Wildlife and Fisheries Resource Governance

5) Wildlife :-
a) Importance of wildlife :-
i) Wildlife helps to preserve biodiversity.
ii) Wild life helps to maintain food chains and food web.
iii) We get useful products from wild life like food, medicines, leather,
bones, honey, lac etc.
b) Conservation of wildlife :-
i) Preserving the natural habitats of animals.
ii) Banning poaching of animals.
iii) Protecting endangered species of animals.
iv) Setting up of wildlife sanctuaries, national parks, biosphere
reserves etc.

Contents
Utilization of common property resources
Fisheries and economic development
The simple sustainable fisheries model
Efficient fisheries
Unmanaged common property fisheries
Fisheries over time: Dynamics
Uncertainty in fisheries
Special fisheries: Schooling and migration
Multispecies fisheries

Lecture 1
Utilization of Common Property Resources: Opportunities and limitations
The economic (and social) problem is to arrange production and consumption so as to maximize national economic welfare.
Opportunities for generating economic welfare are measured by the GDP (gross domestic production)
So, the economic governance problem is to find ways to maximize the GDP

Ways to solve the economic problem
There are essentially three basic types of economic organizations to deal with the problem:
The traditional economy
The command economy
The market economy
The first two generally do not solve the problem!
The market system solves the economic problem under certain circumstances ('the invisible hand').
All goods traded in markets
Full information
Perfect competition

The market system does not solve the economic problem in the case of common property natural resources
Common property natural resources are ones that are not privately owned. Examples are:
the ozone layer,
common grazing lands,
many aquatic resources,
many water resources,
Common property resources are not tradable
⇒ No price, and markets don’t work

Fish stocks are often (although not always) common property natural resources.
⇒ The market system is not going to maximize their economic contribution to the nation.
⇒ It is necessary to resort to special fisheries management.
Why does the market system not work for common property natural resources?
The prisoners’ dilemma game!

Simple fishing game
(An example of the prisoners’ dilemma)
Two fishers
Options: fish full-out or fish prudently
Best policy for both A & B is to fish full out !

This (in essence) is
“The tragedy of common property resources”
(Hardin 1968)
People misuse natural resources because of lack of private of property rights

Lecture 2
Fisheries and Economic Development
Fisheries can affect economic development in various ways.
Direct contribution to GDP
Forward and backward linkages (indirect contribution to GDP)
Source of economic profits that can be invested (economic growth impacts)
Source of government taxation income
Labour employment & training (creation of human capital)

Direct contribution to GDP
Direct contribution = Profits + Supplemental wage
Wage above the going rate!

Linkages

Linkages
Backward Linkages (economic surplus there?)
Inputs
Maintenance
Shipbuilding, gear ……..etc, etc.
Forward linkages (economic surplus there?)
Processing
Marketing
Transport…………etc., etc.
==> Demand for labour

Multiplier Effects
The linkages and profits generated in the fishing industry give rise to multiplier effects in the economy.
These multiplier effects can expand the GDP far in excess of the direct impact of the fishing industry

Types of multipliers
Links multipliers
The fishery expands (or contracts) other industries via linkages
Demand multipliers
Income generated in the fishery leads to demand for other goods and services
Investment multipliers
Income generated in the fisheries (esp. profits) may be invested and thus lead to economic growth

Size of Multipliers
Multiplier effects in an underemployment economy will generally be larger than in a full employment economy.
Multiplier effects in a vibrant economy will generally be larger than in a stagnant economy.
When fisheries are rationalized (from the common property point) there will be reduced demand for inputs
=> multiplier effects in developing a new fishery will generally be larger than when rationalizing an existing fishery

Illustrative Examples
(Rationalizing (downsizing) an existing fishery)

Illustrative Examples
(Developing a new fishery)

Capital Accumulation and Economic Growth
Profits generated in the fishery can be invested and thus launch the economy onto a new growth path
Simple model:
GDPt = a⋅Kt,
Kt = Kt-1 -d⋅Kt-1 +It,
It=I+profitst+s⋅GDP
Kt = capital at time t
It = investment at time t
I = fixed investment
a=output/capital ratio (a=0.33)
d = depreciation rate (d=0.1)
s=savings rate (s=0.05)

Growth Model
Impact of fisheries rents
+5.1%
+25.8%

Fisheries contribution to GDP
Direct contribution is the foundation!
Without it there can be no multiplier or growth effects,
(.....unless generated by linkages).

Other important considerations
Fisheries as a source of taxation revenue
Fisheries as a source of foreign exchange
Fisheries as a source of
education,
know-how,
labour-training
entrepreneurship

Lecture 3
The Simple Sustainable Fisheries Model
Here the simple aggregate fisheries model
Sufficient to understand the essentials of the fisheries problem

The biomass growth function
Biomass
Biomass
growth

The Harvesting Function
Harvest
Fishing effort
[Small stock]
[Large stock]

The Sustainable Yield (harvest)

The Sustainable Biomass
Sustainable
biomass
Fishing effort

Harvesting costs
Costs,
$
Fishing effort

The Sustainable Fisheries Model
Value,
$
Effort
Biomass
Costs
Sustainable
revenues (yield)
Sustainable
biomass
Profits

Lecture 4
Efficient Fisheries
Efficient fisheries are those that maximize contribution to social welfare
Must be Pareto efficient
⇒ maximize difference between revenues and costs
Same as maximizing profits, if prices are correct.
Distributional considerations may modify this – but be careful!.

The Sustainable Fisheries Model

Nota Bene
It is the OSY-point (optimal sustainable yield ) that is socially optimal
MSY is not socially optimal
OSY implies greater biomass than MSY
OSY is sustainable
OSY entails little risk of stock collapse
OSY generally generates substantial profits (rents)

Changing parameters
Costs (e.g. price of fuel)
Output price
Biomass growth

Lower costs
Value,
$
Effort
Biomass
Sustainable
biomass
MSY
OSY

Lower prices
Value,
$
Effort
Biomass
Sustainable
biomass
MSY
OSY

Lower biomass growth
Value,
$
Effort
Biomass
?

Unprofitable Fishery
Value,
$
Effort
Biomass
Costs
Sustainable
revenues (yield)
Sustainable
biomass
MSY
OSY

Lecture 5
Unmanaged Common Property Fisheries
(Sometimes called the competitive fishery)
Fishing effort converges to a point where there are
No profits (⇒ poor fishermen)
Biomass is low (below OSY-level)
There is an increased and often substantial risk of a stock collapse
Harvests are often less than at the OSY

Unmanaged common property fisheries

Common property fisheries and technical progress
Value,
$
Effort
Biomass
Sustainable
biomass
OSY
CSY
MSY

Nota bene
The same applies to price increases, cost reductions, subsidies etc.
There are no long term benefits, but an increased risk of a stock collapse, i.e. Less sustainability
Isn´t this in accordance with history?

The fundamental source of the problem
Prisoners’ dilemma
Lack of private property rights (the wrong institutional structure)
Externalities
It is not!
Lack of understanding by fishermen
Mistakes by fishermen

The common property problem is
Universal
It is found all over the world in all sorts of situations
All common property fisheries exhibit these features
There are no counterexamples
Claimed counterexamples are rare
They turn out to be some sort of management structures that alleviate the CPP
Even so they are generally just slightly better than the competitive equilibrium
One of the most solid laws of all of economics

Is there anything good about common property fisheries?
People have mentioned:
Increased (maximum) employment
More equitable
Politically feasible
But does this really hold water?

Lecture 6
Fisheries over Time: Dynamics
Real fisheries evolve over time
They may take a long time to reach an equilibrium (constant or sustainable state)
As a result, equilibrium models constitute a very limited description of real fisheries. (At best they describe a long term tendency)
Therefore, we need dynamic models

The evolution of fisheries over time is a complicated and technically demanding subject
A convenient analytical tool is provided by“phase diagrams in biomass-effort space”
That consists of:
Biomass equilibrium curves
Effort equilibrium curves
Derivation of the joint movement of biomass and effort over time

A theoretical example:
Dynamic Fisheries I
(The common property case)

Fisheries Dynamics:
(The common property or competitive case)

Note
The economic equilibrium curve ( ) corresponds to zero profits
The competitive equilibrium corresponds to zero profits
Note, the danger of stock extinction
In equilibrium
Along the adjustment path
Note the impact of
Increased fish price
Cost changes
Technological advances
Subsidies

Technological Advance

Dynamic Fisheries II
(The optimal case)
It is not possible to jump immediately to the long run optimal equilibrium
Moreover, due to varying biological, economic and environmental conditions, it is not possible in reality to stay at the optimal equilibrium
Therefore, the task is always to select the optimal adjustment path to the optimal equilibrium

Examples
Adjustment Paths

Economically, it is very important to find and implement the optimal adjustment path - at least approximately
Theoretically, optimal paths should look something like this:

Example
Optimal Fisheries Policy

In optimal dynamics, the rate of discount (interest) plays an important role
The higher the rate of discount, the lower the optimal equilibrium biomass
If the rate of discount is high enough, the optimal equilibrium may exceed the MSY- effort level.
The reason is that current benefits become relatively more attractive than future ones

Optimal sustainable biomass and the rate of discount (interest)

Lecture 7
Uncertainty in Fisheries
Fisheries are subject to a great deal of uncertainty
Therefore the outcome of a fisheries management policy is always uncertain
Therefore, even a conservative policy may lead to a stock collapse
Therefore, even a reckless policy may not lead to detrimental consequences

Sources of uncertainty
Lack of knowledge
Model (parameters & relationships) (Estimation problems)
State of the system (Measurement problems)
Levels of control variables (Measurement and control problems)
Fundamental randomness in nature
Recruitment
Feed availability
Environmental conditions
Economic conditions

Implications of uncertainty
The outcomes of a given fishery policy are subject to risk
I.e. may turn out differently than expected
Equilibrium will never be maintained
Random shocks will always disturb the system

Appropriate responses
Apply optimal decision making under risk
Maximize the expected value of any action
Risk amounts to a cost (if risk averse)
Therefore the optimal course is to avoid undue risk
This suggests
Less risky fisheries policy
I.e. normally lower exploitation levels (less catches, higher biomass)

The effects of risk
Value,
$
Effort
Biomass
OSY
(no risk)
OSY
Risk “cost”
Effort: reduced
Biomass: increased

Lecture 8
Special Fisheries
Two topics
Schooling species
Migratory fish stocks

I. Schooling species
Defining characteristic: Stock size does not affect harvesting
This holds primarily for pelagic species
This implies:
Catch per unit effort, CPUE, is not a measure of stock size
Serious danger of extinction, especially under competitive fishing

Schooling species: Sustainable yield
Sustainable
yield
Fishing effort

Schooling Species:
The sustainable fisheries model
Value,
$
Effort
Biomass
Costs
Sustainable
revenues (yield)
Sustainable
biomass
MSY
OSY

Schooling Species:
Extinction under competition
Value,
$
Effort
Biomass
Costs
Sustainable
revenues (yield)
Sustainable
biomass
MSY
OSY

II. Migratory fish stocks
Defining characteristic: Distance from port varies over time
It follows that:
The economics of harvesting vary over time
The optimal fisheries policy varies over time
Similar impact from other varying conditions including:
Catchability
Weather
Prices etc.

Migrations: An example
Country
Fish stock migrations

The economics of harvesting

Optimal Harvesting Periods
Time
Potential profits, $
Fishing period 1
Fishing period 2

Multi-national utilization
of a migratory stock
Marked tendency to evolve as a common property, unmanaged fishery
Excessive fishing effort and capital
Loss of economic rents
Low biomass
Risk of extinction
However, there is generally room for mutually advantageous agreements

Two country migratory fishery
Country A
Fish stock migrations
Country B
EEZ for B
EEZ for A

Lecture 9
Multispecies Fisheries
All fish stocks are embedded in an ecological system (ecosystem)
The ecosystem generally contains a number of different species
These species interact in a variety of ways
Predation
Competition
Symbiosis

Ecological interactions lead to complications
Multiple equilibria
Strange dynamics
Chaos
Even when there are no ecological interactions, the economics of multi-species fisheries can lead to equally complicated dynamics
Multi-species relationships may affect
Stocks
Harvests
Costs
Profits

Example of chaos
Two species
Predator and prey
Consider biomass path of prey
Two cases:
No harvesting of predator
Heavy harvesting of predator

Biomass path of prey
No harvesting of predator

Biomass path of prey
Harvesting of predator

Appropriate responses
Sensible fisheries policy/management must take account of multi-species relationships
Under multi-species conditions, optimal fishing effort on one species will depend on the fishing effort for all the other species
It follows that the different fishing efforts must be set simultaneously

Sustainable yield for one species in a multi-species context
Fishing effort
Sustainable
yield
High effort for other species
Low effort for other species

2-species sustainable yield contours
Species 1
Species 2

An Example:
Icelandic cod & capelin
Cod prays on capelin
Cod is much more valuable

Sustainable yields
Cod
Blue dots: Maximum capelin stock
Red line: Average capelin stock
Green dash: A very small capelin stock
Capelin:
Green dash: A very small cod stock
Red line: Average cod stock
Blue dots: Large cod stock

Icelandic cod and capelin:
Optimal joint harvesting paths
Only
cod fishing
Only
capelin
fishing
No
fishing
Cod
and capelin
fishing
Stock of capelin
Stock of cod

Ecosystem fisheries
A special case of multispecies fisheries
Several species
Jointly caught
Selectivity impossible
Harvesting takes a proportion of all biomasses
May be characteristic of many tropical fisheries
But is it really true?
Fishing technology
Fishing techniques

Implications
Some species may be wiped out before ecosystem extraction is optimized
This leads to problems of irreversibilities
The high value of depleted (extinct) species
But is it really extinct?
This also leads to technical problems of analysis
Nonconvexities

3 Species
Sustainable biomass
Aggregate
Species 3
Species 2
Species 1

3 Species
Sustainable yield
Aggregate
Species 3
Species 2
Species 1

What to do?
Regard as one joint biomass?
Likelihood of wiping out species.
Much reduced for optimal fishing
Cost of wiping out. How costly is it?
If very costly, cannot exploit ecosystem

Possible situation
Costs
Revenues

What to do?
Avoid extinction by
Marine reserves and possibly rotational harvesting
Marine reserves (conservatories) and re-introductions
Develop selective fishing technology