Global Management of Whales as a Mixed Good and Shared Resource: Bargaining and Institutions

Abstract

The global management of whale species, which are here defined as an economic mixed good, is addressed by means of economic theory of bargaining and institution making. Analysis is focused on: (1) why and how it is important to take account of both (consumptive) use and non-use values when we cope with international environmental agreements (IEAs) on whales and global mixed goods; (2) the role and nature of institutions dealing with such global issues; and (3) the role of bargaining between conflicting interests as a focal feature of the institution-making process. Co-operative and non-co-operative solutions are discussed, together with instruments aimed at achieving co-operation. The study has both positive and normative implications, as far as international conventions on whales are concerned. Such institutions should internalize both ecological and economic issues. Developing the results of previous work, which argues that whale management should take into account the total value of the species in order to obtain an optimum vector of stock and harvest, a theory of two-agents bargaining is added to the picture and a normative analysis of institutions is attempted. Using natural resource economic theory, a model representing how the International Whaling Commission (IWC) currently works is attempted. The weakness, instability and possible inefficiency of the current IEA are underlined, and the paper then highlights how economic efficiency could be enhanced if monetary transfers were allowed. The ethical implications of monetary compensation are considered, together with economic efficiency. The main result is that economic models showing that optimal dynamic management is optimal only if based on total value maximization are right but useless if proper global institutions are not reformed or created. What we need is to make economic theory operational within the realm of global institutions. On the basis of the bargaining model, the conclusion is that the IWC should be reformed, by shifting the convention goals from being narrowly consumptive value-oriented to explicitly total value-oriented, that is from a 'whaling' to a 'whale' convention. As new rules are to be developed within the convention, the possibility of introducing compensatory side payments into the bargaining arena is suggested in order to increase economic efficiency with respect to a 'ban' scenario. The limits and potentialities of economics and economic instruments are thus tested with respect to the global environmental issue of whales. Finally, insights for further necessary empirical research are discussed and proposed.