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Fishery Economics

Fishery Economics. The role of economics in fishery regulation. Renewable Resources. Examples Fisheries  today Forests Characteristics Natural growth Carrying Capacity. Motivation.

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Fishery Economics

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  1. Fishery Economics The role of economics in fishery regulation

  2. Renewable Resources • Examples • Fisheries  today • Forests • Characteristics • Natural growth • Carrying Capacity

  3. Motivation • Group Project: Otters eating lots of shellfish, south of Pt. Conception. Marine Fisheries Service considering removing otters, and you are doing a CBA on the policy. What is the damage the otters are causing and thus the value of restricting them to the north of Pt. Conception? • See http://www.bren.ucsb.edu/research/2001Group_Projects/Final_Docs/otters_final.pdf

  4. Some terms we will use • Stock – total amount of critters -- biomass • Natural growth rate (recruitment) – biologic term • Harvest – how many are extracted (flow) • Effort – how hard fisherman try to harvest (economic term)

  5. Simple Model of Fish Biology • Exponential growth • With constant growth rate, r: • = rx  x=aert • Crowding/congestion/food limits (drag) • Carrying capacity: point, k, where stock cannot grow anymore: x ≤ k • As we approach k, “drag” on system keeps us from going further • Resource limitations, spawning location limitations Stock, x t k x t

  6. Put growth and drag together Biomass (x) “Carrying Capacity” (k) Growth Rate xMSY x time Stock that gives “maximum sustainable yield”

  7. Interpreting the growth-stock curveAKA: recruitment-stock; yield-biomass curves Growth rate of population depends on stock size low stock  slow growth high stock  slow growth GR dx/dt = g(x) x

  8. Introduce harvesting H1 GR H2 H3 x xc xa xb H1: nonsustainable  extinction H2: MSY – consistent with stock size Xb H3: consistent with two stock sizes, xa and xc xa is stable equilibrium; xc is unstable. Why??

  9. Introduce humans • Harvest depends on • How hard you try (“effort”); stock size; technology • H = E*x*k k = technology “catchability” E = effort (e.g. fishing days) x = biomass or stock Harvest for high effort H kEHx kELx Harvest for low effort x

  10. Will stock grow or shrink with harvest? • If more fish are harvested than grow, population shrinks. • If more fish grow than are harvested, population grows. • For any given E and k, what harvest level is just sustainable? • This can be solved for the sustainable harvest level as a function of E: H(E) • Solve (1) first for x(E) • Substitute into (2) to get H(E) Where k*E*x = g(x) (1) and g(x) = H (2)

  11. “Yield-effort curve” Gives sustainable harvest as a function of effort level H(E) Notice that this looks like recruitment-stock graph. This is different though it comes from recruitment-stock relation. E

  12. Introduce economics • Costs of harvesting effort • TC = w•E • w is the cost per unit effort • Revenues from harvesting • TR = p•H(E) • p is the price per unit harvest • Draw the picture

  13. Open Access vs. Efficient Fishery TC=w*E $ Rents to the fishery TR=p*H(E) E $/E Value of fishery maximized at E*. Profits attract entry to EOA (open access) MR AR w MC=AC E* EOA E EMSY

  14. 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 (should get MR<AR) • So fishers enter until AR = AC ( TR = TC) • But even open access is sustainable • Though not socially desirable • What is social value of fish caught in open access fishery? • Zero: total value of fish = total cost of catching them

  15. Illustration of equilibria Maximum Sustainable Yield (Effort EMSY) Sustainable Catch ○ ○ Efficient Catch (Effort E*) ○ Note: efficient catch lets biology (stock) do some of the work! Open Access Catch (Effort EOA) X

  16. Mechanics of solving fishery pblms (with solutions for specific functions) • Start with biological mechanics: • G(X) = aX – bX2 [G, growth; X stock] • Harvest depends on effort: H=qEX • Sustainable harvest when G(X) = H • First compute X as a function of E • Then substitute for X in harvest equation to yield H(E) which will depend on E only • Costs: TC = c E • Total Revenue TR=p*H(E) where p is price of fish • Open access: find E where TC=TR • Efficient access: find E where • Marginal revenue from effort (dTR/dE) equals • Marginal cost (cost per unit of effort)

  17. Example: NE Lobster Fishery • Bell (1972) used data to determine catch (lb. lobsters) per unit of effort (# traps), using 1966 data • H(E) = 49.4 E - 0.000024E2 • Price is perfectly elastic at $0.762/lb. • Average cost of effort: $21.43 per trap • Open access equilibrium: TC = TR • E=891,000 traps; H=25 million lbs. • Compare to actual data: E=947,000;H=25.6 million lbs. • Maximum Sustainable Yield • E=1,000,000 traps; H=25.5 million lbs. • Efficient equilibrium • E=443,000 traps; H=17.2 million lbs.

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