Economic Efficiency in Common Property Natural Resource Use: A Case Study of the Ocean Fishery

"The common property ocean fishery is often cited as an example of economic inefficiency in production. The usual recommendation is to restrict entry of fishermen so that 'incomes' of those remaining are improved. Such logic would seem to indicate that the economic theory of common property natural resource use is not well developed. It was with this premise that the current investigation commenced."A mathematical model of productive interdependence among firms in a common pool situation was developed. Following this, the concept of rising supply price for an industry exhibiting productive interdependence was introduced. The concept of a fishing-day was introduced and it was argued that the firm viewed a fishing-day as one of its variable inputs."When the above concepts were combined With the biological model presented, a bioeconomic model of the fishery evolved. The model permitted illustration of the impact upon industry output from changes in: (1) technology; (2) demand for the product; and (3) fish population; and the chain of ramifications which result, when current production is something other than the sustained yield of the fish in stock."The usual charge that a common property fishery is 'inevitably overexploited' was evaluated in the context of the bioeconomic model and seen to be false. The traditional recommendation, to restrict entry such that fleet marginal cost equals fleet marginal revenue, so as to maximize 'rent,' was shown, instead, to. merely create higher than competitive returns (profit) for remaining fishermen. The disregard for those: fishermen excluded, by such action was questioned on equity grounds, as well as on grounds of economic efficiency. It was also demonstrated that depending upon demand for the product and technology of the industry, equating, fleet marginal cost with fleet marginal revenue was not sufficient proof that the fish stock would not be overfished."