Economics of fisheries lecture

okay welcome to this environmental and resource economics video this particular video will be on the economics of fisheries so let's get started in this video I'm going to talk about three different aspects of the economic officiers the first thing I'll be talking about is the biological relationship between the growth of a fish stock and the maximum sustainable harvest level then I'm going to talk about the economics I'll be looking at total revenue and total costs and profit and then finally I'll be looking at policies to manage fisheries sustainably so on this diagram here I'm going to show you the relationship between the fish population and the growth rate so on the left hand axis is the growth rate of the fish stock now you can think about this in the reading sometimes it's called the instantaneous growth rate think about this as the total number of fish that will be reintroduced into the population in a particular period so it's the overall population is growing how much this is the incremental growth and on the horizontal axis is the biomass or the fish stock in tons you can think of this as kind of a combination maybe of the size and the numbers especially a fish in a particular stock so this is what that relationship looks like growth rate on the left and biomass on the bottom that has a strange kind of curve so let me explain us to you in more detail first of all let's look at the far right hand side this is the carrying capacity of the fish stock and I'm going to label that K so the carrying capacity at the carrying capacity you'll notice that down here that the overall growth rate of the fish stock is actually zero right so this is zero and then this is increasing so when the carrying capacity is k out here on this part of the curve the growth rate of the fish stock is zero so think about what's happening there the fish stock is completely at its maximum it's a maximum carrying capacity of the of the overall habitat so at that point for every new fish that's born into the population a fish is dying from that population you can imagine that the food and the habitat and other requirements for the fish are really stretched to the total limit there so at that point the biomass point K of that carrying capacity has zero growth of the fish stock now that doesn't mean that the fish stock is zero it means that the growth of the overall fish stock is zero for every one that's introduced another one is dying at the top of the curve is the maximum growth rate so again I'm so down on the bottom here you'll see this B max so we'll call that the biomass biomass and the max is associated with the maximum growth rate so that by what I mean there is if you look for this biomass B Max and then come up to the top of the curve you can see that that's the highest growth rate of this this fish dog and it occurs actually if you think about it right here around halfway through the overall biomass right it's not the absolute largest biomass and it's not over here which we would have zero biomass somewhere in the middle and remember this is a representative curve what's happening at that point well at that point there's this balance between the availability of habitat and then also the enough fish to actually breed by having enough numbers in the fish stock so to the right of B max so over on this side of the curve I'm referring to up here over on this side of the curve as you approach the carrying capacity the issue becomes that there's not enough food and habitat for the population to grow any more and to the left of the curve and especially down on this side the main issue is that there's not enough of a fish stock to multiply rapidly so they kind of have this sweet spot in the middle here B max which is the maximum growth rate okay so let's look at then some different points along here now on the left hand side you'll notice I have up here H max so this represents the harvest level over here so H is going to stand for the harvest level B for the biomass so H here and you can see I have H max that is the maximum sustainable harvest okay and what does that mean that means that in an instant if the biomass was b-max here then it would be possible to harvest this amount coming off the left-hand axis and that total amount that you took away in a in a period would immediately be reproduced right because this is the growth rate of the fish stock and the harvest level so growth rate on this curve here harvest level indicated by this line so the maximum sustainable yield then is this point right at the top right up here the maximum harvest level okay let's look at another harvest level let's move it down slightly so what if the harvest level were lower down here is that also sustainable now remember the last one sustainable because for whatever fish stock for this particular harvest level here H max every instant that we took that out it would be reproducing it so we could keep going on like that presumably forever now let's look at us every one here at this lower harvest level HS it turns out that there's two different biomass levels that could sustain that harvest level first of all let's start off over here so there's this B high so that's the higher of these two biomass levels remember that size of the fish stock is increasing in this direction and its growth rate is increasing up here so at this higher fish stock level the higher biomass B you can see that at this harvest level HS if I come over here it intersects the growth curve at that point and if I follow that down I can see that that biomass B high is associated with growing and and reintroducing this mini fish every period and that just happens to be the exact same amount of fish that I'm harvesting HS so that point there HS and B high is a sustainable yield and could be again fished indefinitely what about this lower level here B low well it turns out then here's another one where at this biomass we can see that it has a growth level associated here on the blue curve at that level and that again happens to be the harvest level HS so that biomass below every period would reintroduce this amount of fish right that this overall amount of fish so if we harvested that out then that could again be sustainable every period so picture what's going on here at either one of these let's look at this B low imagine then that the biomass is below and I harvest out this many HS that would naturally knock the overall biomass down because I've removed it but then you can see that because of the growth rate then it will reproduce itself right back up by replenishing that amount of fish in the next in that same period similarly over here at B high if I were to harvest off HS the biomass would drop slightly but because of the growth rate in the next period would re-establish or reintroduce that same amount of fish in there in the next period so that would be a ongoing sustainable yield now you have to imagine though that in actual fisheries we don't really know what the size of the biomass is we can estimate it but really when you go to the water all you see is this giant blue expanse and it's very difficult to get an accurate estimate of what the actual biomass is so let's consider them that we're harvesting at HS still that's this level here we're taking out that amount of fish every period and now we're going to imagine that down below the top of the water there is some actual size of biomass let's assume some different sizes there because we couldn't be sure first of all let's assume the biomass is out here pretty close to the carrying capacity so it's above this other be high and it's right in this area well what will happen then if we're harvesting at HS up here and the biomass is growing at this level here well let's look what is higher the harvest level or the growth rate we're looking at the growth rate on the left-hand axis I can see that the harvest level is higher than the growth rate therefore what will happen is we're harvesting more than are being reintroduced in that same period and the biomass will go down right it'll shrink in this direction so what does that mean we're harvesting more than is growing the biomass shrinks and we get to a situation over here now in the next period we're still harvesting more than is the growth rate so again the biomass shrinks until right here we happen to be harvesting the same amount as the growth rate so if the biomass happens to be here well we're harvesting more than it's growing but as we cut into that biomass its growth rate increases I think about what's happening there its growth rate is increasing because we're taking away competition were moving the biomass further from its carrying capacity yes so you have to think for the fish that remain all of a sudden have more food and more habitat and therefore the overall size of the fish stock can increase more rapidly right so the growth rate is going up let's look at a different point what if the biomass were down here at this level well we still have the same harvest level right up here right associated with HS and what's the growth rate of the fish stock at that point while I follow this right up to the growth curve in blue and I can see that the growth curve the biomass when it's here is above the harvest level so what does that mean that means that in that period I'm harvesting HS but it's actually put in more into the biomass than I harvested therefore in the next period those fish that are leftover that it didn't harvest will be added to the biomass and the overall biomass will grow so we'll move to a point over here okay well let's look at that second period then what's happening in that second period well again the harvest level it here is less than the biomass growth rate at that point so once again I'm not taking out as many fish are as being put back in and the overall biomass grows again so you can think of this sort of like a bank account where you have some money in it's earning interest and you took some money out of your account but not as much as the interest right you took out part of the of the interest payment but not the whole thing so your bank account started to grow and in the next period you only took out part but not the full amount of the interest again the principal and the interest the total quantity in your bank account will be growing and it's similar here so if if the biomass actually is down here or in fact anywhere in this range where the harvest level is less than the instantaneous growth rate the fish stock the biomass will keep growing and growing and growing and growing and growing until right here and you see at this level then be high that is the exact point where the harvest level once again is the same as the growth rate and therefore it becomes a stable point there again okay let's look at another point what happens if down below the below the surface of the water the biomass is actually over here well let's consider that so I want to know is the harvest level greater or less than the growth that instantaneous growth rate and I can see that we're harvesting this much up here at HS but the growth rate of the fish stock is only here so the fish stock is reintroducing into the biomass only this much but I'm taking it more so what's going to happen well I took out more than was reintroduced so the biomass is going to shrink and we'll go to this situation a little bit to the left of this point and what happens in that second period well once again I'm harvesting more than its reproducing into that biomass so once again it's going to shrink and in fact you can see then what will happen there is will go all the way down to zero and that will be will essentially decimate the fish stock and drive it to extinction so it's really important to note that that it really matters where the overall how much of course we know how much we're harvesting here HS but we don't know where the biomass actually is right if it's over here we're going to reach a steady point here if it's anywhere in this section I'm going to come around the top and reach a steady point here if it's anywhere in this section we'll be driving it down to extinction okay so it's important to note then that if we raise the harvest level and you can see that I've done that over here if the harvest level goes up and in this instance is it possible is there any harvest sorry is there any size of the biomass that could sustain this harvest level and in fact it's not possible at all points on the growth rate here this is the growth rate of the overall biomass at every point we're harvesting more than it can possibly reintroduce back into the biomass and therefore it will shrink shrink shrink all the way down to extinction okay so let's just look at this point and note that that this is the danger zone for the biomass if we're harvesting at h1 and the biomass happens to be really low already like this it just can't sustain a harvest level that's greater than its own growth and will deplete it down to nothing so again the higher that harvest level you can see the greater this danger zone is right now because we're harvesting more at a larger section of this biomass on the left-hand side there is in the danger zone for going to extinction and of course from this diagram I can see if the harvest level goes right over top of the curve there is no biomass that can support that and we'll drive the stalk to extinction okay so now what I'd like to talk about is the total revenue and the total cost associated with a fishery so using a somewhat similar diagram but you'll notice that it has different axes different quantities on each axis and let's have a look at that in more detail okay on the left-hand axis I have total revenue and total costs over here right so that's the dollar figure axis zero and then increasing revenue and cost and the revenue cost will be two different curves and on the horizontal or bottom axis I have the level of fishing effort so what does that mean the level of fishing effort think about that is the number of boats and the number of nets and lines and the number of people in the number of hours that are out on the water fishing for this fish stock okay so over here of zero costs and zero effort well what does that mean it means that nope there's no boats and nobody's going on to the water therefore there's no revenue and there's no no costs and as I increase my level of fishing effort what will happen then well I have more boats and more people and more time in the water so let's take a look at those different curves then first of all I want to introduce you to the total revenue curve so this might seem a little strange this definitely haven't seen a revenue curve like this before so let's break it down a little bit in fact you can notice that it has the same shape as the overall growth rate curve for a fish stock and why is that well that's because at any harvest level and I'm talking about sustainable harvest level here if you can imagine that for a particular biomass and a harvest level if it's sustainable every time you went out you would catch that many fish you would bring the back in and sell them if you went back out again you would bring come back in and sell them and so on so remember that in the growth curve the was the maximum sustainable up here was the maximum sustainable yield from the fishery that was the maximum we could catch on a sustainable harvest well imagine that we just sold every fish for $1 so we harvest all of those thinking about that other curve there we sell them for a dollar and we get that much revenue right okay and then now this will be a little confusing so listen closely to this now on the other one as we approached the maximum carrying capacity so think about where the maximum carrying capacity is is it over here or is it over here in fact it's over here so think about if we weren't ever to have fished this fish stock before then it will be at its maximum carrying capacity right we won't have put in any effort it will be at its maximum size so then if we started to harvest and had these sustainable harvests we could be tipping some off of the this big stock and we would be getting some revenue from selling those fish right and we could keep increasing the overall level of fishing effort this is the maximum sustainable yield that's the revenue associated with the largest growth rate so if we were harvesting at the biomass associated with the fish stock growing at its maximum rate then that would be this point to be the that largest total revenue now if we keep increasing and keep increasing fishing effort you have to think well we're pretty soon we're driving that stock down smaller and smaller and smaller right and the issue over there is we can still have sustainable harvests but the fish stock there is very few numbers so it has a harder time reproducing quickly and that's why it's overall growth rate is lower and therefore even if we're harvesting sustainably the total revenue is lower so that's a little bit tricky and I want you to think about that a little bit and I'm going to introduce costs so this is the total cost curve why does it go up like this well every time so this again goes from low to high in terms of level of fishing effort and increasing costs and revenue in this axis so every time people go out fishing have more time in the water you have to think that the nets and the fuel and the time the labor and all of those different types of things add up so the more fishing effort there is think of it this way if each unit of fishing effort had a cost associated with it well the more fishing effort you did the higher your total costs so this is the greater the fishing effort that more the total costs what does this say them about different levels for harvesting well first of all I've already indicated that this level II is the level of fishing effort associated with the maximum harvest right and that goes back to this diagram right here back to it here this one here right so this is when the growth rate of the fish stock the biomass is somewhere in the middle here and that produces the maximum growth rate of the biomass right over to this side running up to habitat constraints and on this side not enough population to grow quickly so if we happen to be harvesting here this H max of the B biomass max there let's go back to here and see what that looks like on our economics curve okay so here you can see them that that is associated with this level of fishing effort this many costs and this much revenue so recall that profit is total revenue minus total costs so the profit here you can see for this e maximum harvest that fishing effort there is this much profit well it's interesting to think then we know in economics that we often focus on profit maximization what is the profit maximizing total level of fishing effort so I'll let you think about that for a second in fact it's over here why is that well look what's happening over here so over here notice that we're putting in less fishing effort then we would be at the maximum sustainable yield right so we're putting in less effort so there's less costs and there's this is your total revenue up here and it turns out the difference then between the total revenue and the total cost is greater this profit you can see is greater than it is over here the maximum sustainable harvest so think about what's happening there in fact what's happening is this if we're if we don't harvest as at the maximum sustainable yield and just back off a little bit then it means that there's more fish out there so that when we go out to fish it's less difficult to find them I catch them so fish are quite different than forests when we leave a forest at the end of harvesting for a day we know exactly where the trees are but fish are tricky as soon as you start to harvest them then they redistribute and they're you know if you think more dilute the population is more diluted in the ocean so they're harder to find so if we don't fish quite as much they're more concentrated so when we go out we get more total revenue for that level of effort and indeed is you know we can see that the profit then is greater so the revenue is smaller then at the maximum sustainable yield but the costs are also less than that the maximum sustainable yield and indeed they drop off more quickly so that the total profit is the greatest that's at this point here at that level of fishing effort so what happens then if the total costs increase somehow and that would be represented by a tilt vertical tilt upward of the total cost curve so what would happen to the the economically efficient level of fishing effort well we can see that if the cost curve moves up like this now we have to reevaluate what is the profit maximizing point a level of fishing effort here is our former one right this was the one on the on the former curve there and now I can see in fact it's moved over in this direction the greatest distance between the total revenue and the total cost curve we want to maximize that we lie because profit is the difference between revenue and cost the greatest profit then is in that area there so anything that raises the total cost of fishing effort reduces the economically efficient level of fishing effort or the profit maximizing level of fishing effort okay well what happens if we go in the opposite direction then if the costs go down well if the costs go down then you can see that here was this is the very first example this was our profit maximizing level of fishing effort here the difference between total revenue total cost and you can see when the costs go down we reevaluate this is now the the greatest profit which is the difference between total revenue and total cost and its associated with a greater level of fishing effort okay so let's imagine what would cause the cost to go up or down well costs going down might be something like a reduction in the price of labor or a reduction in the price of something that might cause the cost to go up is in the other diagram if I go back to here that could be for instance attacks on attacks on the number of hours of the boats on the water or an increase in the licensing fees or an increase in fuel or increase in labor cost all of those types of things would cause cost to go up so anything that lowers the total cost of fishing effort increases the economically efficient level of fishing effort or the profit maximizing level of fishing effort okay now what I'd like to talk about our different policies to manage fisheries so I've given you a bit of a base than to start to understand the growth relationship with fish stocks and then also the economics related to fish stocks and fisheries so now let's look at some different policies that we could use to manage them so the first common policy to manage fisheries is a quota on the total amount you can catch the total allowable catch or the total authorized catch so if you think about this it would operate like this typically scientists would try to estimate the overall biomass and determine what the you know what may be what the economic what the maximum sustainable yield would be and then the regulator would make sure that the fishers who were involved in that industry didn't catch any more than that overall authorized catch and there's possibly two ways you could do that you could have it either buy licenses or buy some other type of total volume so typically it can work by limiting the number of votes or licenses right you can have fewer boats and then have less restrictions on how many fish each boat can catch because there's only a limited number of you know hours in a day and days in the year so if you have fewer boats in the water then it will be harder to catch fish and that would be one way of staying below the total allowable catch you can also have licenses and so you reduce the you could have a license that was associated with a certain overall amount of catch and you could once you reach that license limit then you could you know we could manage that way so you could have a limited number of licenses with a specific allocation to each of those different licenses so you can imagine that it's important for the fisheries regulator to be monitoring the overall catch that's coming in right it's harder to monitor the biomass although we try to do that but here typically what would happen is very regular reporting on the part of fisheries purchasers in a fishery plans about what species were caught and where they were caught and what time of year and so on and that helps a regulator to understand how many fish are there and how much effort is being expended to catch them and what the overall total harvest level was so they can compare that then to the previously determined total allowable catch and as it approaches a total allowable catch they can take a number of steps including to stop people from fishing if it's happening you know regularly year after year then what could happen is that it would appear that there's too many boats for the total allowable catch or too many licenses so the regulator could then go in and try to purchase back some of those boats or licenses a different way that they could do it is to have seasonal closures so fish have a breeding season and it's therefore advisable with that we would not harvest them during that particular season so seasonal closures are also very common and it just means that for a particular time of year there's no fishing allowed in certain areas another approach would be Geographic closures so that and often it is associated again with the the breeding areas for fish so this would be closing down particular locations in the ocean to fishers and then what happens is that it just protects the fish that are in there and you know once they once they increase in size then they distribute out into the ocean and that's where people are allowed to catch them another approach would be conservation areas so conservation areas would be more permanent locations that are close to fishing and once again they tend to be associated with areas of you know breeding areas for fish and other crucial habitat areas and by protecting those we you know ensure that the overall fish dock as a greater chance of not being overfished another one would be technology rules and this can include both positive or negative lists so what do I mean by that well a positive list would be a list of allowable technologies that fisheries can use right the fishers can use so they might be allowed to use a gill net with a you know 10 centimeter square net opening or they might be allowed to use certain lines with hooks a negative list then so just to just emphasize then a positive list means that fishers can use anything on the list a negative list means those are the things that they can't use so for example a negative list might mean that you can't use a barb on the hook and or they might not be able to use a Seine that you can only use a drift net so different things like that consumer education so if you think back to our integrated policy frameworks lecture consumer education might include different actions and and campaigns and so on to tell consumers about the level of fish stocks and their health and then to encourage or discourage them from consuming certain fish so examples of this in fact you might see you go to your local fish store and you know maybe there's an advocacy group that's given out a little card that says you know don't eat or add Ruffy only eat whatever it might be some other type of Cod so it's a it's a way of telling consumers who aren't as familiar with the state of different fish stocks what fish stocks are healthy and which ones to avoid part of that process could even include certification of labeling so if you think about we talked about this a little bit before in forestry and other areas so certification would be an independent organization looking at a particular fish eree and determining whether or not that fishery fish sustainably so that would mean are the people that are involved fishing it properly within its limits and with the appropriate technologies proper seasonal closures and other things to make sure that that fish stock can be sustained into the future and if it is being fish sustainably then that independent organization will give its authorization to use its label and certification and that can then be associated with the sale and people can you know make more money or they send an indication to consumers that the fish stock is being sustainably managed so the common one in forestry is the Forest Stewardship Council and in fisheries it's the Marine Stewardship Council so you may see Marine Stewardship Council certified seafoods and that indicates that they're going through a process of auditing auditing and verification and certification to make sure that they are properly and sustainably managed when the different one here and this is again a bit of a technology limit is a limit on the total amount of horsepower so this one may seem little strange to be in with so what it means is that the total horsepower on the boat is actually capped and limited and the effect of that is that the boat goes out more slowly and it can't go as far so in effect it decreases the efficiency of the fishing right it increases the overall cost of going out because it takes so much longer and we know that things that increase the time and the cost of fishing will shift the curve up the total cost curve and lead to lower economically efficient or profit-maximizing levels of fishing effort another possible policy or practice would be the development of substitutes so if there's a lot of pressure on a particular fish dog then we could take actions to try to develop a substitute so perhaps instead of a yellowfin tuna maybe we'll try to eat catfish instead or perhaps we'll even go for a vegetarian option to have tofu instead so developing substitutes then is taking the pressure off of one fish stock in order to in order to have it more sustainable in the future taxes would be another way of managing fisheries and you can think here about what the effect of taxes would be on the total cost curve so look back at those economic graphs a tax would increase right move the total cost curve up to the left and by doing that we've seen in the previous examples when the total costs go up then the economically efficient level of fishing effort goes down so examples of that might be a fuel tax put a fuel tax on the cost go up and the level of fishing effort goes down it also be possible to and it's commonly associated with when there has been historically too many boats for the total allowable capture too many licenses and the government goes through a period of purchasing purchasing them back they typically also tend to have a retraining for the people that were in that industry to move them into something else you can imagine that would possibly be quite difficult for people that have fished all their lives and that's their special skill set to move into something else could potentially be difficult not easy to take somebody out of the boat and make them into a web designer or put them into some other industries that might be a quite a different skill set so what's happening in practice well in practice the policies to manage fisheries kind of are coming from both different sides pressures toward sustainability and also pressures towards over exploitation so in terms of for sustainability for managing we have pretty carefully managed or scientifically researched total allowable catches and we do have a combination in most industries fishing industries of a combination of Licensing and limits on the number of boats cismo closures and geographic closures and Technology and conservation areas and technology rules and so on we have a whole combination of those and that's more commonly the case where it's within the territorial waters of a entry so within the you know ocean area around Australia for example that Australia can actually go and regulate we would tend to see those things in other situations though for instance where there's open Oh Cherie open ocean fisheries it can be more difficult because no one country can actually manage and regulate that to the same degree so in international waters and is commonly the case in the North Atlantic and even off the coast of Australia further out there's often a lot more pressure on fish stocks because countries have a harder time agreeing to the distribution of allowable catch even if the cumulative total of all of their individual catches exceeds the maximum a possible catch maximum sustainable catch so countries just end up overfishing because they can't negotiate a lower and more sustainable level back at home when you see a for instance with in many different fisheries because fisheries are often in rural locations many times governments and politicians are interested in helping out that particular constituency so they can be areas of high unemployment their remote in rural areas so often there's development projects and other policies put in place to try to help out those folks with their livelihoods and things in fact could be things like fuel subsidies so if you decrease the cost of the fuel what will happen indeed we can already tell that anything that decreases the cost will increase the economically efficient level of fishing effort so lower the costs people fish harder and for longer other things that lower costs are low interest loans the government's help to offer or loan guarantees so if a Fisher goes into the bank and wants to buy a new sonar equipment for their boat or a new net or something the bank might be you know not particularly favorable but the guarantee of the loan by the government says that if the Fisher defaults the government will pay therefore the banks are pretty happy with those arrangements and they'll go ahead and do that again that lowers the total cost of fishing effort and increases the maximum overall amount of fishing further examples might be putting processing plants close to you know out in rural areas close to closer to these fishing villages again that reduces the overall level of time and effort required to get a fish to a plant and increases the overall level of fishing effort so in fact there's this kind of contradictory set of policies and practices in many different fisheries around sustainability on the one hand the closures and the technological limits but at the same time other economic subsidies and low-interest loans and other incentives and so on that are increasing level of fishing effort and that's really causing quite a difficult complex situation so much so that where there's been a long period of having these subsidies and other things we can often see that there'd be a very high investment in extended boats with you know lots of nets and high-tech equipment all so on we call that over capitalization of the fishing industry and once then the you know it becomes obvious that the fish stock just can't sustain that level of fishing effort in many instances those same boats then have left that location and gone to fish somewhere else and notably you see that you know boats that used to be fishing in North America or in the North Atlantic or other locations where there were at one point quite healthy stocks and now they're no longer have moved over to Africa and other developing countries and are putting enormous pressure on these other fish stocks and in these other developing countries so that wraps up the fisheries lecture please have a look through those different charts and graphs you go through the readings and this is it's quite important to be able to draw the graphs and explain the curves and know what's on each axis and what causes different movements and shifts and the curves and so on okay thanks for time