Renewable Common-Pool Resources: Fisheries and Other Commercially Valuable Species

1. Renewable Common-Pool Resources: Fisheries and Other Commercially Valuable Species

2. Growth rate (replacement) and size of the fish stock/pool • 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

3. Schaffer model: Relationship between the Fish Population and Growth

4. An Equation for Current Stock Size • 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)

5. An Equation for Sustainability • 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

6. Maximum Sustainable Yield • 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 Max Sustainable Yield

7. What Else Could We Do? • 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) • Determine profit maximizing level of the harvest/catch (H*) • Determine the efficient number of boats for the fishery, issue that number of licenses (L*) • Calculate the quota per license • Q* = H*/L* • Allow license holders to use or sell the license

8. The Open Access Solution Profitable to fish as long as Tot Rev > Tot Cost H(t) > G(t) so in the long-run S(t) < S(t-1) -> stock will decrease Zero profits Open Access Harvest

9. 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)

10. 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)

11. Comparing All 3 Options Zero profits Economist MSY Open Access Harvest

12. How do we use this to manage the fisheries (prevent extinction) • 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

13. 3 Possible Solutions • 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)

14. Economist Solution

15. Policy Options • 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

16. 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.

17. 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.

18. 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.

19. FIGURE 14.7 Effect of Regulation

20. 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.

21. Countries with Individual Transferable Quota Systems

22. 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.

23. 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.