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

Fish Stock(tons)

Growth in the Fish Stock (tons)

Fish Stock(tons)

Growth in the Fish Stock (tons)

Fish Stock(tons)

Growth in the Fish Stock (tons)

Fish Stock(tons)

Growth in the Fish Stock (tons)

Fish Stock(tons)

Growth in the Fish Stock (tons)

Fish Stock(tons)

Growth in the Fish Stock (tons)

Natural Equilibrium

0

0.5

1

1.5

2

2.5

0 1 2 3 4 5 6 7 8 9Stock (tons)

Gro

wth

(to

ns

per

yea

r)

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)?

Fish Stock(tons)

Growth in the Fish Stock (tons)

Sustainable yield (Y(E0))

When fishing begins, the growth is taken out (harvested) instead of adding to the stock in the next period

Fish Stock(tons)

Growth in the Fish Stock (tons)

Y(E0)Y(E1)

More effort

Fish Stock(tons)

Growth in the Fish Stock (tons)

Y(E0)Y(E1)Y(E2)Y(E3)Y(E4)

Low effort level low

harvests

High effort level low

harvests

Medium effort level high

harvests

0

0.5

1

1.5

2

2.5

0 1 2 3 4 5 6 7 8 9Stock (tons)

Gro

wth

(to

ns

per

yea

r)

•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?

0

0.5

1

1.5

2

2.5

0 1 2 3 4 5 6 7 8 9Stock (tons)

Gro

wth

(to

ns

per

yea

r)

•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?

Quantity of Fishing Effort

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)

Revenue

Costs

Quantity of Fishing Effort

Benefits and Costs of Fishing Effort ($’s)

Sustainable Resource

Rents Revenue

Costs

Quantity of Fishing Effort

Benefits and Costs of Fishing Effort ($’s)

Rents

Revenue

Costs

Ee

R(Ee)

C(Ee)

MR = MC

Quantity of Fishing Effort

Benefits and Costs of Fishing Effort ($’s)

Revenue

Costs

Ee Eo

Rent elimination in an Open Access Fishery(a.k.a The Tragedy of the Commons)

Quantity of Fishing Effort

Benefits and Costs of Fishing Effort ($’s)

Rents

Revenue

Costs

Ee Em Eo

Example

0

0.5

1

1.5

2

2.5

3

0 0.5 1 1.5 2 2.5 3 3.5

Boats

$'s

Output Price = $1 Cost per boat = $0.95

Sustainable Revenue

Costs

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)

Quantity of Fishing Effort

Benefits and Costs of Fishing Effort ($’s)

Revenue

Efficient Costs

Em Ec

Inefficiently high Costs

Waste

Solutions to the “Tragedy of the Commons”

• Limiting the season or otherwise making fishing more difficult

• Taxing effort

Quantity of Fishing Effort

Benefits and Costs of Fishing Effort ($’s)

Revenue

Costs

Em Ec

Costs after Tax

Ee

Tax Revenue

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

Quantity of Fishing Effort

Benefits and Costs of Fishing Effort ($’s)

Rents

Revenue

Costs

Ee Effort level determine by the group or otherwise limited

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

0

20

40

60

80

100

1994 1995 1996 1997 1998 1999 2000

Mil

lio

n M

etr

ic T

on

s

Freshwater

Marine

91.7 92.0 93.5 93.9 87.3 93.2 94.8

Source: FAO 2000 Yearbook of Fishery Statistics: Summary tables

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!