The Problem of Overcapacity

Overcapacity of marine fishing fleets is common everywhere, leading to recommendations for the reduction of capacity. One approach, vessel buybacks, has a mixed record of success, as the remaining, licensed vessels tend over time to attain increased fishing power as a result of 'capital stuffing'. The present paper analyzes the economics of overcapacity in a common-property resource system. The main conclusion is that, unless some method of resolving the common-property problem is applied, limited success in capacity reduction will be likely over the long run. Individual transferable quotas (ITQs) and related schemes have the potential of overcoming the tragedy of the commons and can by themselves lead to a reduction in fleet capacity.