AGEC 604 Natural Resource Economics
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1 AGEC 64 Natural Resource Economics Photo NOAA Fishery Management Issues Fisheries Renewable Resource Whose Stock can be Continuously Replenished Renewable but exhaustible Example of common property resources Biological dimension Growth G(S) Biological Growth Model S S* Fish Stock Four Segments Population growth is negative Population growth increases as population increases Population growth decreases as population increases Population growth is negative S _ 1
2 Equilibriums Equilibriums Natural Equilibrium S _ Stable Minimum viable population S Unstable Growth G(S) S S* S _ Fish Stock Sustainable Yield Catch Level is Sustainable Whenever it Equals the Growth Rate of the Population For a given population (x axis) sustainable yield given by the y axis Maximum Sustainable Yield (MSY) is G(S*) Population level which yields the maximum growth hence catch is S* Growth G(S*) S S* S _ Fish Stock Static Efficient Sustained Yield Catch Level Which if Maintained Perpetually Would Produce the Largest Annual Net Benefits Ignores discounting Assumptions Price of fish is constant MC of a unit of fishing effort is constant Amount of fish caught per unit of effort expended is related to the fish population Effort Catch All Term 2
3 Graphically Benefits/ Costs Tangent Line Total Costs (TC) E e E m Total Benefits (TB) Quantity of Fishing Effort Net Benefits - Distance Between TC and TB Lines Maximized at E e Maximum sustainable yield (MSY) at E m Efficient population > max. sustainable yield population Technological Change Rotates TC Dynamic Efficient Solution Maximize Present Value of Net Benefits Introduces discounting Impact - moves use towards today Efficient level of effort increases beyond that suggested by the static efficient sustained yield Corresponding decrease in population Population Level Relationship Know static largest population Indeterminate between MSY and dynamic Most likely static > MSY > dynamic Market Allocation Open Access vs. Sole Owner Tangent Line R(E e ) Total Costs (TC) C(E e ) Total Benefits (TB) E e E c Effort MC MR AR Effort 3
4 Summary Sole Owner Equilibrium at point MC = MR at E e Realizes economic rents of R(E e ) C(E e ) Open Access Fisheries Equilibrium at AR = MC at E c Economic rents are dissipated Caused by the open access nature of the fishery Number of Fishermen Total Catch Marginal Catch Example Average Catch MR AR MC 7 12 Number of Fishermen Externalities Contemporaneous Borne by the current generation Dissipates economic rents Too much effort to catch too few fish and cost is substantially higher than with sole ownership Intergenerational Over fishing lowers the population less fish for future generations Open Access Results in Overexploitation 4
5 Policy Alternatives Market Allocation Inefficient How to correct Aquaculture Raise the Real Cost of Fishing Tax Effort Individually Transferable Quotas International Aspects Enforcement Aquaculture Idea Common property aspects cause the inefficiency so privatize the the fishery Two types Fish farming Similar to raising other animals Trout, catfish, salmon, crayfish Privatize beds in open waters Works if species is not very mobile oyster beds Give a section of the ocean bed to fishers Raise the Real Cost of Fishing Idea Use regulations to increase the total cost of fishing Rotate TC curve until it intersects total benefits at E e Regulations Restrict or Constrain Effort Limits on technology, time, equipment etc. Problems May protect fish population but does not address the incentives of the fishermen 5
6 Tax Effort Dual Role Influence level and composition of effort Rotate TC curve until you get at E e Means of offsetting any adverse effects on the distribution of income Capture rent by being at E e Individually Transferable Quota s Two Types Quota on number of boats or licenses Quota on the number weight of fish caught Efficient Quota Quota entitles the holder to catch a specific number or weight of fish Total amount of all quotas equals efficient catch E e Quota s must be freely transferable Distributional Aspects Auction quotas vs. give to current fishermen International Aspects and Enforcement International Aspects Open aspects not only within but between countries Treaties limit fishing 2 mile limit Enforcement Define polices with enforcement in mind Enforcement is expensive Argument for private property 6
7 7
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