A Model of Regulated Open Access Resource Use

REGULATED OPEN ACCESS RESOURCE USE 17
stifled in order to hold the harvest at the targeted quota. For example, in Area 2
the regulated open access equilibrium has ten times the capacity of the unregulated
open access equilibrium. However, instead of fishing over 80 days as in the
unregulated case, the regulated season length is only 3 days. The actual values
predicted by the regulated open access model are also relatively close to what has
been observed in the actual fishery recently. For example, total exploitable biomass
in Areas 2 and 3 combined reached about 275 million pounds in the late 1980s.
Area 2 and 3 total harvest levels during the same period averaged about 24 and 55
million pounds, respectively. Season lengths off Alaska in both Areas 2 and 3 have
fallen to about 35 days. 14
The predictions from the regulated open access model point to and explain
several interesting facts about modern fisheries. First, regulated fisheries are likely
to attract even more redundant capital than was predicted by Gordon’s unregulated
open access model. The degree to which this is true depends, in fact, directly
on the degree to which regulations are successful in holding biomass close to a safe
level. At higher biomass levels, more potential rents exist, generating more entry
pressure which must be controlled with efficiency decreasing policies. Second, as
real prices rise Ž due to population growth ., the industry equilibrium curve in Fig. 3
shifts upward, causing the equilibrium to slide along the regulatory equilibrium
hyperbola. Thus it is almost inevitable that over the long run, more capacity is
attracted and regulations are tightened. This explains the process we observe
whereby in many fisheries, seasons have been reduced to a few weeks, days, and
even hours. Finally, this model suggests some important but sometimes counterintuitive
links between regulations, the output market, and rent dissipation. In
particular, as seasons and other regulations are tightened, a likely market consequence
is that exvessel prices are lower than they would otherwise be. For example,
short seasons result in poorly delivered and handled product, and high storage
costs. As prices are affected by regulatory actions, rent dissipating pressures are
actually mitigated somewhat. Thus the direct effects of the regulatory process are
to draw in more capacity than the Gordon model would suggest, but dampened
somewhat due to indirect effects of regulations on the market. This in turn explains
recent observations about fisheries that have become rationalized with individual
transferable quota Ž ITQ.
programs. In many of these, a surprising outcome has
been that most of the immediate rent gains have seemed to emerge on the revenue
rather than the cost side. 15 But this is what we would expect: as the system is
released from its restrictive regulatory structure which reduces revenues, the first
easy gains come from new marketing opportunities engendered both the unconstrained
system and also by the new incentives generated under property rights
based regulations.
Rent Dissipating Capacity Function
APPENDIX A
This appendix discusses the shape of the equation depicting industry equilibrium
in a regulated open access setting. Industry behavior is assumed to be driven by
14
Cf. U.S. Department of Commerce 23 .
15
Cf. Wilen and Homans 25 , Wilen and Homans 26 .