Fishery Resources

AREC 365: Natural Resource Economics

Douglas Mugabe
[email protected]
Outline

● Announcements and Recap

● Attributes of Fisheries

● Key Terms and Biological Dimension

● Sustainable Harvest

● Static and Dynamic Efficiency

● Public Policy Toward Fisheries

Attributes of Fisheries
● A Natural Resource - can replenish with the

passage of time (biological processes)

● Fisheries

○ Ownership structure matter

 Private property resources

 A common property resources;

 Open access–resources

• Biological Population – the size of the fish stock is determined jointly by biological
considerations and society’s actions Birth rate, growth rate and mortality (including catch)
Definition of Terms
● Define the following terms and discuss their connection to fish population

○ Fish stock and Growth rate

○ Harvest and Effort

● Stock – total amount of critters  biomass

● Natural growth rate (recruitment)

● Harvest – how many are extracted

● Effort – how hard fisherman try to harvest

Fisheries (Stock Size and Growth Rate)
Management of Fisheries
● T/F: When there is a small fish stock (biomass/size) the growth of population is low.

● T/F: With more fish, reproduction rates goes up then there is crowding effect &
competition for food and carrying capacity is reached and growth rate declines.

● We need to address the following questions.

○ What is the efficient management level of fishery?

○ What is an efficient sustainable level of harvest?

○ Is efficiency a sufficiently strong criterion to avoid extinction?

○ How well do our policies fulfill those criteria?

The Biological Dimension
● Biological dimension  relationship between growth and population of fish

● The Schaefer model (Schaefer 1954; 1957) posits an average relationship between the growth

of the fish population and the size of the fish population.

● St+1=St+(R+G-M-C);

○ St+1= Biomass of fish in one year;

○ St= Current biomass;

○ R= Biomass of new recruits in one years time;

○ G= Additional biomass due to growth of fish;

○ M = Biomass of fish that died;

○ C=Biomass from harvesting (fish catch)

Sustainable Harvest (Yield)
• Sustainable Yield - biomass that can be harvested from a fish population each year
without resulting in a decline
• MSY – the largest average catch that can
be captured from a stock under existing
environmental conditions.
• MEY - the value of the largest positive diff
between TR & TC of fishing (including cost
of labour & capital)
• MSocY - break-even (zero profit) point,
where effort is maximized in a non-loss-
making fishery
Static-Efficient Sustainable Yield: Fishery Economics
● The static-efficient sustainable yield is the catch
level that, if maintained perpetually, would produce
the largest annual net benefit.

● Assumptions of the economic model are:

○ The price of fish is constant and does not

depend on the amount sold.

○ The MC of a unit of fishing effort is constant.

○ The amount of fish caught per unit of effort

expended is proportional to fish population.

● The static-efficient sustainable yield allocation

maximizes the constant net benefit.
 Equilibria (Open access vs Economic Efficient)

● The open access equilibrium (OAE) occurs at the point

where average revenue (AR) = marginal cost (MC)

● The open access equilibrium is usually neither

economically efficient nor ecologically sustainable

● The economic efficient production level occurs where

marginal revenue (MR) equals marginal cost (MC)

● We can control harvest of fish at optimum or reduce

the fishing effort using tax or quota

Class Activity, page 302
1. Assume that the relationship between the growth of fish population and the population size
can be expressed as g=4P-0.1P2, where g is the growth in tons and P is the size of the
population (in thousands of tons). Given a price of $100 a ton, the marginal benefits of
smaller population sizes (and hence larger catches) can be computed as MB=20P-400.

a. Compute the population size that is compatible with the maximum sustainable yield.

b. What would be the size of the annual catch if the population were to be sustained at this
level

c. If the marginal cost of additional catches (expressed in terms of the population size) is
MC=2(160-P), what is the population size that is compatible with the efficient
sustainable yield.
Class Activity Answers
a. Maximum sustainable yield is obtained when marginal benefit is zero  20P-400=0

● Therefore P=20,000 tons thus MSY g=4(20)-0.1(20)2=40tons

b. The annual catch should be equal to g=40tons if population were to be sustained at this
level

c. The efficient sustained yield is when MC=MB of additional catches

● MC=2(160-P) & MB= 20P-400

● Therefore 2(160-P) = 20P-400 ,is compatible with the efficient sustainable yield.

● P=32,727 tons
The dynamic-efficient sustainable yield (DESY)
● The dynamic-efficient sustainable yield incorporates discounting.

● The DESY will equal the static-efficient sustainable yield if the discount rate is zero.

● What are the implications of higher discount rate?

○ Higher discount rates mean higher costs to the resource owner of maintaining the
stock. With an infinite discount rate, net benefits equal zero. Extinction could occur
if the growth rate is lower than the discount rate and if the costs of extracting the
last unit are sufficiently low.

● Actual fisheries differ from the standard model: Harvesting MC are typically not
constant.
Inefficient Fisheries; Open-access & Common Pool
● If the rate of harvest > sustainable yield then the stock will fall.

● If total allowable catches (TACs) are set at inefficiently high levels  inefficiency

● Open access – resources that offers unrestricted and unregulated access  overfishing

● Common Property - owned collectively by a community  overfishing

● Open access & common property - are a source of externalities

● Individuals have no incentive to consider the ultimate cost of restocking (to “save” fish).

● Contemporaneous external costs - costs imposed on the current generation from overfishing.

● Intergenerational external costs - costs imposed on the future from current stock exploitation
Class Discussion
● Discuss the implications of having a sole owner vs open access in fisheries

○ A sole owner of a fishery would have a well-defined property right to the fish and would want to
maximize his or her profits. Profit maximization will lead to the static-efficient sustainable yield. Ocean
fisheries are typically open-access resources. Thus, no single fisherman can keep others from
exploiting the fishery. Possibility of overfishing.

● Compare and Contrast forestry and fishery management

○ The economics of forest resources are very similar to the dynamic management of a fishery

○ Both forests and fisheries are renewable resources

○ The economic principles that determine optimal management are very much similar

○ The major diff between economics of forest vs fishery resource are related to biological principles

○ Forest rotation does not get harvested every season, its growth cycle is long
Class Discussion
● Consider what would happen to the static efficient sustainable yield if;

i. A technological change were to occur.

ii. Government regulation e.g a subsidy/tax

● Effects of improved technology and subsidy:

○ Lower marginal cost;

○ More annual effort;

○ A lower population level;

○ A larger annual catch;

○ A higher net benefit for the fishery

Public Policy Toward Fisheries
Policy Description
Raising the Real • Raising the MC of effort results in a lower harvest & higher stock sizes.
Cost of Fishing • Technological innovations have lowered the cost of fishing, offsetting the increases imposed by regulations.
Taxes • Tax can lead to the static-efficient sustainable yield allocation
• For fisherman, a tax represents an increase in costs.
Catch Share • Allocate a portion of the total allowable catch to individuals, communities, or cooperatives.
Programs • Individual Fishing Quotas (IFQs); Individual Transferable Quotas (ITQs); Territorial Use Rights Fisheries
(TURFs); European Common Fisheries Policy; Cooperatives & community development quotas (CDCs )
Aquaculture • The controlled raising and harvesting of fish. Fish farming - cultivating fish over their lifetime; Fish ranching -
holding fish in captivity for the 1st few years of their lives.
Subsidies and Buy • Encouraging overcapacity & overcapitalization.
Backs • Fuel subsidies, tax exemptions, fish price supports, and grants for new vessels
Exclusive • Countries bordering the sea now have ownership rights that extend 200 miles offshore. Within the 200-mile
Economic Zones: limit, the countries have exclusive jurisdiction.
200-Mile Limit • This ruling protects coastal fisheries, but not the open ocean.
Marine Protected • Areas that prohibit harvesting and are protected from other threats such as pollution
Areas and Marine • Marine protected areas are designated ocean areas within which human activity is restricted.
Reserves • Marine reserves protect individual species by preventing harvests within the reserve boundaries.
Enforcement- • Illegal, unreported, and unregulated (IUU) fishing e.g Poaching
Illegal, Unreported • Poaching can be discouraged by raising the relative cost of illegal activity, economic incentives to the local
& Unmanaged Fish community, and transition from hunting to compensation.
Countries with Individual Transferable Quota Systems

Country # of Species Covered Country # of Species Covered

Argentina 1 Italy 1
Australia 26 Mauritius 1*
Canada 52 Morocco 1*
Chile 9 Mozambique 4
Denmark 1 Namibia 10
Estonia 2 The Netherlands 7
Falkland Islands 4 New Zealand 97
Greenland 1 Portugal 1*
Iceland 25 South Africa 1*
Italy 1 United States 6
Source: Adapted from Chu, C. (2009); *Complete species list
unavailable.
Share of Aquaculture
• China has the largest capture fisheries & aquaculture production worldwide accounted
for 19.2% of global marine capture & 61.5% of global aquaculture production in 2016
(FAO, 2018)
Take Home Practice Assignment
● Self Check Exercises

○ Numbers 2; 3;4;5 and 6

● Reading Assignment

○ Example 12:2: The relative effectiveness of transferable Quotas and Traditional Size

and Effort Restrictions in the Atlantic Sea Scallop Fishery

○ Debate 12.1: ITQs and TURFs? Species, Space or Both?

○ Debate 12.2: Aquaculture: Does Privatization Cause More problems than it Solves?

○ Debate 12.3: Bluefin Tuna: Is Its High Price Part of the Problem or Part of the

Solution?
 Any Questions?

Next: Water Resources