Title: Fisheries and Aquatic Resources
1Session 4
Fisheries and Aquatic Resources
John A. Dixon from materials prepared by J.
Vincent, T. Sterner, J.E. Padilla, and Marian
delos Angeles johnkailua_at_aol.com World Bank
Institute Ashgabad, November, 2005
2Allocating Scarce Resources the Fisheries
- Optimal fisheries management
- Tragedy of the Commons
- Regulation of public fisheries
- Common property resources
31. Simple fishery model
- Fish growth is an instantaneous, logistic
function of fish stock - XMSY maximum sustained yield stock
- Growth is highest
- Catch at F(X) or lower can be sustained
forever - Any catch below this amount (e.g., F1(X)) can be
generated by either of two fish stocks, one small
and one large - k carrying capacity
4Convert to economic terms
- Change horizontal axis from fish
stock (X) to fishing effort (E) - Reverses direction of axis when stock is low,
effort must be high - Change vertical axis to money
- Total revenue (TR)
- Price (P) Catch (H)
- Add total cost function
- TC Unit cost (c) Effort
- Rent TR TC
5Optimal management
- Suppose only one fisher. How much effort should
he apply? - E, where profit (rent) is maximized
- MEY maximum economic yield
- Note MEY is left of MSY
- Optimal harvest (H) is less than the MSY harvest
- But rent is larger than at MSY
6Marginal analysis
- Can show that MEY point is where marginal revenue
(MR) equals marginal cost (MC) - For the marginal unit of effort
- Marginal rent 0
- Average rent gt 0
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8Which approach conserves more fish?
- Goal of traditional fisheries management achieve
MSY - In contrast, the economist aims for MEY
- Relative to MSY, at MEY
- Fish catch is lower
- Fishing profits are higher
- Fishing effort is lower
- Fish stock is higher
- MEY more fish is conserved
92. Tragedy of the Commons Property rights and
environmental degradation
- Property rights are often not well-defined for
environmental resources - Open access e.g., no restrictions on who can
use the open seas - Result tragedy of the commons
- Economics research indicates that unclear
property rights and other institutional factors
are the fundamental causes of environmental
degradation, and not only more obvious factors
like population growth and consumption
10Tragedy of the Commons
- Now suppose users act independently and maximize
individual profit - Because fishery is common pool, MRi AR gt c at
E each user perceives that his profit will rise
if he increases his fishing effort - But if all users do this, AR declines its not
fixed in the aggregate - Users keep adding effort until E 0, where AR c
- Rent is completely dissipated, and fish stock is
severely depleted
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12Stock externality
- An individual user who adds effort beyond E
ignores an externality that his actions impose on
other users - The increase in effort causes a decrease in fish
stock - As a result, other users catch fewer fish
- In the aggregate, their profits decrease by an
amount that more than offsets the increase in the
individuals profit
13Market failure lack of property rights
- Fishery is open access fishers (or herders,
etc.) are free to use as much as they wish - No property rights no one is excluded
- Everybodys property is nobodys property
- When combined with common-pool assumption, result
is rent dissipation - Too many boats chasing too few fish
- Fishers earn only opportunity cost of labor
- In developing countries, subsistence wage
poverty
14Example Costa Rica
- Illustrates unfolding of tragedy after
introduction of technology that permits
harvesting of unexploited fish stocks - Gulf of Nicoya was Costa Ricas most important
fishery during 1970s and 1980s, but it rapidly
became overfished - Analyzed by World Resources Institute in Accounts
Overdue (1991)
15 EXAMPLE PHILIPPINES, OVERFISHED SMALL
PELAGICS 1948-1991
Source J.E. Padilla
16COD
- Cod in Atlantic Banks outside Canada richest in
the World - Crashed 1992
- 30 000 fishermen unemployed
- No sign of recovery after 10 years!
17Iceland shows the way
- World Cod catch down 75 since 1968
- 200 mile EFZ hopeful
- Private transferable quotas as SHAREs in TAC
- TAC decided by biologists
183. Regulation of public fisheries
19Fisheries regulation options
- What are options to address open access?
- Options are
- Command-and-control limit aggregate effort to
EMEY or aggregate catch to HMEY - Charge set tax on effort or catch, to eliminate
discrepancy between MR and AR - Individual tradable quota (ITQ) limit aggregate
catch to HMEY, allocate quotas to fishers, allow
them to buy and sell
20Command-and-control
- Regulating quantity of effort
- How to define Ei vessels? days? horsepower?
- Regulating quantity of catch
- E.g., fishery is closed when aggregate catch
reaches quota - Inefficient each user increases effort in order
to catch fish before the quota is filled
21Charges
- Tax on effort same problem as regulating
quantity of effort - Tax on catch easier than taxing effort (because
catch is easier to measure), but rarely done - Politically unpopular
22ITQs
- Seemingly best of the options limits aggregate
catch to MEY level, in a cost-effective way - Low-cost fishers outcompete others for quotas
- See James Sanchirico and Richard Newell,
Quota-based fisheries management (Resources,
spring 2003)
23CHARACTERISTICS OF SOME ITQ FISHERIES
24CHARACTERISTICS OF SOME ITQ FISHERIES
25World leader New Zealand (NZ)
- Diverse short-lived (squid 1 year) vs.
long-lived (orange roughy 125 years), inshore
(diving) vs. offshore (deep-sea fishing) - Introduced in 1986 26 species
- Today 45 species 85 of NZs commercial catch
- Divided EEZ into species-specific management
regions, based on populations - 1 for hoki, 11 abalone
- In 200, 275 quota markets
- Total quota based on MSY
- Individual quotas can be split, leased,
subleased, but number that a single company can
hold is limited - Monitoring and enforcement detailed reporting,
satellite tracking, on-board observers
26Issues with NZ ITQ markets
- Market efficiency
- Very active markets annual average of 1,500
quota sales and 9,300 leases through 2000 - 44 of total catch leased in 2000
- Market capitalization US2 billion
- Small medium companies use quota brokers
- large companies have quota managers on staff
- Prices have risen fisheries becoming more
profitable, especially those that were initially
overcapitalized - Monthly quota prices for given species have
converged over time
27Issues with NZ ITQ markets
- Ease of administration
- NZ regulators report greater demand for data,
less adversarial relationship - Quota values depend on information and integrity
of system - Vs. U.S. 100 lawsuits pending against National
Marine Fisheries Service - Distribution
- Big political concern with ITQs in U.S. will
ITQs hurt small-scale fishermen? - NZ 37 decline in number of quota owners 25 of
quota markets are concentrated - But most owners continue to be small or medium
cos. - Which is better sustainable but concentrated
industry, or unconcentrated but unsustainable
industry?
28Fisheries policiesin developing countries
- Government objective is typically to increase
catch or employment, not to maximize rent - Subsidies are common boats, engines, gears,
fuel, ice-making equipment, fish culture - How do such subsidies affect effort? catch?
- crowding? pollution? fishers income?
294. Common property resources Collective action
- Is there a need for government regulation?
- Fishers have an incentive to craft an agreement
with the following key features - All fishers agree to limit their effort so that
the collective effort does not exceed EMEY - The fishers agree to hire someone to ensure that
no one cheats (common-pool assumption remains) - All fishers receive a share of the rent that
remains after paying costs of policing - Why doesnt this self-organization happen?
30Common property collective action
- Actually, it does happen many examples of common
property institutions in developing countries,
and not just for fisheries - Common property ? Open access
- Long studied by anthropologists, long ignored by
economists - Our simple model predicted rent dissipation in
part because it didnt allow cooperation or
repeated interaction among fishers
31Attributes of long-enduring CPRS
- Recognition of rights to organize
- Clearly defined boundaries resource and users
- Congruence
- Appropriation rules and resource conditions
- Distribution of benefits of appropriation and
costs of rules - Collective-choice arrangements
- Individuals affected by rules can participate in
modifying them - Monitoring
- Graduated sanctions
- Conflict-resolution mechanisms
32Summary
- There are many sustainable management points for
renewable resources - Economic (rents) and ecological (stocks)
characteristics vary among those points - In the absence of property rightsi.e., in open
accesstragedy of commons results rent
dissipation, stock depletion - Various property rights options exist not just
public or individual private, but also collective
(common property)