Economics of Fishery Harvests - Environmental Economics - Handouts, Lecture notes for Environmental Economics. Manav Bharti University
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dipen18 December 2012

Economics of Fishery Harvests - Environmental Economics - Handouts, Lecture notes for Environmental Economics. Manav Bharti University

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Economics of Fishery Harvests, Over Harvest of Fishery Resources, Stock Growth, Lack of Property Rights, Common Property Problem, Biological Equilibria, Critical Depensation, Harvest Level, Sustainable Yield, Maximum Sus...
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Econ 372 In-Class Work The Economics of Fishery Harvests

The Economics of Fishery Harvests Over-harvest of fishery resources can be largely attributed to the lack of property rights. That is, we have a common property problem which works exactly as Hardin described it. Unfortunately, solutions to the fishery problem may be more difficult to find than was the case for Hardin’s “commons” due to a host of complicating factors. First, we will use a simple model to derive the theoretically efficient solution, and then discuss the various factors that prevent it from being attained. Stock growth As fisheries are a renewable resource, we must be concerned with the nature of growth. Fish population growth is measured in terms of biomass – pounds of fish, and is typically characterized as following a logistic pattern. This is very similar to the “S-shaped” pattern we saw with forest growth – population increases at an increasing rate initially, then a saturation point is reached, and growth slows. Here, the slowing of growth does not occur due to the age of the stock (as was the case for the forests) but rather due to the constraints imposed by the natural environment. For a given fishery, a maximum possible stock size, known as the carrying capacity, exists due to limitations on food, and area for growth. Let X = stock size (pounds), t = time, and k = carrying capacity → Using the two graphs below, show how stock size changes over time, and how growth is therefore a function of stock size. X ∆X ∆t time X → Where are the two biological equilibria on the right graph? What is “critical depensation”, and why is a depensation model more accurate than the one graphed above?

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Harvest A catch or harvest level is said to represent a sustainable yield whenever the catch per unit of time is equal to the natural growth per unit of time. That is, if the amount of fish removed from the water per year is exactly equal to the amount of net growth of the stock, then the stock hasn’t been depleted, and this level of harvest can continue forever. → On the graph below, find the stock size that corresponds to maximum sustainable yield, andlabel it X*. Label the corresponding catch rate MSY. ∆X ∆t X Given the definition of maximum sustainable yield, when can a fish stock be considered over-exploited? What is the effect on stock of a catch rate greater than MSY? Explain. An historical goal of fisheries management has been to attain MSY. Is this efficient? Explain.

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The Gordon Model For efficient use of the resource, the goal of fisheries management should be to attain the catch level which results in the “maximum economic yield” (MEY). This is the catch level where, if maintained perpetually, net benefits from the resource are maximized. We wish to examine whether or not the MSY is equivalent to the MEY. “Effort” is some measure of energy expended by fishermen to catch the fish. Units of effort can be hours, number of boats, etc.. Catch per unit of effort (CPUE) is therefore a measure of success. Assume the following for a given fishery: 1. The ex-vessel price of harvested fish (the wholesale price the fisherman receives) is constant. 2. Total costs of harvest increase in effort at a constant rate, so that we can treat the marginal cost of effort as a constant (note: the MB of effort will not be constant). 3. CPUE is proportional to the size of stock. Therefore, for a given level of effort, a higher stock implies higher CPUE. Taking assumptions 1-3 together allows us to state that for any sustainable yield (where stock growth = catch), the corresponding stock size, effort, and net benefits are all constant. Starting at the unharvested biological equilibrium X = K in the graph below, use that above assumptions and what you know about catch to derive a function describing how total benefits change with effort expended in the fishery (plot on the other graph). ∆X $ ∆t

effort K X Given the cost assumption, add a total cost curve to the right graph. Where is the optimal level of effort?

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Given the analysis above, what can you conclude about the efficiency of MSY and the corresponding stock size, X*? With open-access to the fishery resource, can we expect profit-maximization by individual firms to bring us to the efficient solution? What happens to the efficient level of effort, and the corresponding stock size, when there is an advancement in technology which increases the efficiency of harvest? In general terms, what types of solutions are necessary to remove this inefficiency? Also list specific examples of these solutions.

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