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Basic Bioeconomics Model of Fishing

Basic Bioeconomics Model of Fishing. Objectives of lecture. Introduce you to basic bioeconomic analysis; Introduce you to game theoretic applications to the study of shared fish stocks. Catch per unit effort.

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Basic Bioeconomics Model of Fishing

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  1. Basic Bioeconomics Model of Fishing

  2. Objectives of lecture • Introduce you to basic bioeconomic analysis; • Introduce you to game theoretic applications to the study of shared fish stocks.

  3. Catch per unit effort • Catch per unit of fishing effort (CPUE) is the total catch divided by the total amount of effort used to harvest the catch. • CPUE = c/E

  4. Global catch and effort 25 90 80 20 70 60 Catch 15 50 Catch (million tonnes) Effort (GW or watts x 109) 40 10 30 20 5 10 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 Year FAO Fisheries Statistics *Effective effort indexed on 2000 based on average 2.42% increase annually

  5. Global catch and effort 25 90 80 20 70 60 Catch 15 50 Catch (million tonnes) Effort (GW or watts x 109) 40 10 30 20 5 Effective effort* 10 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 Year Watson et al. (2012) *Effective effort indexed on 2000 based on average 2.42% increase annually

  6. Classical Management Problems • Overfishing; • Overcapacity; • Low or negative profits. • Can you predict the above using only cpue and/or fishing mortality models? Nope! • Bioeconomic models needed to predict these results!

  7. These undesirable outcomes are the result of Individually Rational, but Non-cooperative Behavior

  8. Issues in fisheries economics • Fish as natural capital in a broad sense; • Fish as common property resource; • Externalities  Tragedy of the commons   Private property; • Need for regulation; • Decision making over time.

  9. Fish as natural capital in a broad sense • The natural environment contains the natural resources essential to life on earth; • Natural resources provide inputs to our economic system; • By and large economists see natural resources as similar to human made capital.

  10. Economic efficiency and Bioeconomics

  11. Economic efficiency • Maximum profit subject to sustainability; • Profit = Total Revenue – Total Cost; • With economic efficiency, profit is maximized.

  12. A static single species model • Fisheries biology – the logistic model; • The optimal harvest – equilibrium catch; • The maximum sustainable yield; • Sustainable yield as a function of effort; • Max Profit= max(TR-TC):=Maximum Economic Yield; • Profit=TR-TC=0:=Bionomic equilibrium.

  13. MSY Bionomic equilibrium (BE) Total cost of fishing effort (TC) MEY TR & TC ( $) Max. rent Total Revenue (TR) E1 E2 E3 Fishing effort (E) The Basic Bioeconomic model Gordon Schaefer bioeconomic model

  14. Bioeconomic Models • (1) Biological Model: Net annual change of biomass = Growth + Recruitment – Nat. Mortality – Catch (2) Economic Model: Net annual revenue = Sales income - Cost

  15. R = pH – cE Schaefer Catch Equation: H = qEx (Highly Dubious!) Therefore R = (pqx – c) E Bionomic Equilibrium: Under open access, fishery reduces the stock level x until R = 0, i.e., x = c/pq Predictions: Zero rents; overfishing ( if c/p low).

  16. Numerical example: Bo = 1,000,000 t q = .001 / vessel yr c = $ 500,000 / vessel yr Price p ($/tonne) x (Bionomic Eq.) 500 1,000,000 t 1,000 500,000 t 5,000 100,000 t What is Bionomic Equilibrium?

  17. How to Fix It? • TACs? • Gear Regulations? • Limited Entry? • Vessel Buy-backs? • Quasi-property rights through individualized (or community) quotas; • MPAs; • Taxes.

  18. Bioeconomic modeling • The objective of fisheries management: • Conservation of resources through time; • Economic viability and profitability; • Social objectives.

  19. Economic rent/profit • Total revenue = price*harvest (V). • Total cost = unit cost of effort* effort (C). • Economic rent = V – C.

  20. Dynamic bioeconomic model • Discounted economic rent (V-C) through time to obtain the discounted value of the economic benefits from the fishery.

  21. Decision making over time • Natural resource (NR) use involves decision making over time: • How much oil or gold should be extracted from a mine this year, how much next year, etc? • Should salmon on the west coast of Canada be harvested intensively this year or not at all? • Time is important because the supply curve of NRs are always shifting due to: • Depletion of non-renewable resources and • biological and physical changes in renewable resources.

  22. Hence, a dynamic rather than a static analysis is required to analyze natural resource use in most cases; • Interest or discount rates are a crucial link between periods in dynamic models of NR use; • Discount rate vs. discount factor; • Present value vs. current value. • Introduce your quiz!

  23. Thank for your attention

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