Renewable Common-Pool
Resources: Fisheries and Other
Commercially Valuable Species

Too Small/Low Stock Size
◦ Lower growth rate as fish can’t hook up and
reproduce
◦ Birth (replacement) less than death/harvest
 Growth rate declines; species becomes extinct

Too Large Stock Size
◦ Food sources (plankton, biomass, other fish) too
small to support large # of fish
 Growth rate declines


Current Stock(t) = Previous Year Stock(t-1) +
Births(t) – Deaths(t) – Harvest(t)
More succinctly
◦ S(t) = S(t-1) + B(t) – D(t) – H(t)
◦ But Growth (G) of the stock (excluding Harvest)
 G(t) = B(t) – D(t)

S(t) = S(t-1) + G(t) – H(t)

Current Stock
◦ Depends on past year’s stock + net growth of the
stock – fish harvested
 S(t) = S(t-1) + G(t) – H(t)

Sustainability
◦ Means keeping the stock size constant over the
time (from one year to the next)
◦ S(t) = S(t-1) = S(t-2) = S(t-3) = … = S(t-n)
◦ Can do this as long as G(t) = H(t)
 Harvest (or catch quota = replacement (growth) rate

It’s the Fish Biologists goal
 Maximize H(t)
 Given that S(t) = S(t-1) = S(t-2) = … = S(t-n)
 That is find the largest size of the stock that can be
harvested/caught without reducing the size of the
stock over time
Max Sustainable Yield

Open Access Fishery
◦ Let each fisherman/boat make the decision on
whether or not to “go out”
 Boat will “go out” if it’s revenues exceed costs

Economist Approach (tradable permits)
1. Determine profit maximizing level of the
harvest/catch (H*)
2. Determine the efficient number of boats for the
fishery, issue that number of licenses (L*)
3. Calculate the quota per license
1. Q* = H*/L*
4. Allow license holders to use or sell the license
Profitable to fish as long as Tot Rev > Tot Cost
H(t) > G(t) so in the long-run S(t) < S(t-1) -> stock will decrease
Zero profits
Open Access
Harvest

Suppose that there was a single owner of the
fishery and he did not have any market power
(ability to set price)
◦ What would be the economically efficient level of
harvest/catch?
 The one that maximizes profits (marginal benefits of
consuming fish = marginal costs of catching fish)

Suppose that there was a single owner of the
fishery and he did not have any market power
(ability to set price)
◦ What would be the economically efficient level of
harvest/catch?
 The one that maximizes profits (marginal benefits of
consuming fish = marginal costs of catching fish)
Economist
Zero profits
MSY
Open Access
Harvest

Compare
◦ Open Access Fishery (Tragedy of the Commons)
 Everyone who has a boat can harvest as many fish as
they can catch profitably (individual)
◦ Maximum Sustainable Yield (MSY)
 What is the largest stock of fish that can be sustained
from one year to the next
◦ Economically Efficient
 Given costs/benefits – what is the efficient harvest

1. Open (unregulated) Fisheries (Ec)
◦ Catch until total costs exceed revenues (up to zero
profits) => ATC(Q) = TotRev(Q) = P*Q

2. Maximum Sustainable Yield(MSY) (Em)
◦ Largest “harvest” that can be sustained every year
(harvest = replacement rate)
◦ Biologist solution

3. Economically Efficient (Eo)
◦ Maximize Economic Value (MC(Q) = MR(Q)

Command and Control (Regulation)
◦ Set Quota for number of fish that can be caught
 Ignores differences in costs/efficiency of fishermen
 Can lead to over capacity (too many boats, too big)
 Discarded catch/by-catch issues

Tradable permits (ITQs)
◦
◦
◦
◦
◦

Determine optimal “harvest” and number of licenses to be issued
Divide quota/target by number of license = #fish caught per license
Auction or grandfather licenses
Allow owners to trade (one-year, or multi-year)
Multi-species/by-catch
Taxes
◦ Per unit tax on the #fish caught
Individual Transferable Quotas (ITQs)
 An efficient quota system will have the
following characteristics:
◦ The quotas entitle the holder to catch a specified
volume of a specified type of fish.
◦ The total amount of fish authorized by the quotas
should be equal to the efficient catch level for that
fishery.
◦ The quotas should be freely transferable among
fishermen.

Taxes also raise the real cost of fishing, but
do so in an efficient manner.
◦ Unlike regulations, the tax can lead to the staticefficient sustainable yield allocation because the tax
revenues represent transfer costs and not realresource costs.
◦ Transfer costs involve the transfer of resources
from one part of society to another.
◦ For the individual fisherman, however, a tax still
represents an increase in costs.

Taxes also raise the real cost of fishing, but
do so in an efficient manner.
◦ Unlike regulations, the tax can lead to the staticefficient sustainable yield allocation because the tax
revenues represent transfer costs and not realresource costs.
◦ Transfer costs involve the transfer of resources
from one part of society to another.
◦ For the individual fisherman, however, a tax still
represents an increase in costs.
Individual Transferable Quotas (ITQs)
 An efficient quota system will have the
following characteristics:
◦ The quotas entitle the holder to catch a specified
volume of a specified type of fish.
◦ The total amount of fish authorized by the quotas
should be equal to the efficient catch level for that
fishery.
◦ The quotas should be freely transferable among
fishermen.
Subsidies and Buy Backs
 One of management options to reduce
overcapacity.
◦ Payments used to buy out excess fishing capacity
are useful subsidies, but if additional capacity seeps
in over time, they are not as effective as other
management measures.

Marine protected areas and marine reserves
are areas that prohibit harvesting and are
protected from other threats such as
pollution.
◦ Marine protected areas are designated ocean areas
within which human activity is restricted.
◦ Marine reserves protect individual species by
preventing harvests within the reserve boundaries.