|
1. Background of Fisheries
- Discussion is about fish, but it also applies to wildlife too.
- Open access resource
- Tragedy of the Commons
- Fishermen have the incentive to catch as many fish as possible
- If they conserve on fishing, then another fisherman will catch those fish
- Fishermen may cause fish populations to decline and even become extinct
- Technological improvements may have resulted in decline of fish populations
- Commercial trawlers - ships that use nets to scrape the bottom of the lake or ocean
- Catches almost everything
- Bycatch - then workers throw out the fish and wild life they do not want or is illegal to catch
- Catching the fish may have harmed it, thus is eventually dies when tossed back into the water.
- Regulations prevent fishermen for catching too small of fish and they throw them back.
- Supposedly trawling has converted the ocean floors in the Gulf of Maine into watery deserts.
- Over investment into boats and fleets
- Declining fish populations may cause fishermen to invest in more boats
- Thus, more boats catching more fish cause a more rapid resource depletion
- Sonar
- Use technology to find where the fish are
- The boats hone in and start catching
- Demand for fisheries and wildlife
- Demand for wildlife has a big impact on which species of fish is caught
- 40% of the fish catch is eaten by people
- Developed and developing countries eat fish for protein
- Culture has an impact
- 33% of the fish catch is used for animal feeds or food for aquacultures
- Aquacultures - fish farms
- Pens are constructed in the ocean
- Large amounts of fish are raised for harvest
- Uses large amounts of feed and fertilizers
- Fertilizers help algae and plant life grow faster, so fish have more food
- May damage the eco-system
- Some farmers use large tanks on land
- Then the tanks require lots of water
2. Biological resources grow over time, thus the supply is the interaction of net birth rates and harvest rates
- Renewable resources have two features.
- Resource amount is determined by the biological growth and harvest rates.
- Biological growth adds fish
- Harvest removes fish
- Market structure influences how much resources are used.
- If it is open-access, then the resource is over-harvested.
- A competitive market may also over harvest the fish
- A monopoly will lower its harvest, causing market price and profits to increase
- A monopolist again conserves a resource
- Graph
- Vertical axis - the growth rate of a fish species
- net growth rate - births minus deaths
- denoted as f(X)
- Does not include harvest
- Horizontal axis - the total population
- Denoted as X
- k is called the carrying capacity
- The environment cannot sustain this species beyond this amount
- Before the peak, fish rapidly grow
- Plenty of food and space for the species
- After the peak, the fish are depleting the environment
- Food is more scarce and less space for the species
- Economists use the logistic function
- dX/dt = f(X) = aX – bX 2
- a and b are parameters
- Maximum value
- Set F(X) to zero
- f(X) = X (a - bX) = 0
- X min = 0
- X max = a / b
- Thus, k = a / b
- Substitute b = a / k into F(X)
- dX/dt = f(X) = aX – aX 2 / k
- or f(X) = aX (1 - X / k)
- Fishermen over harvest the fish
- Set the fish population to k
- If the harvest rate > maximum population growth rate
- Fish are harvested to extinction
- Harvest rate is denoted by H
- Example
- Round #1
- Set fish population to 100
- Harvest rate is 10
- Round #2
- The fishermen removed 20 fish, but the fish population grew by 0
- We have 80 fish
- Round #3
- The fishermen removed another 20 fish, but the fish population grew at 5
- Thus, the fish population is at 65
- Round #4
- The fishermen harvested another 20 fish, but the fish population grew by 7.
- Thus, the fish population is at 52
- As you can guess, the fish population will be driven to zero as fish are over harvested
- Maximum Sustainable Yield (MSY) - the maximum amount of fish that can be caught will depleting them
- The Harvest line intersects the maximum of the growth rate of fish
- Example shows the maximum sustainable population is 50
- 8 fish are caught each period and the net birth rate is 8
- Note - if the fish population is at 100, then the fish population drops to 50
- If the fish population is below 50, the fish are harvested until extinction
- The net growth rate of fish is always lower then the harvest rate
- Setting the harvest rate below the Max. Sustainable Yield (MSY)
- We have two potential outcomes
- High-density fish populations, i.e. the stable equilibrium
- Low-density fish population, i.e. the unstable equilibrium
- High-density fish population
- Stable equilibrium
- If fish population is at k, or 100, then the fish population drops to 80 fish
- Harvest rate > net birth rate
- If fish population is greater then 20, then fish population climbs to 80 fish
- Net birth rate > harvest rate
- Unstable equilibrium
- If we are exactly at 20, then the fish population stays at 20.
- A small random event can cause the fish population to surge or decline
- A small increase cause the fish population to grow to 80
- A small decrease cause the fish population to be harvested to extinction
- Harvest rate > net birth rate
3. Adding the economics to fish harvesting
- Harvest depends on effort and the fish population
- H = G(X,E)
- This is a production function
- Technically, there are time subscripts, but have been omitted to make equation nicer
- Harvest is H
- G is a function and assume it is a straight line
- X is population of fish
- E is effort
- Effort - fishermen need boats, equipment, nets, bait, etc.
- The more effort a fisherman expends, the higher the harvest
- i.e. dH / dE > 0
- Fish Population
- The higher the fish population, the more the fishermen catch
- i.e. dH / dX > 0
- Shown below in diagram
- It is possible to have the same harvest rate, but different levels of fish population and effort
- In the graph, we have the same harvest levels
- However, the fish populations are different
- Effort and fish population interact
- X 2 is a higher fish population that would require less effort
- X 1 is lower fish population that would require more effort
- More difficulty to catch fish
- The steady state equilibrium
- H = f(X)
- The harvest rate equals the net birth rate of the fish
- Fish population is at a steady state
4. Supply functions for renewable resources
- Now we add prices and we have a profit function
- Each fish has a price of P
- Each unit of effort costs c
- Profit function is: Total Revenue (TR) - Total Cost (TC)
- profits = P H - c E
- profits = P G(E, X) - c E
- The total revenue function is a parabola because the more effort, the lower the harvest rates
- The fish population is driven to extinction
- If fish are open-access resource, then fishermen profits are driven to zero
- Fishermen expend much effort in the terms of costs, i.e. E2
- The harvest rates are low as well as the fish populations
- If government imposed restrictions on catch, then fishermen can maximize profits
- Fishermen expend lower costs for effort, E1
- The harvest rates are higher because fish populations are higher
- Remember, they expend much less effort
5. Backwards Bending Supply Functions
- If market prices become too high, fishermen over harvest the fish, causing fish populations to fall
- A high enough market price will cause an extinction of a species
- Fish Market
- Supply function - the fishermen
- Demand function - the consumers who eat fish
6. Government polices
- Place ownership of the resource under one person
- Not a problem if it is a lake
- More of a problem for seas and oceans
- The person could charge a fee to fish
- Prohibit catching, fishing, or hunting during mating season
- Called spawning for fish
- Allow the species to procreate and replenish the stocks
- Government restricts technology
- Then fisherman have more difficulty in catching fish
- Requires licenses for boats
- Government requires a fisherman to buy a license for a boat
- Fishermen see a price to enter the fishing market
- However, they may overinvest in equipment to get the largest catches as possible
- Prohibit and outlaw of catching, fishing, and hunting of a particular species
- Example - Some species of whales were becoming extinct
- Man found a substitute for whale blubber, which was petroleum
- Individual Transfer Quotas (ITQ) - i.e. permits for catching fish
- Used in Australia, New Zealand, Canada, Iceland, and Alaska
- Example - Alaskan halibut and king crab fisheries provide examples
- Before ITQ, the fishing season lasted 3 days
- In three days, fishermen would race and catch as much fish as they can.
- Now, it lasts 8 months
- Government estimates the population growth rate and sets the harvest rate at an optimal rate
- Government creates the number permits based on the optimal harvest rate
- Government either gives or auctions the permits to the fishermen.
- Fishermen are limited in the amount of fish that they can catch
- One permit = one fish
- Fishermen can sell shares if they want
- Benefits
- The fish becomes a property right
- Fishermen have an incentive to take care and manage this resource
- Fishermen will monitor their area and turn poachers and illegal fishermen into government
- Reduces supply, so fishermen get a higher price
- Fish may be fresher
- Fish populations stay at high levels
- Problems
- Hard to apply to international waters
- How to allocate shares?
- Fishermen earn economic rent
- Problems with policies
- Some species are migrate
- Tuna and swordfish travel large distances
- They may migrate from a place with good management to another area that allows over fishing.
|
|
1. Economics of forestry
- Economics is different for a forest
- Lumber jacks know where the trees are
- Economic decision is still dynamic
- Cut down tree today
- Sell lumber to earn revenue
- Invest profits into market to earn interest
- Let tree grow another year
- Next year, there is more lumber
- If prices are the same, then they earn more revenue
- The gain in revenue must compensate for not having the opportunity to earn the interest income
- Arbitrage is still present
2. Deforestation - the clearing of land by burning the trees or selling the timber
- Why?
- People earn money from selling the timber
- Lack of income
- Export timber products provide income.
- Clear the land for pastures, then they raise livestock
- Plant crops
- Government gives subsidies to clear land
- For example, Brazil offered tax breaks for development of forested land, such as for cattle ranching
- Lack of property rights
- People who do not own the land have little incentive to preserve it.
- People may illegally cut down and sell the trees to earn profits
- Illegal logging cost governments $15 billion in 2002.
- Human settlements
- Pressures from population growth and migration
- Lack of other energy supplies leads to using timber as a fuel.
- War
- United States destroyed forests in at least two wars
- World War II -U.S. destroyed German forests as a means to hurt the German nation
- Vietnam War - U.S. cleared forests with Agent Orange
- Easy for the enemy to hide and attack U.S. soldiers in the dense forest.
- Problems caused by deforestation:
- Soil erosion - roots help hold soil together
- If land is bare, then rainwater easily washes away soil
- Water quality and supply both decrease
- The land can become more arid
- Tree roots bring water deep from the ground and pulls it up into the tree
- Loss of biodiversity
- Loss of animal habitat
- Carbon emissions increase
- Because forests serve as carbon sinks
- Believe deforestation causes greenhouse gases to be 20% higher
- Developing countries are reluctant to devote resources to problems such as biodiversity or global warming
- The benefits are long-term.
- Many developing countries have abundant natural resources, yet their populations are poor.
- Resource-rich countries grow more slowly than other poor countries, even after controlling for other variables.
- This paradox is known as “Dutch Disease.”
- Increase in natural resources, like oil leads to appreciation in domestic currency.
- A strong currency makes non-oil industrial sectors less competitive in world markets.
- Consequently, the oil sector dominates the economy.
- Oil-rich countries do worse on issues such as child mortality, nutrition, and education.
- Oil revenues allow governments to keep taxes low.
- Thus, population has less incentive to demand change.
- Another Explanation
- Government officials believe they have time and resources
- They indirectly create a bad legal system
- Society performs badly under this legal system
|