1. Renewable, open-access resources: fisheries
Econ 1661 Review Section
March 4th, 2011
Robyn Meeks

2. Plan Review renewable resources
If there’s time, we will review a few concepts from first half of course.
Please note that an exam review will be held on Saturday 5th March from 12 to 130 pm in Room L382.
If you have questions you want addressed in review, Liz.

3. Renewable, open-access resources outline
Renewable resources
Open-access
Biological aspects of fisheries
Efficient allocations: fisheries
Issues of open-access in fisheries
Public policies available

4. Renewable resources Open-access vs. common property
Property rights
Absence of well-defined property rights
Communal, but well-defined
Access
Free and open to all (no one can be excluded)
Identifiable community of users (can exclude others and regulate use) (Berkes et al., 1989)
Examples
(See Teitenberg for more examples)
certain fisheries
some forests
traditional communal surface water irrigation systems
lobster stocks in Maine protected through informal arrangements
We are looking at open-access fisheries

5. Biological dimension of fisheries
Logistic Growth Curve with Harvest
natural equilibrium (Scc)
the population size that would persist in the absence of outside influences
stable
“carrying capacity”
minimum viable population (SMVP)
level of the population below which growth is negative
unstable
below this population the species could become extinct
critical depensation
Population growth increases as population increases
Population increases lead to eventual decline in growth

6. Biological dimension of fisheries
Logistic Growth Curve with Harvest
sustainable yield
Population for which catch level = growth rate of population
This can be maintained
maximum sustainable yield (SM)
population size that yields the largest catch that can be perpetually sustained
maximum sustainable yield = maximum growth
Population growth increases as population increases
Population increases lead to eventual decline in growth 6

7. Few additional points on biological dimension
Very small and very large populations generate small rates of growth
One population will have the greatest possible annual growth rate (maximum sustainable yield)
Except for at the stock maximum, equilibrium at any desired yield can be achieved through 2 different levels of fishing effort (high and low)

8. Recall : Static Efficiency
To achieve static efficiency (single time period), undertake policy to the point at which marginal benefits equal marginal costs
Marginal Benefits and Marginal Costs
Total Benefits and Total Costs
Marginal Benefits
Total Benefits
Net Benefits
Marginal Costs
Total Costs Q* Q* 8

9. Efficient sustainable yield
We use three assumptions to simplify analysis/graphs:
price/fish constant over all catch levels
Constant MC of fishing effort
Quantity of fish caught proportional to existing stock of fish
Static vs. dynamic
For details on impact of discount rate, see Tietenberg.
Slope=MB
Efficient level of effort

10. Efficient sustainable yield
Efficient sustainable yield occurs where
MB=MC
Net benefits are maximized
Slope=MB
Efficient level of effort 10

11. Market exploitation under open access
In an open-access fishery, the rent is a stimulus for new fishermen to enter
As long as TB > TC competitors will enter the market
Under open-access, there will be an inefficient level of effort:
Effort will increase until TB=TC
Overexploitation, overcapitalization, depleted stocks
Rents dissipate entirely
Total cost
Total benefits (total revenues)
Under open access

12. Reasons for Ec:OPEN ACCESS
Contemporaneous external cost: one fisher affects another (if I catch, you can’t and vice versa)
Intertemporal external costs: take today, less for tomorrow
Does not take into account future value MUC (this is why hotelling rule for non-renewables required secure property rights)
Market on its own cannot achieve efficient result.

13. Effect of a subsidy on open-access level of effort
Total benefits (total revenues)
Total cost
Competitive equilibrium under open access
Total cost after subsidy
Level of effort under open access with a subsidy

14. What can be done? Privatization (e.g. aquaculture)
If resource is not very mobile, can contain with barriers
If species instinctively returns to identifiable location
Is efficient
In cases of open-access, regulation is possible
Traditional command-and-control
Market-based instruments
Taxes
ITQs

15. Traditional command-and-control
Examples of command-and-control regulations
Restrict # of fishers (through licensing)
Restrict amount of gear or size of fishing vessel
Limiting time periods or areas in which fishing is allowed
Restricting use of specific technologies
Imposing restrictions on types (e.g. size or gender) of fish caught
Problems
Effort can change or expand to re-capture rents
Difficult to monitor and enforce

16. Market-based instruments: tax
Goal of an efficient tax
Try to increase total cost of fishing effort
Thereby decreasing level of effort we see if the fishery
Implications
May result in the efficient level of effort
Not always equitable
Not typically liked by fishers, not commonly used in fishing sector
Effect of an efficient tax on fishing effort

17. Market-based instruments: ITQs
Individual transferable quotas (ITQs)
Tradeable right
Different ways they can be allocated, for example
Given based on historical catch
Auctioned
Quotas entitle the holder to catch a specified share of total authorized catch
Total amount of individual quotas equals the efficient level of harvest for the fishery
Fishers can freely buy and sell quotas
Net sellers are the high-cost fishers
Net buyers are the low-cost fishers

18. Comparison of taxes vs. ITQs
Certainty
Costs are certain, catch is not
Catch is certain, costs are not
Distribution of rents
Go to government
Depends on how quotas are initially allocated.
If govt wants to change stock level over time
Govt can raise tax
Govt might have to buy back permits (depending on how they are designed)

19. Additional information
I will have office hours immediately following this section (2:30-3:30) in Taubman, carrel 3.
If you haven’t yet collected your graded problem set #1, please collect it now.
Extra Office Hours:
Dominic will Hold Office Hours on Saturday from 2 to 3 pm
Liz and Gabe will hold Office Hours in Taubman Carrel 2 from 2:00-4:00pm on Sunday, March 6th.