Fisheries Economics & Policy: Maximum Economic Yield

ok let’s say we have a stock of fish a population of fish and we see that the caches are steadily falling every year and it’s probably from fishing too much or maybe the catch isn’t falling it’s staying about the same from year to year but we notice that the number of boats on the stock is increasing and the size of the boats is increasing and the technology they’re using is becoming more advanced the amount of effort that seems to be going into fishing is increasing but the catches are not if there’s more effort being put into fishing but there’s not more fish being caught it’s a pretty clear sign that the population is probably declining this exact thing happened to the Grand Banks Cod off the eastern coast of Canada the scientists who monitored the fish population calculated the fish stock was on the decline but the policymakers saw that there were still high catches from the fishermen and thought scientists with their math and their hipster glasses but the stock was indeed over fished and the catches weren’t changing because of the increased technology because nothing was done the population continued to decline and eventually the catches did too as of now there’s been a ban on fishing Cod for over 20 years because the population has been so low increasing effort without increasing catches is a sign of an unhealthy population anyways it may be clear that fishing needs to decrease on a particular stock but to what degree in this video we’re going to look at what we should be aiming for in a fishing quota first let’s try to model how fish populations behave let’s say this line represents fish population this axis is population and this axis is time or something let’s say there’s not a lot of fish in the beginning so we’re down here they’re going to reproduce but at first their population isn’t going to rise that fast because there’s not a lot of fish reproducing as their population increases more and more fish reach sexual maturity and the population rises faster but then growth slows down as food and habitat space becomes scarce and then eventually the death rate equals the birth rate this is the highest population this particular environment can fit the carrying capacity in reality ecosystems are dynamic and this level is always always changing for example if some food sources are depleted or the fish find other food sources or if they move around and this is no small effect and when setting quotas we can’t ignore that but for our model here we’re just going to treat it as constant so what this is showing is that down here when the population is low the growth rate is low and also when the population is high the growth rate is low somewhere in the middle is where the fast growth is happening okay let’s take this same information but model the population growth rate as it changes with the population we’re assuming the population is the only thing that affects the growth rate so when the population is zero the growth rate is zero because there’s no fish to reproduce at low populations the growth rate is low but as the population Rises then reproduction rises at some point food and habitat are starting to limit growth reproduction rates are still high but they’re starting to decline the growth rate slows and slows until the carrying capacity is reached okay so this is basically showing the same thing as this other graph when the population is in the middle the growth is fast when the population is low or when it’s high the growth is slower but what this graph can show us is what amounts of fish we can take and how it affects the population if the fish population was here then the fish is growing by this amount so we know we can take that amount and by next time the population wouldn’t have changed if the population was still here but we took below that line then next period the population would be greater if we keep taking that amount the population will grow and grow and grow until it reaches here now we’re at the growth line for this fish if we take this much again the population isn’t going to change if the population we’re here but we took this much fish then we’re taking more than that periods amount of growth and next time the fish population will be lower if we still take that much the next period then it will be lower and lower and lower what I’m calling the period will depend entirely on the ecology of the fish and requires a bit more insight for simplicity we’re just sort of assuming that it’s the growth in between fishing seasons and it only depends on the population of the fish if you take a catch below the line the population will rise by next period if you take above the line the population will fall by next period catches along the line won’t change the population so if you take an amount of fish in these areas here the catch is sustainable the population will change but only until it reaches the line in this way the line is an equilibrium for the catches but if the amount of fish is taken in this area then the population will decline keep taking in those areas and the population might collapse so it’s always safer to be fishing when the population is high if the population is low we’ll want to try to take an amount from below the line so the population is safely given room to grow okay so based on this how much should we be taking well of the caches along the line this point here allows us to take the maximum amount to fish each period this is the maximum sustainable yield taking any higher will result in a declining population so we could try to take a little bit less when the population is good just for safety I think this was actually an old basis for setting fishing quotas but it’s pretty shallow I mean maybe it would be fine if our goal was to take as much fish out of the water as fast as we can but that’s not our goal our goal or rather the fisherman’s goal and Fisher women who will hereby be referred to collectively as fishermen fishermen will want to make as much money as they can for as long as they can so our goal is to maximize the economic rent from fishing and to do it sustainably for as long as possible if you’re new to the term economic rent don’t worry about it just think of it as profit for now the difference between the costs and the revenue there are some important differences between rent and profit which is why we’re bringing it up but for here if you just think of it as profit you’ll do just fine but I’m going to call it rent anyway so let’s change this graph to reflect that we’re trying to maximize the amount of money made instead of looking at what amount of fish is taken from period to period sustainably let’s change this to what amount of money can be made sustainably from period to period the line changes from what caches are sustainable to what earnings are sustainable we’re going to keep the line the same shape you can look at it like it’s just whatever fish was caught was then sold and the price of fish isn’t ever changing okay now this is a revenue curve the total revenue curve from the amount of fish caught for the bottom axis we have population but we’re assuming the population is only changing because of what we are doing that is how much effort we’re putting into fishing so let’s track that instead and change this axis to fishing effort this is how the population will be experienced by the fishing industry on a cost and revenue basis the population is low then they have to put more effort into finding and catching fish because there’s less fish to find there’s less fish in every net effort is a term that refers to a few things it could refer to how long people are fishing or how many people are fishing or how advanced the fishing gear is it’s about how much equipment is on the fish stock so more boats fishing more time spent fishing more advanced equipment more efficient techniques or all increasing the amount of effort while money and fish catch were directly related effort and population are actually inversely related as the population decreases more fishing effort is required to find out where they are and there’s less fish in every net or we could look at it like the more effort put into fishing the lower the population will be but we want low effort over here and have the effort increasing so we’re going to switch the axis so that high fish population is here and low population is over here as fishing effort increases so look at it like this we’ve come to a new stock the population is high because we haven’t touched it yet and the more effort that’s put into fishing the lower the overall population gets ok so now this graph is what are the sustainable earnings when certain amounts of fishing effort are put in let’s say we come to a new stock at the beginning when the population is at carrying capacity the equilibrium catch is zero right the population is as high as it can be there’s no net growth so there’s no amount of fish that we can take without affecting the population if we put in some effort the equilibrium catch increases we freed up some room for the fish to grow and the growth rate increases so the equilibrium catching pieces but it’s still of the high population is limiting the growth rate of the fish as we put in more effort we keep freeing up room for the fish and the growth rate increases until it reaches this point the maximum sustainable yield coming up to this point the population was still limiting growth a little bit but after this point it’s the fact that the population is lower and there’s less fish reproducing that’s limiting growth and this trend continues until there’s no more fish reproducing keep in mind we change this axis from population to effort with the old graph when we caught a certain amount of fish the population changed and we could sort of track how the population changed when certain amounts of fish were taken season to season but we can’t do that with this graph there’s no population anymore for example let’s say we come to a new stock and we put in a ton of effort there’s tons of boats fishing on it is the total revenue going to be this measly amount of money well no that first season they’re going to catch a lot and the industry will have a high total revenue the relationship between effort and revenue for one season would look more like this the more effort you put in the more fish you catch until there’s no more fish to catch here you can put in more effort but you’re not going to make any more money but with this graph when we refer to this amount of effort being put in we mean after many seasons and an equilibrium has been reached remember that previous chart if we try to catch this amount the population will change until the catch equals the growth rate along the line this level showing the amount of fish that’s taken is kind of like the effort kind of when we look at this graph we’re assuming an equilibrium like that has already been reached this is after many seasons okay okay to determine the economic rent we need to know what the costs are let’s pretend there’s only one person fishing on this stock and fishing effort will measure just as the amount of time they’re spending fishing the first week of fishing costs this much the second week costs this much the third well each week costs the same the total cost line is going to be a straight line we’re just assuming additional units of effort extra weeks of fishing always cost the same amount okay to maximize economic rent we want the spot where the difference between the revenue and the costs is greatest there is an equation to derive it personally I’m just going to eyeball it it is here we can fish more and make more total revenue but the cost will increase by more from that point so the total economic rent will actually go down that’s no good compare that to if we were back here and we wanted to put in more effort that total revenue increases by more than the total cost so we should be putting in more effort we can be making additional rent this spot is the maximum economic yield it’s the amount of effort where the rent is maximized at the maximum economic yield the catch will be sustainable the rent is highs it can be everyone’s happy and note that the maximum economic yield is at a lower fish catch send the maximum sustainable yield even though we’re catching less fish more rent is being generated and also the population is larger so it will be more resilient to other stresses but the problem is fishermen don’t study a graph pick this point and say I’m going to fish with this amount of effort they live day by day year by year trying to maximize their personal rent so we need to look at this graph in a different way let’s look at it in steps to see how the fishermen are thinking we need to examine the marginal cost and marginal benefits let’s say in between each of these lines is one week again we’re still assuming this is one fisherman if the Fisher fishes for one week they’ll make this much revenue and pay this much costs if the Fisher fishes for two weeks they’re making this much revenue and paying this much in costs but the extra revenue of the marginal revenue from an extra week sketch is this amount the extra costs from an additional week is this amount the third week of fishing will give them this much additional total revenue and they’ll have to pay this much additional total costs as I fill these in note here pass the maximum sustainable yield the total revenue is actually going down they would be spending so many weeks on the stock that the population is getting to a point where additional effort is damaging the fish’s productivity okay how many weeks is the Fisher going to fish they’ll fish until the marginal revenue is no longer greater than the marginal costs when the extra week of fishing costs more than the money from the fish again eyeballing it it looks about here where the marginal revenue equals the marginal costs they could spend another week fishing but they wouldn’t catch enough fish to cover the cost of gas and labour and whatever it’s just not worth it so they’ll stop interesting one person fishing alone will stop fishing at the maximum economic yield which is great in all but a stock of fish is almost never fished by one person okay so what happens when the stock of fish is under an open-access scenario fished by multiple people they’re going to be fishing with slightly different incentives so let’s change this up we’ll use the same chart but this time let’s measure fishing effort as the number of boats on the water this will be just for simplicity this will be the same effect whether we’re talking about increasing technology or creasing amount of time they’re each spending fishing any other effort measure the important thing is there are multiple people using the resource now one fisherman will stop at the maximum economic yield if you kept fishing he could make more money but not enough to cover those new costs it’s the same thing with multiple boats and if the industry were acting as a single unit they wouldn’t add any additional boats the additional catch doesn’t cover the additional costs but the new boat doesn’t see it that way they’re not getting this amount of revenue which wouldn’t cover the costs right they’re there with everyone else they share a total of the revenue of the industry the total number of fish caught and the revenue only increased by a little bit but they’re not making decisions based on that they only see their share okay so an individual or a group acting as an individual will think does this extra effort make the whole pie bigger No then screw it but working within a group that’s not working together people will think does this extra effort make my slice bigger the individual has the opportunity to gain more by in essence trying to get a bigger portion of the pie so if we assume the fishermen always share an equal portion of the catch then they’re each coming away with just the total revenue divided by the total number of boats okay so it’s this line here in between each of these lines is no longer one week but the amount of effort that one boat puts in each boat makes this amount in revenue and spends this amount in costs okay so this was where an individual would stop fishing more effort means less rent but here the extra person coming in can earn some additional rent by basically taking a little bit of everyone else’s remember back there at the maximum economic yield was where rent was maximized we’re only going down in rent by going forwards but people will keep entering the fishery because they don’t see it that way even past this point when the total revenue is actually decreasing the new fishermen still see rent to earn people will keep entering the fishery until that is no longer the case that is here when the total revenue equals the total costs now when you boat won’t enter the fishery they would buy a boat hire a crew and never find enough fish to cover those costs this is the amount of effort that a group under open access will put in at this point the total revenue equals the total costs and there’s no rent being made there’s less rent being made and in this case less fish being caught and significantly more effort being put in than back at the maximum economic yield also they could have got the same amount over here for way less effort and way more rent and now we’re potentially in a danger zone for collapse this is all less than ideal we want to be fishing back here at the maximum economic yield while one fisherman will stop there anyway a group needs extra incentive to cooperate and that’s our next goal and the rest of this series we’re going to look at a few more challenges facing fishing industries today and then what are some things we can do to try to structure a fishery so that people fish at the maximum economic yield where population is relatively healthy and the rent is high

  1. Great video Jesse (@This Place). i really like your videos , because you always manage to make it easy to understand and still very informative . also the animation is simple but still unambiguous . (y)

  2. ah man, life saver. never managed to completely grasp this concept when its explained by "boring" lecturers

  3. These videos are amazing! Thank you so much for putting the effort in with the graphics and explanations 🙂 I'm trying to do something with e-waste (very low level, exploratory stuff at the moment:, would you do a series of videos for that topic?

  4. what if the problem was the increasing of fisherman population, in an area where they live from catching fishes ?

  5. Just to spread some knowledge. The North Sea is empty because it didn't belong to anyone. It originally belonged to the UK fishing fleet, but then got opened up to the EU after which Spanish and French boats ran rampage.

  6. Thank you soooo much for this! Totally cleared up a lot of concepts surrounding MSY. One suggestion: instead of lumping women into 'fishermen' replace the noun with 'fisherpeople.' Much appreciated by us women.
    Thanks again for the great, colorful explanation, I'm marginally more confident for my econ exam!

  7. Thank you, this is a really good alternative. I think i wasted a lot of time trying to understand it from my books.

  8. These videos are outstanding. One of the challenges of economics as it relates to the general public is that they don't understand it. Economics does not have what physics has in, for example, Neil Degrasse Tyson who makes physics and astronomy a far more approachable topic for the public. These videos bring a similar, simplified yet thorough approach. High praise to you, sir.

  9. 9:52 Anyone have the actual equation?
    I believe it's just taking the derivative of the red line and setting it equal to the derivative of the green line, then solving for x.

  10. awesome video!! great explanation and neat presentation:))) Also your voice is so soothing ahhh enjoyed this lecture!!

  11. these videos are amazing thank you so much!!! reasoning is clear and intuitive and the pace is just right 🙂

  12. Can you explain what the formula for MSY is?
    Is it dN/dt = rN(1-(N/K)) – H
    ……..or is it rN(1-(N/K)) = H

    If we only are concerned with how much we can harvest, do we only care about the first formula? For example, if the initial population of fish for a particular year is 368, should we only use the first formula (dN/dt = rN(1-(N/K)) – H) because we only want to see see how much we are taking out of the population?

  13. I have to draw diagrams where an open access renewable resource is harvested below the social optimun and 2nd above the social optimum but without becoming completely extinct… I have not clarify which is the social optimum in open access the point where profit is zero and nowone can enter the fishery or the point that we can have the maximum sustainable yield?

  14. Very helpful but you spoke so so fast..i kept pausing to grasp and absorb this bioeconomic theory..thanks alot anyway…

  15. i know i commented yesterday but youre literally the reason im going to pass. do more videos, or tutor me. I pay handsomly

  16. So at the point where marginal revenue = marginal cost and they arent gaining profits anymore… is it called the bioeconomic equilibrium?

  17. terima kasih ada video ini, bisa membantu kami melihat tingkat degradasi suatu danau, sehingga bisa mengambil langkah restocking sesuai dengan kebutuhan

Leave a Reply

Your email address will not be published. Required fields are marked *