Economics of Fisheries

Question 1

Draw the goods and services diagram.

Answer 1

Question 2

Where does fishing play into the economic web?

Answer 2

Common resources – They are rivals since if you catch a fish and keep that fish, that fish is no longer able to be caught and consumed by another person. However, they are not excludable, historically. Common resources are where we get overuse because there is no excludability property. Management is trying to make this excludable to make this, not an issue anymore.

Question 3

Sustainable Harvest Equation

Answer 3

Question 4

What can the sustainable harvest equation be used for?

Answer 4

Use this equation to map from our biological space to our fishing space.

Question 5

Explain the sustainable harvest diagram:

Answer 5

Think of it as the mirror image.
With a high fishing effort, you are going to have a collapse.
Intermediate level of fishing effort, you can fish at MSY
The stock will be at carry capacity if you have no fishing effort.

Question 6

What are some common management strategies?

Answer 6

1. Open Access
2. Total Allowable Catch
3. Input Controls
4. Catch Shares (Incentives)

Question 7

Open Access Equilibrium

Answer 7

anyone is free to enter the fishery and fish as much as they want

Under no management or regulation

Question 8

Explain the tragedy of the commons theory with open access equilibrium:

Answer 8

Not associated with the resource collapsing or being exploited down to nothing.

The tragedy is that the resource yields no surplus value. It is exploited to the point that is yields no excess benefit.

Question 9

Give an example of the Tragedy of the Commons with Open Access equilibrium:

Answer 9

Lantern Fish – mesopelagic species estimated biomass 90% higher than all the other biomass in the ocean.
Why don’t we fish for them? It costs a lot to get out there, lower CPUE and the market value of the species is not demanding.
The tragedy of the commons is not overuse in a biological sense but because of unfavorable conditions.

Question 10

What is the issue with open access (or common use) fisheries?

Answer 10

The resource outcome is conditional on economic parameters, which can change. If it becomes more cost-effective to go and exploit that resource or demand higher could lead to rapid over-exploitation.

Question 11

What does MEY stand for?

Answer 11

Maximum economic yield

The maximum amount of profit that can be pulled out of the system.

Question 12

When does the MEY of a fishery occur?

Answer 12

at the effort level with the highest total profits (difference between revenue and cost)

Question 12

Explain the profits curve.

Answer 12

Profits are the difference between the green curve and the blue curve. (Revenues vs net cost). Going to the highest where the slope of these two things equals.

Question 12

Why doesn’t MEY equal MSY?

Answer 12

1. effort becomes increasingly less productive (stock effect)
2. costs are increasing in effort

Question 13

Total Allowable Catch

Answer 13

First management tool used

Set an upper limit and allow fishing to occur until this limit is reached.

Question 13

Total Allowable Catch

Answer 13

First management tool used

Set an upper limit and allow fishing to occur until this limit is reached.

Question 14

If set appropriately, what can TAC achieve?

Answer 14

Biological goals

Question 14

What can TAC achieve?

Answer 14

Biological goals - If set appropriately and limited bycatch

Question 15

What is the overarching issue associated with TAC?

Answer 15

Economically this is not efficient because of human incentives. One overarching limit incentivizes people to go out as much as possible and catch as much as possible.

Question 16

What is the negative of TAC?

Answer 16

Safety
Flooding the market
Product quality.
Dynamic -> in the sense that any profit or value you extract as a company this year from the fishery will incentivize you to revest back into your equipment.

Question 17

Where do all the profits go in a TAC management system?

Answer 17

Increased costs - using more inputs than are necessary and often operating in an inefficient manner

Reduced value - Low product quality and flooding the market decreases prices received for landings.

Question 18

What are input controls?

Answer 18

Technical measures that can achieve a desired biological outcome. However, they also generally to bad economic outcomes.

Question 19

What are some examples of input controls?

Answer 19

1. Temporal restrictions
2. Gear or technology restrictions

Question 20

What is an example of Input Controls management?

Answer 20

Groundfish fishery – New England.
The prevailing management was done by days at sea. Each boat has a specific allocation.
Management was based on effort.
The clock started in terms of using your days when you left the dock. The clock ended when you got back.
Fishing grounds were far away, so fishermen invested in these giant engines to get to Georges’s bank as fast as possible.

Question 21

What is an example of Input Controls management?

Answer 21

Groundfish fishery – New England.
The prevailing management was done by days at sea. Each boat has a specific allocation.
Management was based on effort.
The clock started in terms of using your days when you left the dock. The clock ended when you got back.
Fishing grounds were far away, so fishermen invested in these giant engines to get to Georges’s bank as fast as possible.

Question 22

What does fishing effort respond to? What do people respond to?

Answer 22

biological and economic conditions

people respond to incentives.

Question 23

What have economists viewed as the solution to the tragedy of the commons?

Answer 23

Ownership
Providing excludability to the resource.

AKA Catch Shares

Question 24

Catch Shares (property right systems)

Answer 24

Generally is shares of total allowable catch – as a business owner, you get a certain amount of the TAC. Generally, not implemented in pounds but in percent and/or spatial.

Question 25

Give an example of a fishery that changed to a Catch Shares management system.

Answer 25

North Pacific Halibut:
- Originally was an open-access fishery.
- Refrigerated rail cars opened new markets and increased demand.
- Decided to move to an input control system and decided to manage season length. This led to very poor quality and safety issues.
- Finally, Catch Shares (individual fishing quotas were implemented in US and Canada in 1991 and 1995

Question 26

Once the Catch Shares system (open rights system) was in place in Canada, the outcomes were:

Answer 26

Season expands to nine months

90% of product fresh

Ex-vessel prices increase 50%

Employment down 20%

Question 27

What are the catch shares system (property rights) challenges?

Answer 27

Technical
Political
Philosophical

Question 28

Why is high-grading a challenge in catch share systems?

Answer 28

If you get a set number of points or percent of an allocation, you want to catch the best, highest marketable fish.
Example: smaller unhealthy fish were caught, you would incentivize to throw that fish back.

Question 29

Why is bycatch especially a challenge in Catch share systems?

Answer 29

To catch the higher value product but to catch the higher value, the lower value species are caught in unison.
You cannot catch the higher-value species if you hit your limit on the lower-value species. Choke species.

Question 30

What are the two main considerations with distribution in a Catch Share system?

Answer 30

1. Recent catch history
2. Vessel capacity