Fisheries The steadystate model Richard T Woodward Department

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

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?

A full day’s work for an Indian fisherman

Growth in the Fish Stock (tons)

Growth in the Fish Stock (tons)

Growth in the Fish Stock (tons)

Growth in the Fish Stock (tons)

Growth in the Fish Stock (tons)

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

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)?

Growth in the Fish Stock (tons) When fishing begins, the growth is taken out (harvested) instead of adding to the stock in the next period Sustainable yield (Y(E 0)) Fish Stock (tons)

Growth in the Fish Stock (tons) More effort Y(E 1) Y(E 0) Fish Stock (tons)

Growth in the Fish Stock (tons) High effort level low harvests Y(E 4) Y(E 3) Medium effort level high harvests Low effort level low harvests Y(E 2) Y(E 1) Y(E 0) Fish Stock (tons)

• 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?

• 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?

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

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

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

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

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

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

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

Example

The Gulf of Nicoya, Costa Rica

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

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

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

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

Solutions to the “Tragedy of the Commons” • 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

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

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

The Problem of Bycatch

World Fish Utilization

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!