A Model of Regulated Open Access Resource Use

More documents

Recommendations

Info

2 HOMANS AND WILEN fisheries were virtually unregulated and operating under open access conditions. H. S. Gordon’s 10 important paper had just appeared, pointing out how open access fisheries inevitably dissipate potential rents and as a result, economists’ early discussions about regulations focused on normative issues such as: how can regulations be designed in order to coax an open access fishery closer to a rent maximizing ideal? The extension of jurisdiction by coastal nations in 1976 changed the institutional context of fisheries dramatically since virtually all of the most important fisheries suddenly came under the authority of adjacent coastal nations. This important change set the stage for a new era of regulated fisheries use by legitimizing coastal nations’ authority to explicitly manage the use of their fisheries. As coastal nations have begun to exert more regulatory control over their adjacent fisheries, economists have continued to focus primarily on normative issues associated with regulatory design. There have been several important policy contributions emerging from this work. Economists were instrumental, for example, in framing management legislation Ž such as the Magnuson Act. in a manner that incorporated socioeconomic as well as biological goals and in promoting rationalization schemes including limited entry and transferable quota schemes. Interestingly, however, in their descriptive analytical and empirical work, economists have continued to depict fisheries as if they are still operating under pure open access conditions. This is in spite of the fact that most modern fisheries are heavily influenced by regulatory structures which proliferated especially after the extension of coastal jurisdictions at the end of the seventies. A question which might be asked is, why not simply incorporate regulations as technological constraints and treat them as a minor modification of the basic open access model? The answer to that question is that the regulatory structure is fundamentally more important than this, particularly as a force affecting the character of fisheries in the long run. Moreover, regulatory constraints are not simply exogenous but instead are fluid and an outcome of purposeful behavior by institutions with goals and objectives. The menu of regulatory instruments is often extensive and regulators actively choose both the suite of instruments and their respective levels in a manner that reflects current and expected future conditions in each fishery. When external factors change, regulations also change in response and hence regulations are fundamentally endogenous and dynamic. The implications of these observations are at least three. First, the technological and behavioral character of modern fisheries is intimately bound up with the nature and operation of the regulatory structure. Not only will technology and behavior be affected by the regulatory structure, but so also will the health and attributes of the harvested species. Second, discussions of policy alternatives need to measure the gains from rationalization relative to the appropriate status quo. Regulated fisheries may look considerably different from what would emerge under pure open access and they may, in fact, even be generating substantial economic rents. Finally, modeling the evolution of fisheries and particularly forecasting future conditions must account for not only the dynamics of the biomass and the technology and behavior of the industry but also the dynamics of the behavior and technology of the regulatory apparatus. This places an even greater burden on modelers to know and understand the particular features of the fisheries they are modeling. In this paper we present a model of a regulated open access fishery which we believe more accurately captures some of the features of modern fisheries. It is
REGULATED OPEN ACCESS RESOURCE USE 3 important to highlight that this is a predictive rather than a normative model; we are interested in modeling and understanding the implications of structures which exist in real world setting rather than addressing questions about whether they are efficient or which institutions might be optimal. The model developed elevates the role of the regulatory structure to one on par with consideration of industry behavior and biological dynamics. We treat the regulatory sector as rational and purposeful Ž although not necessarily efficient ., so that regulatory behavior and industry behavior jointly and endogenously determine the character of the fishery in question. We also view the process of regulatorindustry interaction as dynamic so that when internal and external conditions change, the regulatory sector responds rather than being considered simply exogenous. In the next section the conceptual model is discussed and in Section 3 this model is used to generate some hypotheses about regulated open access fisheries. Section 4 discusses results of an empirical application of the model and the concluding section summarizes the differences between our model of regulated open access use and the more widely used pure open access model. 2. A MODEL OF A REGULATED OPEN ACCESS FISHERY The model developed here has three fundamental components. First, in the industry component, it is assumed that the fishing industry commits a given amount of fishing capacity each season, based upon anticipated prices, costs, biomass level, and Ž importantly. the regulations set by the regulatory agency. Second, in the regulatory component, it is assumed that the regulatory agency selects regulations, based upon specific biologically oriented goals and the anticipated fishing capacity level of the industry. Thus there is a joint equilibrium established between the industry and the regulatory sector. Finally, in the biological component, we assume that the biomass evolves between seasons in a manner dependent upon how much has been harvested each season and the initial biomass level. The fishery is characterized by an equilibrium consisting of fishing capacity and regulation levels determined endogenously, and the biomass level. 3 The motivation for the specific characterizations of these components are as follows. 2.1. Fishermen’s Behaior H. S. Gordon’s model of rent dissipation is a useful point of departure for considering industry behavior. We assume that fishermen behave as Gordon suggested, that is, they enter in response to rents and entry proceeds until effort is earning its opportunity cost. Rents will be assumed to be the difference between industry revenues and industry costs, defined over a given fishing season. Revenues are defined as total seasonal harvest multiplied by an exvessel price P per pound. Assume that there is an instantaneous Schaefer type harvest function defined by hŽ t. qEXŽ t ., Ž 1. 3 For a more complete exposition of this model, see Homans 13 . An earlier attempt to model regulation in fisheries as endogenous is in Wilen 24 .
Page 1: Ž . JOURNAL OF ENVIRONMENTAL ECONO
Page 5 and 6: REGULATED OPEN ACCESS RESOURCE USE
Page 21: REGULATED OPEN ACCESS RESOURCE USE

A Model of Regulated Open Access Resource Use

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?