commercial slash-and-burn. On the same issue, looking at how Wall Street companies operate, I find it quite plausible that a CEO may decide to maximise immediate profit at the cost of long-term asset value because it gives him a higher bonus.”
This definitely will not work. This is an agency problem and not a problem with privatization. It is the dishonest manager that is managing the asset for the owner. Would the owner fire the short term profit maximising manager that is destroying his capital asset? I would if I am the owner. Would I set agreement on how my ocean would be maintained? Owners have the incentive to take care of their own assets, be it long term or short term. They will do what they can to maximise their own interest. For example, look at Citibank as an example. The management consistently sold assets off during the crisis and reported profits. All these were extraordinary and would not recur.
I do agree on three as I am not exactly familiar with the migration portion or how schools of fishes migrate from place to place, based on climate, temperature etc. I do agree that this could be an issue if not studied properly. However I am sure the owners will hire marine specialists to study this deeper and make sure the appropriate action to release the boundaries is done at specific periods so that fishes can migrate when need be. The owner has an incentive to do so. In the most simplistic model, Owner A can then negotiate with Owner B of the new migration point to lease his ocean space for migration. Owner B gains rental income and Owner A maintains his fishes.
Hi Christopher,
Thanks for your reply.
I was thinking of commenting on your rebuttals, but I realise, ultimately, my objections stem from my distrust of private industries to do good.
For one, the track record of profit-oriented industries operating in such a way as to benefit the community and the environment (or, even at the very least, not to exploit them) hasn’t been stellar. Moreover, I think this idea depends on the assumption that commercial value of species is equivalent to their value to the environment/ecosystem/biodiversity, which I am not entirely convinced would be the case. Most importantly, I think, once implemented, it is something that is quite impossible to reverse.
But in any case, I do strongly agree with you that the current situation is unacceptable. It’s just that privatisation is too extreme a move. I still think regulation/education is the way forward. Much can change within a short period of time. After all, the now anti-whaling country of Australia used to have a whaling industry until just thirty years ago.
@Jackson,
Do not look at it as a rebuttal but exchange of opinions. We do learn from each other during the process of exchange of ideas. Basically this is not my pet topic either.
I did think of other solutions for this but radical as it might sound, this is probably the most logical solution. Protection in the form of security around the borders of the ocean on the land might be set, then designated entry points will be set up for people who want to enter the ocean as leasee.
Education might be the way but slow. Regulation I doubt it will be useful. Like I said, if the demand still exist, regulation will only force the supply into a black market. Given the everlasting demand of the Chinese for such goods, it is likely the black market will end up being a huge business. The Chinese and HK government would not give up collecting consumption taxes on this.
Establishing property rights will determine who is the rightful owner and the owner can bring the offender to court for trespassing and destruction of property. Right now, as long as the ship is away from jurisdiction, the courts that enact such laws can do nothing to these finners. Protection in form of security and boundaries will also be set up to prevent such activities on a massive scale.
It takes imagination. It does not mean it is untried therefore it is unworkable. I think the problem lies with mainly governments all over the world. They have been fighting over territories for thousands of years. Fighting for islands, rivers, straits. Who can determine who is owner of Pacific ocean or Atlantic ocean now? This is the most tricky part. Politics.
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If a private enterprise owns the ocean, we can trust the private owner to take a longer term perspective than the government.
OK. This is a typical tragedy of the commons problem. The textbook solution calls for the assigning of property rights to the parties involved, but I’m not sure if it’ll work out for oceans.
Firstly, high transaction costs. As you noted, Who can determine who is owner of Pacific ocean or Atlantic ocean now?, there will probably be years of negotiating followed by years of drawing up contracts, after which there will probably a tender for private companies etc. The cost of leaving the current situation as such might be significantly less than any anticipated benefits from the assigning of property rights.
And there’s a large number of parties involved too. Ensuring that all their interests converge is not realistic.
Even if privatization succeeds, the cost of purchasing a piece of the ocean might be so high, that the private company would be pressured to exploit all the resources so as to recoup the cost.
And why in the first place would a private company want to own a part of the ocean? The property rights are not really enforceable i.e. other fishing boats can enter their area without detection, unless the company can find some way to ring up their waters. Furthermore, demarcation of the ocean would be a perpetual nightmare.
Hmm. Maybe if you wanna reduce shark finning, an easier solution might be to slap a ‘shark fin soup’ tax :-p
Do read http://mises.org/daily/4879 for a better explanation of how things may work out for this privatization of waters.
@eternalhap slap a shark fin tax wouldn’t it be a conflict of interest? Government have incentive that people eat more shark fins because they collect more tax? So do governments really want to protect sharks then?
@eternalhap slap a shark fin tax wouldn’t it be a conflict of interest? Government have incentive that people eat more shark fins because they collect more tax? So do governments really want to protect sharks then?
That’s a lame reason. It’s like saying the Sg govt imposes higher tax on cigarettes, so to collect more tax, they have a perverse incentive to ensure more people buy cigarettes. You sure or not? (;
@”Shark fin tax and conflict of interests”
The case of cigarette taxes is more subtle: The monetary benefits and the social costs are both borne by a government that represents the people. In this case, there are conflicting goals, but not conflicting interests across different parties.
Also, the presence of conflicts of interest does not preclude an overall beneficial outcome. For example, the well known principal-agent problem between shareholders and executives is a price that shareholders pay, willingly.
@Author
“The inverse correlation of the shark population with Chinese middle class affluence is extremely high.”; “As the Chinese middle class gets more affluent, demand for shark fins has reach a stage where it is unsustainable for the shark population as the rate sharks are being finned is way higher than their reproduction rate. The result is a depleted population today that stands more than 90% lower as compared to 1970s.”
Many things, like the price of the ASUS laptop I bought, are inversely correlated with Chinese middle class affluence. Perhaps you intended to suggest a strong causative effect instead? Although I personally think that it is the population growth rate of sharks that is correlated.
@”Feasibility of privatization”
In “The Privatization of the Oceans”, Rögnvaldur Hannesson analysed the development of property rights in ocean fisheries. While its success is mixed, privatization is neither new nor impossible. Within our aquatic food chain, the shark might just be the next link.
@”That’s a lame reason. It’s like saying the Sg govt imposes higher tax on cigarettes, so to collect more tax, they have a perverse incentive to ensure more people buy cigarettes. You sure or not? (;”
I’m back, because I couldn’t resist pointing out that… Singapore did devise, legalize, incentivize, and subsidize the casino. =P
Not just the casino. It is the same with Singaporepools. By making other private operators illegal, they rip the entire benefits themselves with poorer payout ratios. In a freely competitive markets, betting operators compete with each other on many features,e.g. sms alerts on betting odds change, special types of betting, live betting, sms alerts on results etc. But most importantly they compete using payout ratios. By making the rest illegal, they made themselves a monopoly.
@dingfeng, perhaps yea, causation might be more appropriate in this case. I have been refraining from using causation because of the many inferences which other writers have hastily concluded using correlation studies to suggest a causation effect. I would rather let the reader decide if it is causation or correlation, e.g. in the recent news, Health Promotion Board made a statement like this with regards to the graphic warning labels on cigarette packs “We are pleased to share that our surveys with more than 1,000 respondents showed that 28 per cent smoked fewer cigarettes, while 21 per cent made efforts to abstain from smoking. 54 per cent of non-smokers who were surveyed advised their friends and colleagues to quit.”
“Graphic warnings on cigarette packs found effective: HPB survey” was the title of the article. Was it a skewed statistical sample? Or was it pressure through being surveyed? Let intelligent readers decide whether it is effective or not based on what they see daily.