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Fisheries and Aquatic Resources

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Fish growth is an instantaneous, logistic function of fish stock ... 1974-demersal. 1990-all. 1986- 32 species. Year; species. Chile. Canada. Iceland. New Zealand ... – PowerPoint PPT presentation

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Title: Fisheries and Aquatic Resources


1
Session 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
2
Allocating Scarce Resources the Fisheries
  • Optimal fisheries management
  • Tragedy of the Commons
  • Regulation of public fisheries
  • Common property resources

3
1. 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

4
Convert 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

5
Optimal 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

6
Marginal 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

7
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8
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

9
2. 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

10
Tragedy 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

11
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12
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
    individuals profit

13
Market 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

14
Example 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
16
COD
  • Cod in Atlantic Banks outside Canada richest in
    the World
  • Crashed 1992
  • 30 000 fishermen unemployed
  • No sign of recovery after 10 years!

17
Iceland 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

18
3. Regulation of public fisheries
19
Fisheries 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

20
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

21
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

22
ITQs
  • 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)

23
CHARACTERISTICS OF SOME ITQ FISHERIES
24
CHARACTERISTICS OF SOME ITQ FISHERIES
25
World 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

26
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 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

27
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
  • 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?

28
Fisheries 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?

29
4. 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?

30
Common 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

31
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

32
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 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)
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