“Economics of fisheries” is a field of economic research that has developed since the mid-1950s. The core of the research in its early stage was to find conditions for optimal exploitation of fish stocks over time. The purpose is to inform policymakers about harvest levels that maximize net present value of the fish stock. At the same time, the fundamental insight was developed that in absence of effective regulation or collective control over harvest behavior the fish stocks tend to be overexploited from both a biological and economical point of view. In many instances, the fish stock is a common-pool resource with lack of well-defined property rights over the in situ resource. In the open access fishery, in which there are not any enforceable property rights, the competition will lead to a zero rent situation. So, development of regulation theory and application hereof has been a central research theme. Another important topic has been the expansion of the one-species, one-fleet approach to expand the number of other dimensions such as multispecies, shared stocks of more than one country, risk and uncertainty, and the marine environment. This development has been driven by both theoretical developments in the science of economics and fishery economics as well as political needs.
The field of fisheries economics developed during the late 1960s and 1970s. However, Gordon 1954 and Scott 1955 are two classic articles from the 1950s focusing on static models of open access and optimal exploitation. These papers set the scene for further theoretical developments and empirical investigations. Gordon’s analysis was based on Schaefer 1954 and the static bioeconomic model is called the Gordon-Schaefer model. Warming 1911 is the earliest known published paper showing how the open-access externality lead to inefficient allocation. Dynamic models were developed by Smith 1968 (open-access) and by Crutchfield and Zellner 1962 (optimal exploitation). Turvey 1964 and Smith 1969 added more externalities than the stock externality. Copes 1972 developed the backward bending supply curve for a fishery under open access.
Copes, Parzival. 1972. Factor rents, sole ownership, and the optimum level of fisheries exploitation. Manchester School of Economics and Social Studies 40:146–163.
Copes introduces backward-bending supply curve for a fishery under open access. This might lead to more than one equilibrium and hence difficulty in assessing the situation in the fishing sector. With a backward bending supply curve higher demand will lead to higher price and lower quantities traded, that is, the stock is declining.
Crutchfield, James A., and Arnold Zellner. 1962. Economic aspects of the Pacific halibut fishery. Vol. 1. No. 1. Washington, DC: Fishery Industrial Research, US Department of the Interior.
Solved the dynamic fishery problem before optimal control theory was developed using calculus of variations. Their solution shows how the static solution is modified by the introduction of dynamics. This first rigorous development of optimal management of the resource over time maximizes the present value of the stream of future net economic benefits from the fishery. It was made clear that property rights over the fishery preclude biological overfishing.
Gordon, H. Scott. 1954. The economics theory of the common property resource: The fishery. Journal of Political Economy 62:124–142.
The static fishery model of open-access is presented and used to show that in the bionomic equilibrium the fleet size is too high (too many vessels) with a low stock size.
Schaefer, Milner B. 1954. Some aspects of the dynamics of populations important to the management of commercial marine fisheries. Bulletin of the Inter-American Tropical Tuna Commission 1:27–56.
Offers for the first time the harvest function in which catch rates are a function of effort and stock. By applying this function together with the logistic growth function, Schaefer investigates interaction between dynamics of fish populations and management.
Scott, Anthony D. 1955. The fishery: The objective of sole ownership. Journal of Political Economy 63:116–124.
Scott shows that a sole owner with exclusive harvesting rights will maximize static rent where the fleet is fishing at a lower level and stock size is higher than open-access level. Fishery managers should limit the number of fishermen and hours fished to this level. Scott outlined the first dynamic theory of sole ownership.
Smith, Vernon L. 1968. Economics of production from natural resources. American Economic Review 58:409–431.
The theoretical dynamic open-access was developed in this paper. It includes dynamics of both the fish stock and the capital stock of the fishing industry in a systematic approach. To the basic biological growth function, Smith appended an entry-exit equation for the industry in which vessels responded to the existence of rents in the fishery. Different externalities were introduced. Introduced phase diagrams.
Smith, Vernon L. 1969. On Models of Commercial Fishing. Journal of Political Economy 77:191–198.
Three different externalities (stock, crowding, and gear) are modeled and analyzed under open-access assumption and under assumption of sole ownership. By comparing the two situations a decentralized regulation system is developed.
Turvey, Ralph. 1964. Optimization and suboptimization in fishery regulation. American Economic Review 54:64–76.
Turvey noted that if harvesting is reduced to rebuild the resource stock, this temporary loss should properly be weighed against future gains, which should, in turn, be discounted by the appropriate social rate of discount. An additional externality, mesh size, was added, and its impact upon harvested fish size demonstrated. Observed that both the resource stock and mesh size externalities must be regulated and distinguished between first and second best optimums.
Warming, Jens. 1911. Om grundrente af fiskegrunde. Nationaløkonomisk Tidsskrift 49:499–505.
The first published paper (in Danish, however) showing the open-access externality and how differences in fishing conditions between areas leads to inefficient allocation of effort. Warming proposes a fishing tax to secure an efficient allocation.
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