Post on 25-Dec-2015
Renewable Common-Pool Resources: Fisheries and Other Commercially Valuable Species
Too Small/Low Stock Size◦ Lower growth rate as fish can’t hook up and
reproduce◦ Birth (replacement) less than death/harvest
Growth rate declines; species becomes extinct Too Large Stock Size
◦ Food sources (plankton, biomass, other fish) too small to support large # of fish Growth rate declines
Growth rate (replacement) and size of the fish stock/pool
Schaffer model: Relationship between the Fish Population and Growth
Current Stock(t) = Previous Year Stock(t-1) + Births(t) – Deaths(t) – Harvest(t)
More succinctly◦ S(t) = S(t-1) + B(t) – D(t) – H(t)◦ But Growth (G) of the stock (excluding Harvest)
G(t) = B(t) – D(t) S(t) = S(t-1) + G(t) – H(t)
An Equation for Current Stock Size
Current Stock ◦ Depends on past year’s stock + net growth of the
stock – fish harvested S(t) = S(t-1) + G(t) – H(t)
Sustainability◦ Means keeping the stock size constant over the
time (from one year to the next)◦ S(t) = S(t-1) = S(t-2) = S(t-3) = … = S(t-n)◦ Can do this as long as G(t) = H(t)
Harvest (or catch quota = replacement (growth) rate
An Equation for Sustainability
It’s the Fish Biologists goal Maximize H(t)
Given that S(t) = S(t-1) = S(t-2) = … = S(t-n) That is find the largest size of the stock that can be
harvested/caught without reducing the size of the stock over time
Maximum Sustainable Yield
Max Sustainable Yield
Open Access Fishery◦ Let each fisherman/boat make the decision on
whether or not to “go out” Boat will “go out” if it’s revenues exceed costs
Economist Approach (tradable permits)1. Determine profit maximizing level of the
harvest/catch (H*)2. Determine the efficient number of boats for the
fishery, issue that number of licenses (L*)3. Calculate the quota per license
1. Q* = H*/L*4. Allow license holders to use or sell the license
What Else Could We Do?
The Open Access SolutionProfitable to fish as long as Tot Rev > Tot CostH(t) > G(t) so in the long-run S(t) < S(t-1) -> stock will decrease
Zero profits
Open Access Harvest
Suppose that there was a single owner of the fishery and he did not have any market power (ability to set price)◦ What would be the economically efficient level of
harvest/catch? The one that maximizes profits (marginal benefits of
consuming fish = marginal costs of catching fish)
The Economist Solution
Suppose that there was a single owner of the fishery and he did not have any market power (ability to set price)◦ What would be the economically efficient level of
harvest/catch? The one that maximizes profits (marginal benefits of
consuming fish = marginal costs of catching fish)
The Economist Solution
Comparing All 3 Options
Zero profits
Open Access Harvest
MSYEconomist
Compare◦ Open Access Fishery (Tragedy of the Commons)
Everyone who has a boat can harvest as many fish as they can catch profitably (individual)
◦ Maximum Sustainable Yield (MSY) What is the largest stock of fish that can be
sustained from one year to the next◦ Economically Efficient
Given costs/benefits – what is the efficient harvest
How do we use this to manage the fisheries (prevent extinction)
1. Open (unregulated) Fisheries (Ec)◦ Catch until total costs exceed revenues (up to
zero profits) => ATC(Q) = TotRev(Q) = P*Q 2. Maximum Sustainable Yield(MSY) (Em)
◦ Largest “harvest” that can be sustained every year (harvest = replacement rate)
◦ Biologist solution 3. Economically Efficient (Eo)
◦ Maximize Economic Value (MC(Q) = MR(Q)
3 Possible Solutions
Economist Solution
Command and Control (Regulation)◦ Set Quota for number of fish that can be caught
Ignores differences in costs/efficiency of fishermen Can lead to over capacity (too many boats, too big) Discarded catch/by-catch issues
Tradable permits (ITQs)◦ Determine optimal “harvest” and number of licenses to be issued◦ Divide quota/target by number of license = #fish caught per license◦ Auction or grandfather licenses◦ Allow owners to trade (one-year, or multi-year)◦ Multi-species/by-catch
Taxes◦ Per unit tax on the #fish caught
Policy Options
Individual Transferable Quotas (ITQs) An efficient quota system will have the
following characteristics:◦ The quotas entitle the holder to catch a specified
volume of a specified type of fish.◦ The total amount of fish authorized by the quotas
should be equal to the efficient catch level for that fishery.
◦ The quotas should be freely transferable among fishermen.
Taxes also raise the real cost of fishing, but do so in an efficient manner.◦ Unlike regulations, the tax can lead to the static-
efficient sustainable yield allocation because the tax revenues represent transfer costs and not real-resource costs.
◦ Transfer costs involve the transfer of resources from one part of society to another.
◦ For the individual fisherman, however, a tax still represents an increase in costs.
Taxes also raise the real cost of fishing, but do so in an efficient manner.◦ Unlike regulations, the tax can lead to the static-
efficient sustainable yield allocation because the tax revenues represent transfer costs and not real-resource costs.
◦ Transfer costs involve the transfer of resources from one part of society to another.
◦ For the individual fisherman, however, a tax still represents an increase in costs.
FIGURE 14.7 Effect of Regulation
Individual Transferable Quotas (ITQs) An efficient quota system will have the
following characteristics:◦ The quotas entitle the holder to catch a specified
volume of a specified type of fish.◦ The total amount of fish authorized by the quotas
should be equal to the efficient catch level for that fishery.
◦ The quotas should be freely transferable among fishermen.
Countries with Individual Transferable Quota Systems
Subsidies and Buy Backs One of management options to reduce
overcapacity.◦ Payments used to buy out excess fishing capacity
are useful subsidies, but if additional capacity seeps in over time, they are not as effective as other management measures.
Marine protected areas and marine reserves are areas that prohibit harvesting and are protected from other threats such as pollution.◦ Marine protected areas are designated ocean
areas within which human activity is restricted.◦ Marine reserves protect individual species by
preventing harvests within the reserve boundaries.