Economics of Biotic Resources Ecosystem Structure and Function

Current Events Tough Truths from China on CO2 and Climate Limiting Carbon Dioxide Pollution by Power Plants –Would cost ~$4 billion to reduce CO2 emissions from power plants by 25% –Would save $25-$60 billion in health care costs alone –CAFÉ standards are creating jobss

Current Events Europe’s Rift on Overfishing and Subsidies As Fisheries Struggle, Debate Heats Up Over How to Help –Disasters declared in NE, Mississippi and Alaska –77% reduction in allowed harvests from NE How to Catch Fish and Save Fisheries –Solution? TURFs: Common property rights Broad Catch Limits Are Put on an Unglamorous but Essential Fish Oysters and Ecosystem Services

Econ of Ecosystem Structure –Pasture grass, timber stocks, game, fisheries (e.g. sturgeon) –Characteristics? –Concepts apply to whole ecosystems: Atlantic Forest, Vermont’s forests, Lake Champlain

Sustainable Yield Curve

Sustainable harvests and effort What is the relationship to scale?

Harvest effort and cost Where did historical harvests take place? Where are they taking place now?

Maximizing sustainable annual profit (static):

Profit maximization π = TR-TC maximum π occurs when MR = MC

Open access fishery Non-excludable, rival π = 0 –This is what happens in any competitive market What happens when harvest costs are very low? What actually happens to harvest costs relative to price over time?

Profit maximization (dynamic) To move from one point on the sustainable harvest curve to one at a lower stock, we must reduce the stock. What happens to the profit made by selling that stock?

Dynamic profit Max

When is Extinction Optimal? Open access Private ownership, but resource cheap to harvest, and grows more slowly than investments

Including the fund-service Passenger pigeons Sardines Cassowaries

Characteristics of ‘optimal’ harvest Must account for stock-flow and fund service Discounting probably not appropriate, and particularly inappropriate for fund-service component Higher stocks, lower harvests than static profit maximizing stock and harvest Must account for uncertainty

Summary

What is the relationship to Projects? Who benefits from ecosystem fund-services? Who benefits from the harvest of stock-flows? –Owned (e.g. farmland, forestland) –Unowned (e.g. fisheries, game) Who deserves profits from harvest of stock- flows? Who should pay for provision of ecosystem services?

Natural dividend from renewable resources