Fishery Economics

The role of economics in fishery regulation

Renewable Resources

ExamplesFisheries todayForests

CharacteristicsNatural growthCarrying Capacity

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

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)

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

t

xk

Put growth and drag together

time

Biomass(x)

x

“CarryingCapacity” (k)

xMSY

Stock that gives “maximumsustainable yield”

GrowthRate

Interpreting the growth-stock curveAKA: recruitment-stock; yield-biomass curves

x

Growth rate of population depends on stock size

low stock slow growthhigh stock slow growth

GR

dx/dt = g(x)

Introduce harvesting

x

H1

H2

H3

H1: nonsustainable extinctionH2: MSY – consistent with stock size Xb

H3: consistent with two stock sizes, xa and xc

xa is stable equilibrium; xc is unstable. Why??

xc xbxa

GR

Introduce humans

Harvest depends on How hard you try (“effort”); stock size; technology H = E*x*k

x

kEHx

kELx

H

k = technology “catchability”E = effort (e.g. fishing days)x = biomass or stock

Harvest for low effort

Harvest for high effort

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)

“Yield-effort curve”

H(E)

E

Gives sustainable harvest as a function of effort level

Notice that this looks likerecruitment-stock graph. This is different though it comes from recruitment-stock relation.

Introduce economics

Costs of harvesting effortTC = w•E

• w is the cost per unit effort

Revenues from harvestingTR = p•H(E)

• p is the price per unit harvest

Draw the picture

$

TR=p*H(E)

TC=w*E

E

MC=AC

MR$/E

E

w

Rentsto thefishery

EOAE*

Value of fisherymaximized at E*.Profits attract entryto EOA (open access)

Open Access vs.Efficient Fishery

AR

EMSY

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

Illustration of equilibria

X

SustainableCatch

Maximum Sustainable Yield (Effort EMSY)

Efficient Catch (Effort E*)○

○

Open Access Catch(Effort EOA)

○

Note: efficient catchlets biology (stock)do some of the work!

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)

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.