Chapter 14
Renewable
Common-Pool
Resources:
Fisheries and Other
Commercially
Valuable Species
FIGURE 14.1 Relationship
between the Fish Population
and Growth
Underlying Assumptions
• Assumptions of the economic model are:
– price of fish = constant (price-taker)
– marginal cost = constant.
– amount of fish caught per unit of effort is proportional
to the size of the fish population.
3 Possible Solutions
• 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)
FIGURE 14.2
Efficient Sustainable Yield for a
Fishery
• Raising the real cost of fishing through
regulation is another policy option.
– Raising the marginal cost of effort results in a
lower harvest and higher stock sizes.
– While the policies may result in an efficient
catch, they are inefficient because the
efficient level of catch is not caught at the
lowest possible cost.
– Technological innovations have lowered the
cost of fishing, offsetting the increases
imposed by regulations.
Policy Options
• 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
static-efficient sustainable yield allocation
because the tax revenues represent transfer
costs and not real-resource 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.
FIGURE 14.7 Effect of
Regulation
TABLE 14.1 Countries with
Individual Transferable Quota
Systems
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.