The economics of fishery management

The role of economics in fishery regulation

Simple model of fish biology

time

Biomass(x)

x

“CarryingCapacity”

xMSY

Stock that gives “maximumsustainable yield”

Interpreting this curve

x

• Growth rate of population depends on stock size

low stock slow growthhigh stock slow growth

• Also “sustainable yield curve”• MSY

Introduce humans

Harvest depends on Harvest “effort”, stock size, and technology

x

kEHx

kELx

H

H = k*E*xk = technology “catchability”E = effort (e.g. fishing days)x = biomass or stock

Harvest for low effort

Harvest for high effort

Does stock grow or shrink?

If more fish are harvested than grow, population shrinks. If more fish grow than are harvested, population grows.For any given E, what harvest level is just sustainable?

Where k*E*x =

“Yield-effort curve”

H(E)

E

Gives sustainable harvest as a function of effort level

Introduce economics

Costs of harvestingTC = w*E • w is the cost per unit effort

Revenues from harvestingTR = p*H(E) • p is the price per unit harvest

Draw the picture

$

TR=p*H(E)

TC=w*E

E

MC

MR$/E

E

w

Rentsto thefishery

EOA

E*

Value of fisherymaximized at E*.Profits attract entryto EOA (open access)

Open access resource

Economic profit: when revenues exceed costs (not accounting profit)Open access creates externality of entry.

I’m making profit, that attracts you, you harvest fish, stock declines, profits decline.

Entrants pay AC, get AR (not MC, MR)So fishers enter until AR = AC

But, even open access is sustainableThough not socially desirable

Why manage fisheries?

Otherwise, open access: externality of entry drives value of fishery to 0.May drive to extinction (or economic extinction)Non-extractive values ignored.Technology may destroy habitat, harvest individuals that should not be harvested, etc (another consequence of open access)Technology may improve, so management must keep up.

How manage fisheries?

Depends largely on characteristics of fishery

Biology & status of stocksHistory of extractionCommercial vs. subsistence, status of stocksOther values (non-extractive, recreational)

May failures, some successes

Some management alternatives

Harvest quotas (for whole fishery)Individual transferable quotas (ITQ, IFQ)Marine reserves (area closures)Season closures Ex-vessel tax (few)Regulated entry (licenses)Regulated efficiency (gear)Effort tax (few)

Small-scale fisheries

Many small, multi-purpose boatsDifficult to enforce regulationsLocal management most successful

Kinship rights, social pressure

Mainly limited entry, also gear, some area closures, etc. Often self-imposed.New entrants, technology, & markets are attractive; can be destructive

Baja CaliforniaBaja California

History of cooperativas

Pre-1991: “Reserved Species Regime”Lobster, abalone, etc. only harvested by fishing cooperatives (A property right)

Post-1991: “Concession Regime”Gave access rights for 20 years in particular areas (benthic) or by boats (pelagic) (Another form of property right)

Post-2000: “National Fishing Guide”Info on catch, status, management of 287 marine species (Pacific) – each fishery different.

Spiny Lobster Fishery

Lobster

0

500

1,000

1,500

2,000

2,500

1978 1982 1986 1990 1994 1998 2002

M T

ons

• Maximum Sustainable YieldMaximum Sustainable Yield

• No increase in Fishing EffortNo increase in Fishing Effort

Abalone Fishery

Abalone meat

-

200

400

600

800

1,000

1,200

1,400

1978 1982 1986 1990 1994 1998 2002

M T

ons

• OverfishedOverfished• Quota systemQuota system• Reference point:Reference point:

Bt > Bt-1

• No increase in fishing effort

-116.00 -115.60 -115.20 -114.80 -114.40 -114.00 -113.60 -113.20

26.20

26.40

26.60

26.80

27.00

27.20

27.40

27.60

27.80

28.00

28.20

28.40

28.60

28.80

29.00

Pacific Ocean

Fishing Areas - Cooperativas

PNAPNA

BPBP

PURPUR

BTBT

EMANEMAN

CSICSI

LRLR PROGPROG

PAPA

Cooperativas

Often devise own rules – social pressure to abide.Have exclusive rights to areas, self-enforce.Federal management supercedes - bargaining process with feds to determine management

Individual Transferable Quotas

Regulator sets “total allowable catch” (TAC).Distributes quotas (auction, sell at fixed price, give away based on historical catch, or equal distribution)Quota rights can be traded.Some systems, buy right to harvest in perpetuity (as % of TAC)

ITQs and property rights

Prior to 1976 coastal nations did not have rights to marine resources in “high seas”

1976 Magnuson Act & Law of the Sea: Grants rights to coastal nations to marine resources 200 miles from shore.

But how to regulate within a country?ITQs effectively secure property rights to fish in the ocean.

Lack of property rights is what causes problems with open access

Potential problems with ITQs

Allocation of quotas?High-grading incentiveEnforcement & administrative costsMost quotas held by largest firms“privatizing the oceans”?How set TAC in first place?

Alaskan Halibut

Prior to adoption, season 1 dayPoor fish quality, excessive investment for harvest, frozen most of year.

Adopted 1995: free allocation to fishing vessels based on historic catch.Debit cards, fish tickets for enforcementA success, longer season, higher profits, more fish, bigger/better quality fish