August 24, 2001

International Commentary

Save the Whales

By David H. Feldman, a professor of economics at the College of William & Mary in Williamsburg, Virginia

The Norwegian or Japanese whaler slicing open a dead whale sees a useful commodity, while the owner of a whale-watching business in Seattle or Virginia Beach needs a living and preferably docile creature in order to sell their service. The Greenpeace activist values each living whale without regard to any direct economic use. Unfortunately, these ways of valuing whales conflict.

Until recently, the International Whaling Commission's moratorium on commercial whaling muted the dispute. But the institution is now at a critical juncture, created in part by its own success at restoring many whale populations. Despite the stalemate at the recently concluded IWC meeting in London, pressure is building from nations like Norway and Japan who wish to resume commercial whaling. Under the IWC's proposed "revised management procedure" a catch limit based on conservative estimates of its current population and reproduction rate would be set for each species deemed plentiful enough to sustain a stable hunt.

The commission's approach will likely fail. Scientific management of whale stocks requires a depoliticized institution, which the IWC is not. Effective monitoring and control requires real coercive powers, which the IWC does not have. And lastly, their new procedure ignores the economics of resource management by leaving out all other competing stakeholders who value the resource.

The IWC has become a political battleground between pro- and anti-whaling nations. Japan claims that the U.S. and others routinely abuse science by pushing increasingly absurd assumptions about whale populations in order to maintain the ban on all commercial hunting. They also resent special treatment afforded aboriginal groups seeking subsistence hunting or cultural renewal. The U.S. contends that Japan's "scientific" whaling is disguised commerce, and the IWC's science commission strongly rejects the need for lethal research.

As a purely voluntary regulatory agency, the IWC cannot long remain a forum for hidden agendas, real or perceived, or nations like Japan will exercise their sovereign right to resume whaling unilaterally. Since there are no defined property rights to migratory whales, unregulated hunting could lead quickly to overexploitation -- the usual "tragedy of the commons."

The IWC must prepare for an end to the moratorium or risk losing what remains of its credibility. Its task, after all, is to restore the whale fishery. The trick is to restore the IWC's standing as a neutral manager of a global resource, and the answer may lie in tradable permits for whales.

Catch limits under the IWC's proposed scheme effectively grant free licenses to nations that wish to hunt whales. But why should we presume that a Norwegian whaler places a higher value on a dead whale than a conservation organization in Britain values keeping it alive? If a commercial hunt of Pacific Grey whales resumes, might this adversely affect the U.S. whale tourism industry? For this industry the whale population is a public good. Seeing a whale off the coast of British Columbia doesn't reduce its value to the next group that views it near San Francisco. Hunting converts this public resource into a private good.

A catch limit creates a set of valuable permits. Allocating all of them to the hunters may not give us a socially desirable outcome. Cetacean societies, ecotourism groups, and the U.S. Department of Commerce all may be willing to buy licenses in order to rip them up, and their willingness to pay may vary by species and by habitat. The traditional catch-limit approach gives these groups no voice other than political obstruction. A well-crafted auction would give us a better result.

A tradable permit scheme requires certain preconditions to succeed. First, all parties must be confident that catch limits are set on the basis of the best, unbiased scientific research available. Since governments appoint the scientists to the relevant decision-making panels, suspicions of bias naturally arise. This problem can be mitigated if each nation has a limited veto power over the appointments made by others.

Next, the initial property rights to the permits must be assigned. The simplest solution is for the IWC to hold them as custodian for the world, though giving an international organization its own private source of revenue is not necessarily a good idea. Since migratory whales are a common property resource of all humanity, a better alternative may be to allocate them to all national governments on a mutually agreed basis. A landlocked country like Bolivia would be quite happy to sell its quota, and developing nations would welcome the additional revenue. The IWC could remain the venue for a periodic auction of permits that national governments did not themselves use or destroy.

Countries could receive a share of the permits equal to their share of the world population. This would surely displease Japan and Norway, and some modification would likely be necessary to recognize their current small whaling industries. Others might argue that maritime nations with historical ties to whaling, like the U.S., also should receive an extra helping. This is just haggling over who pockets the value of the permits. If the U.S. and others who oppose whaling can be induced to recognize the principle that good science should determine the permit limit, surely Japan would be willing to buy their permits in an open auction.

Lastly, we would need an auction mechanism designed to facilitate participation by all interested private groups or public agencies. Our recent experience from auctions of the broadband spectrum suggest that reasonable social scientists can learn from experience and design auction mechanisms that produce the results they are designed to yield. Economists and marine scientists would need to cooperate to divide the auction process into economic and migratory zones.

Without an upgrade in the IWC's enforcement capacity, no permit system likely will succeed. If the permits have real value the temptation to hunt without a license may require a coordinated international response. One possible tack may be to permit nations selectively to revoke trade concessions enjoyed by virtue of membership in the World Trade Organization to countries that violate their commitments to the IWC. The costs of monitoring compliance with IWC rules could be funded with a fixed surcharge on permits.

Within a permit system, those who oppose whaling on ethical or environmental grounds would have two ways to achieve their goals. Their demand for permits would raise the price of hunting whales and decrease the number taken. The permit price also becomes a visible symbol in pro-whaling nations of the cost of maintaining the industry. Whaling opponents can also use education and political action to change attitudes in nations that have a current interest in commercial whaling. By decreasing the demand for whales as a commodity, they might over time eliminate the need for the permit system.

A tradable permit system won't satisfy those who believe whaling is morally repugnant, but they must face the fact that Japan and Norway remain sovereign nations that can resume a commercial harvest at will. If such moral absolutism is put into political action by the U.S. the first casualty will be the IWC's remaining authority. The next casualty will be the whales. As a practical matter, tradable permits would represent real progress in solving a difficult common resource problem.

-- From The Asian Wall Street Journal

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