8 Fisheries and Aquatic Resources

• Simple fishery model

  *YT

  A) below

  
• Convert to economic terms

  
• Optimal management

  A) E*

  B) H*

  C) MSY

  
• Marginal analysis

  A) marginal revenue (MR)

  B) Marginal Cost (MC)

  C) =0

  D) >0

  
• Explain this graph:

  
• Which 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
• 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
• Fishery as a “common pool”

  A) Ei

  B) E

  C) TR

  D) EiAR

  E) fixed

  F) AR

  
• Tragedy of the Commons

  A) MR=AR

  B) declines

  C) AR = c

  
• Stock 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 individual’s profit
• Lack of property rights 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
• Example: Costa Rica

  •Illustrates unfolding of “tragedy” after introduction of technology

  that permits harvesting of unexploited fish stocks

  •Gulf of Nicoya was Costa Rica’s most important fishery during 1970s

  and 1980s, but it rapidly became overfished

  •Analyzed by World Resources Institute in Accounts Overdue (1991)
• What are options to address open access?

  • 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
• Command-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
• Charges

  • 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
• Individual Tradeable Quotas (ITQs)

  • Seemingly best of the options: limits aggregate catch to MEY level, in a cost-effective way
  • Low-cost fishers outcompete others for quotas
• World leader: New Zealand (NZ)

  
• Issues 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: ~ US$2 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
• Issues 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
  • Distribution
  • 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?

  
  

  Sustainable but Concentrated Industry:

  • Pros: Reduced environmental impact, efficient resource use, long-term viability.
  • Cons: Vulnerability to disruption, economic dependency, social equity concerns.

  Unconcentrated but Unsustainable Industry:

  • Pros: Economic diversification, local empowerment, flexibility.
  • Cons: Environmental degradation, resource inefficiency, long-term risks.
• Issues with NZ ITQ markets

  • Health of fish populations
  • Relative to newness of program, and lack of data on more than half of fish stocks, preclude firm conclusions;
  • For stocks with data: stable or increasing
  • Incentive to reduce by-catch, because system is relatively complete
• Fisheries policies in developing countries

  • Government objective: increase catch or employment, not to maximize rent
  • Subsidies are common: boats, engines, gears, fuel, ice-making equipment, fish culture
• Fishers have an incentive to craft an agreement with the following key features:

  1. All fishers agree to limit their effort so that the collective effort does not exceed EMEY
  2. The fishers agree to hire someone to ensure that no one cheats (common-pool assumption remains)
  3. All fishers receive a share of the rent that remains after paying costs of policing
• Why doesn’t this self-organization happen?

  • 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 didn’t allow cooperation or repeated interaction among fishers
• Conditions under which common property rights (CPRS) are likely to evolve

  • Attributes of users (“appropriators”)
  • Attributes of the resource
• Attributes of long-enduring CPRS (they don’t always endure)

  • Example: Meg McKean’s analysis of common lands in Japan
  • Example: Meg McKean’s analysis of common lands in Japan
  • 12 million ha of forests and uncultivated mountain meadows during 17th-19th centuries
  • 3 million ha today
  • Main finding: CPRs are not some kind of altruistic utopia
  • Rather, like a hard-nosed condominium association with cooperation and own rules
• Attributes 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
• Attributes of the resource

  • Spatial extent: sufficiently small that users can develop accurate knowledge of characteristics
  • Indicators: information on condition is regularly available and not too costly
  • Predictability: flow of goods is relatively predictable
  • Feasible improvement: not too underutilized or too overutilized
• Attributes of the users

  • Salience: significantly dependent on resource
  • Low discount rate: value future benefits at non-negligible level
  • Common understanding: of resource attributes
  • Autonomy: user group can set access and harvesting rules without being overturned by external authority
  • Prior organizational experience and local leadership: have participated in other local associations or learned how other groups have organized
  • Trust and reciprocity: expect promises will be kept
• Summary

  • There are many sustainable management points for renewable resources
  • Economic (rents) and ecological (stocks) characteristics vary among those points
  • In the absence of property rights—i.e., in open access—tragedy of commons results: rent dissipation, stock depletion
  • Various property rights options exist: not just public or individual private, but also collective (common property)
• Criteria for choice of allocation scheme

  • Effectiveness

  • Static Efficiency

  • Dynamic Efficiency

  • Fairness (Distribution of costs/benefits)

  • Incentive compatibility

  • Political feasability

  • Instrument costs and information needs