Fisheries: The steady-state model

1. Fisheries: The steady-state model Richard T. Woodward Department of Agricultural Economics Texas A&M University r-woodward@tamu.edu Phone: 979-845-5864

2. What is an open-access good and why does it lead to inefficiencies? • An open access resource is a limited resource that appears to each individual to be limitless. • Individuals use the resource without taking into account the effect that their use has on others. • Which property right characteristic fails?

3. A full day’s work for an Indian fisherman

4. Growth in the Fish Stock (tons) Fish Stock (tons)

5. Growth in the Fish Stock (tons) Fish Stock (tons)

6. Growth in the Fish Stock (tons) Fish Stock (tons)

7. Growth in the Fish Stock (tons) Fish Stock (tons)

8. Growth in the Fish Stock (tons) Fish Stock (tons)

9. Growth in the Fish Stock (tons) Natural Equilibrium Fish Stock (tons)

10. a. Suppose there are no fishermen in the lake and the lake's initial stock is one ton. Approximately what would be the stock in each of the next 5 years? b. Approximately what would be the stock after 100 years (i.e., what is the biological equilibrium)?

11. When fishing begins, the growth is taken out (harvested) instead of adding to the stock in the next period Growth in the Fish Stock (tons) Sustainable yield (Y(E0)) Fish Stock (tons)

12. Growth in the Fish Stock (tons) More effort Y(E1) Y(E0) Fish Stock (tons)

13. Growth in the Fish Stock (tons) Medium effort level  high harvests High effort level  low harvests Low effort level  low harvests Y(E3) Y(E2) Y(E1) Y(E0) Y(E4) Fish Stock (tons)

14. Now assume that one boat comes into the fishery after it has reached its biological equilibrium. This boat can, in any given year, harvest 40% of the stock. What would be the stock after harvests and growth next year (assume harvests and growth take place simultaneously). • Approximately what would the stock be after 4 years?

15. 2 boats can harvest 60% of the stock. • 3 boats can harvest 70% of the stock. • Approximately what would the stock be after 4 years?

16. Maximum Sustainable Yield (MSY) Sustainable Harvests (tons) Quantity of Fishing Effort

17. Sustainable Revenue ($’s) Revenue Quantity of Fishing Effort

18. Benefits and Costs of Fishing Effort ($’s) Costs Revenue Quantity of Fishing Effort

19. Benefits and Costs of Fishing Effort ($’s) Costs Sustainable Resource Rents Revenue Quantity of Fishing Effort

20. Costs Benefits and Costs of Fishing Effort ($’s) MR = MC R(Ee) Rents C(Ee) Revenue Ee Quantity of Fishing Effort

21. Rent elimination in an Open Access Fishery(a.k.a The Tragedy of the Commons) Costs Benefits and Costs of Fishing Effort ($’s) Revenue Ee Eo Quantity of Fishing Effort

22. Costs Benefits and Costs of Fishing Effort ($’s) Rents Revenue Ee Em Eo Quantity of Fishing Effort

23. Example

24. The Gulf of Nicoya, Costa Rica

26. Limiting the season or otherwise making fishing more difficult (e.g., unreasonable restrictions on equipment or very short open seasons) Solutions to the “Tragedy of the Commons”

27. Inefficiently high Costs Benefits and Costs of Fishing Effort ($’s) Efficient Costs Waste Revenue Em Ec Quantity of Fishing Effort

29. Limiting the season or otherwise making fishing more difficult Taxing effort Solutions to the “Tragedy of the Commons”

30. Benefits and Costs of Fishing Effort ($’s) Costs after Tax Costs Tax Revenue Revenue Ee Em Ec Quantity of Fishing Effort

31. Limiting the season or otherwise making fishing more difficult Taxing effort Establishing common ownership over the fishery (fishery cooperatives, 200 mile limit) Individual transferable quotas Solutions to the “Tragedy of the Commons”

32. Costs Benefits and Costs of Fishing Effort ($’s) Rents Revenue Effort level determine by the group or otherwise limited Quantity of Fishing Effort Ee

33. Uncertainty (People don’t trust other people’s estimates) Politics Enforcement The simple models don’t describe a complex world Bycatch Why is Fisheries Management so Difficult?

34. The Problem of Bycatch

35. World Fish Utilization

37. Summary • Biological growth and biological equilibrium • MSY, MEY, and open-access equilibrium • Open access  Common property • Efficient policies: taxation, establishing ownership over the resource, ITQ’s • Inefficient policies: making life difficult for fishermen • Fisheries management is difficult, complicated and important!