Environmental and Natural Resource Economics 2nd ed. Jonathan M. Harris Updates for 2012 Chapter 14: Renewable Resource Use - Fisheries Copyright © 2012 Jonathan M. Harris

Figure 14.1: Species Population Growth Over Time This graph reflects population biology, not economics. It shows the typical pattern of growth of a species in a supporting environment, at first exponentially increasing then slowing to a maximum equilibrium level (this pattern is known as a logistic curve). Species that exceed the maximum will decline back to it due to limitations such as shortage of food supply. Species that fall below a critical minimum will decline to extinction. The relevance of this curve for resource economics is that all non-renewable resource exploitation must necessarily be subject to these underlying biological laws.

Figure 14.2: Species Population and Annual Growth Transforming the previous figure into a stock/annual growth format shows the same logic in terms of stock growth. An increasing population grows at first faster, then more slowly, until the natural equilibrium is reached (unless it falls below the critical minimum and negative growth leads to extinction). On this graph, we can see economic activity (harvesting) going from right to left. At first, harvesting effort actually increases stock growth rates, but after the Maximum Sustainable Yield is reached, growth rates and annual harvest decline. Extreme over-harvesting can lead to species collapse and extinction.

Figure 14.3: Total Revenues and Costs in the Fishery The economic analysis of fisheries, or similar renewable resources, derives from the previous (biological) curve. In this case harvesting effort is shown from left to right, but the same “humped” appearance of the curve indicates the rise of output to Maximum Sustainable Yield point B, followed by a fall. Multiplying the quantity of output by the market price of fish transforms the curve into Total Revenue terms. Total Costs can be shown on the same graph (here a straight line reflecting an assumption of constant marginal costs).

Figure 14.4: Marginal Revenues and Costs in the Fishery When the economic figures are transformed into marginal and average revenue terms, three possible equilibria appear. The open access equilibrium Eo results if there are no limits on entry into the fishery. The maximum sustainable yield Em is not a market equilibrium, but could be achieved by policies restricting output to MSY (quotas or fishing licenses). The economic optimum Ee can be achieved by private ownership of the fishery (as in an inland pond) or where this is not feasible (as in an ocean fishery) by regulation or by social convention (as in some traditional fisheries).

Figure 14.5: Open Access in Philippine Fisheries These actual data from Philippine fisheries show the pattern of rising and then diminishing total fishery output. It has the familiar “humped” shape, and an approximation of total harvesting costs is shown by the straight line. The maximum sustainable yield MSY and optimum economic yield MEY are identified. By the 1980s, excessive fishing effort has pushed yields below MSY, and without adequate regulation further decline is likely.

Figure 14.6: Global Fleet Capacity and Catch Rate The paradox of fisheries. As global fleet capacities have steadily risen, catch rates (measured in tons of fish per gross registered tonnage of fishing boats) have steadily fallen. Clearly this represents extreme economic inefficiency, with ever-increasing capital investment for ever-declining returns.

Table 14-1: Declining Major Fisheries in the World Selected fisheries: year maximum potential reached and decline from peak yield   Ocean Area Estimated Annual Potential (million tons) Year Potential Reached Decline from Peak Yield East Central Atlantic 4 1984 -22% Northwest Atlantic 1971 -38% Southeast Atlantic 3 1978 -53% West Central Atlantic 2 1987 -28% East Central Pacific 1988 -13% Northeast Pacific 1990 -12% Southwest Pacific 1 1991 Antarctic 0.2 1980 unavailable World 82 1999 Sources: FAO, State of World Fisheries and Aquaculture, 1997; McGinn, Safeguarding the Health of Oceans, Worldwatch Paper # 145, 1999. Many of the world’s major fisheries have been exploited beyond their maximum sustainable yield point, with the result that they have declined significantly from peak yields. For the world as a whole, maximum sustainable yield has roughly been reached, as shown in the next two graphs. According to Wordwatch Institute Vital Signs 2011, 28% of the world’s fisheries are classified as overexploited, while another 52% are fully exploited. Only 20% of stocks were considered to be moderately exploited or underexploited.

Figure 14.7: World Fish Production, Total and Per Capita, Including Aquaculture While total fish production (including aquaculture) has continued to increase, per capita production has barely increased since 1990. This is a serious concern, since fish provides an important protein source for low-income consumers. Decreased availability and increased price for fish therefore threaten nutritional adequacy in poorer countries. Often declining coastal and ocean fisheries in these countries have resulted not from their own demand, but from incursion by high-capacity commercial fishing boats from other nations under “open access” fishing regimes. Source: U.N. Food and Agriculture Organization (FAO), FAOSTAT Statistical Database, http://www.fao.org/fishery/statistics/software/fishstat/en, updated February 2011; World Watch Institute, Vital Signs Online

Figure 14.8: World Fish Production: Wild Catch and Aquaculture, 1950-2009 This graph shows that the world output of wild fish has essentially reached maximum yield. There has been no overall increase in wild catch since the late 1980s, and possibly a slight decline since 1995. Rapidly increasing production through aquaculture has kept overall output rising, but large-scale aquaculture often has seriously negative environmental effects. Source: U.N. Food and Agriculture Organization (FAO), FAOSTAT Statistical Database, http://www.fao.org/fishery/statistics/software/fishstat/en, updated February 2011World Watch Institute, Vital Signs Online