Transactions costs as an obstacle to fisheries self-governance in New Zealand

When faced with opportunities for greater self-governance, the New Zealand fishing industry managed to make only limited progress. Why industry was unable to progress self-management more effectively remains an interesting question. This paper argues that the benefits of greater self-governance were probably less than the significant transactions costs to self-organise. The benefits were probably smaller in New Zealand than elsewhere, because reform had already reduced the costs of fisheries administration. And the transactions costs confronting industry were substantial. First, unanimous agreement was required for self-governance, which created high transactions costs. Second, the tools for private enforcement were limited. Third, policy failed to specify clearly the expectations of self-governance, so the investments in self-governance are unusually risky. The government had unrealistic expectations that self-governance would solve third-party environmental externalities as well as fishing externalities. This implied high transactions costs to negotiate with third parties, such as environmental groups. Fourth, the standards for accountability were difficult to specify. This experience identifies four key policies if devolved fisheries governance is to be promoted: non-unanimous decision-making; private enforcement; clarity on areas for self-governance; and clarity on accountability standards.