One thing is for sure - if the Warwick Economics Research Lounge becomes more and more interesting with every talk, people are going to be fighting for space in the PG Hub.
Today's presentation was by Konrad Gudjonsson, a person well suited for delivering a talk on the topic - "Fisheries Economics: How Iceland made Commercial Fisheries Profitable.
Before joining the MSc in Warwick, Konrad obtained a BSc in Economics from the University of Iceland. He was a Research Assistant at the Institute for Economic Studies (Reykjavik) for several months. He is very interested in fisheries economics, in which he did a module during his undergraduation.
The talk (fully focused on Iceland) began by just touching on the origin of fisheries economics and the "tragedy of commons" concept. Those of us who were listening in Abhinay's Microeconomics class would know what the second concept is, but I give a brief two-liner here anyway: the depletion of a shared resource by individuals, acting independently and rationally according to each one's self-interest, despite their understanding that depleting the common resource is contrary to the group's long-term best interests. (sounds familiar? I took it from Wikipedia).
Konrad then moved on to a bit of biology which he claimed was "boring", but he had the audience's attention. He explained the "basic static single species bio-economic model" (this is a simplified phrase :O), where he explained that the growth in the stock of fish may grow initially, but declines over time.
The biggest question at this point was how to reach optimality in the amount of fishing by firms. Konrad gave several answers to show that the best solution is to provide property rights for fishing. These generally take the form of "Individual Transferable Quotas" (ITQs), which put a limit on the total allowable catch per firm.
"The system works in a way that each firm gets a limited share of the fish in the sea - it doesn't allow for squabbles like 'I caught the fish first! It's mine!'" - Konrad. That had us catching our sides with laughter for the next few minutes! :D
He then went on to list the reasons for why ITQs will be a good way of achieving optimality. There are many: This system eliminates the "common property problem" and also gets rid of "Olympic fishing" (a term well known only in Iceland for the amount of fishing which is done there). ITQs also encourage investments, research & development and marketing. Unlike in the case of selecting optimal tax rates where perfect information of fish stocks and firms is required, ITQs only require the estimation of the optimal catch (which is a VERY tough job in reality - it is easy in comparison).
Konrad then gave us a bit of background information on Iceland to present the effects of previous ITQs. Some interesting facts are: Iceland's population is 320,000 (quite close to Coventry's population!!!), and Iceland is not a part of the EU, but it is a part of the EA. Fisheries contribute to about 25% of the GDP.
The results of previous implementations of ITQs were pretty encouraging: greater profits, lesser, but bigger vessels in 2009 than in 1992, a massive jump in the TFP of fisheries, a huge increase in investment, a positive effect on the environment (e.g. less oil used per metric ton of catch),..........
If there are so many good things happening, there have to be some bad things as well. Bingo. There are. And here they are: ITQs might not provide an ideal system, as the time for which people have these property rights are not specified. Biologically, ITQs did not do as well as expected, and there was opposition to it. The initial allocation might have been unfair, but it is the only Pareto Efficient outcome.
But, overall, ITQs seem to have done well with regard to the results presented above. There ended a perfectly timed and wonderfully presented talk, followed by a few questions and comments from the other students. Oh, and, snacks and drinks were provided by the Department of Economics for all of us to feast on.
Some comments from the audience:
Kirti Gupta (a first timer in terms of being at the lounge) - "I really liked this talk and the informal atmosphere, which prevented us from being limited from asking questions due to inhibition. I now realise how much I have missed by not attending the previous discussions".
Claudia Riz: "Konrad is a really good orator. I thoroughly enjoyed today's talk".
Today's presentation was by Konrad Gudjonsson, a person well suited for delivering a talk on the topic - "Fisheries Economics: How Iceland made Commercial Fisheries Profitable.
Before joining the MSc in Warwick, Konrad obtained a BSc in Economics from the University of Iceland. He was a Research Assistant at the Institute for Economic Studies (Reykjavik) for several months. He is very interested in fisheries economics, in which he did a module during his undergraduation.
The talk (fully focused on Iceland) began by just touching on the origin of fisheries economics and the "tragedy of commons" concept. Those of us who were listening in Abhinay's Microeconomics class would know what the second concept is, but I give a brief two-liner here anyway: the depletion of a shared resource by individuals, acting independently and rationally according to each one's self-interest, despite their understanding that depleting the common resource is contrary to the group's long-term best interests. (sounds familiar? I took it from Wikipedia).
Konrad then moved on to a bit of biology which he claimed was "boring", but he had the audience's attention. He explained the "basic static single species bio-economic model" (this is a simplified phrase :O), where he explained that the growth in the stock of fish may grow initially, but declines over time.
The biggest question at this point was how to reach optimality in the amount of fishing by firms. Konrad gave several answers to show that the best solution is to provide property rights for fishing. These generally take the form of "Individual Transferable Quotas" (ITQs), which put a limit on the total allowable catch per firm.
"The system works in a way that each firm gets a limited share of the fish in the sea - it doesn't allow for squabbles like 'I caught the fish first! It's mine!'" - Konrad. That had us catching our sides with laughter for the next few minutes! :D
He then went on to list the reasons for why ITQs will be a good way of achieving optimality. There are many: This system eliminates the "common property problem" and also gets rid of "Olympic fishing" (a term well known only in Iceland for the amount of fishing which is done there). ITQs also encourage investments, research & development and marketing. Unlike in the case of selecting optimal tax rates where perfect information of fish stocks and firms is required, ITQs only require the estimation of the optimal catch (which is a VERY tough job in reality - it is easy in comparison).
Konrad then gave us a bit of background information on Iceland to present the effects of previous ITQs. Some interesting facts are: Iceland's population is 320,000 (quite close to Coventry's population!!!), and Iceland is not a part of the EU, but it is a part of the EA. Fisheries contribute to about 25% of the GDP.
The results of previous implementations of ITQs were pretty encouraging: greater profits, lesser, but bigger vessels in 2009 than in 1992, a massive jump in the TFP of fisheries, a huge increase in investment, a positive effect on the environment (e.g. less oil used per metric ton of catch),..........
If there are so many good things happening, there have to be some bad things as well. Bingo. There are. And here they are: ITQs might not provide an ideal system, as the time for which people have these property rights are not specified. Biologically, ITQs did not do as well as expected, and there was opposition to it. The initial allocation might have been unfair, but it is the only Pareto Efficient outcome.
But, overall, ITQs seem to have done well with regard to the results presented above. There ended a perfectly timed and wonderfully presented talk, followed by a few questions and comments from the other students. Oh, and, snacks and drinks were provided by the Department of Economics for all of us to feast on.
Some comments from the audience:
Kirti Gupta (a first timer in terms of being at the lounge) - "I really liked this talk and the informal atmosphere, which prevented us from being limited from asking questions due to inhibition. I now realise how much I have missed by not attending the previous discussions".
Claudia Riz: "Konrad is a really good orator. I thoroughly enjoyed today's talk".
Interesting & fun to read, Neha =)
ReplyDeleteThank you, Lukas :)
ReplyDelete