Economic Trade-Offs and the North Carolina Shrimp Fishery: Comment

In a recent Journal article, Waters, Easley, and Danielson (WED) offered calculations purporting to show the economic trade-offs of fishery regulation designed to reduce the discard of juvenile pink shrimp caught incidentally by fishermen harvesting brown shrimp. Reducing the cull of juvenile pink shrimp by seasonal closure or prohibiting night shrimping implies that the mature pink shrimp catch will be augmented later in the season. WED argue that such regulations would reduce the brown shrimp harvest. Consequently, an economic tradeoff arises. Although WED conclude that the incidental catch and discard problem are not severe enough at this time to warrant new regulations to protect juvenile pink shrimp, they have ignored both the common property aspects of the fishery and the response of fishing effort to the potential increase in yields. Following the model of Gordon and Scott (1955), assume that the total cost of fishing is a linear function of fishing effort. Further assume, as do WED (p. 126), that the demand for shrimp harvested in North Carolina waters is perfectly elastic. For shrimp, the revenue/yield curve can be assumed concave in the relevant range, with a positive first derivative. Under common property access, the Gordon and Scott model predicts that entry will take place until all rents are dissipated; that is, average revenue per unit of fishing effort will equal average cost. If the yield of pink shrimp were increased by allowing more juveniles to reach maturity, the revenue/yield function would shift upward and effort would increase. Once again, total revenue would equal total costs. The economic benefits from enhancement of the pink shrimp fishery via regulation are, in this case, equal to zero. However, in the WED formulation the calculated gross benefits to the pink shrimp fishery are positive. The reason for this is that they treated effort as exogenous. WED's equation (9) (p. 126) assumes no adjustment of fishing effort as yield increases. They essentially ignored the common property aspects of the fishery by not incorporating an effort response function into their model. In the real world, returns to fishery enhancement may not be zero even in an open access fishery. First, if demand is not perfectly elastic, there will be gains in consumer surplus from a larger net catch. Second, fishermen are not identical, and their supply to the industry is not infinitely elastic. Accordingly, rents may not be totally dissipated in an open-access fishery except for the marginal entrant. Third, there are likely to be lags in response to an enhancement project. Thus, benefits of enhancement may be positive over the short run even when the long-run effort supply function is perfectly elastic. Much recent discussion of fishery regulation concerns the response of effort to changes in property rights and regulations (Scott 1979 and Wilen). Limited entry, gear restrictions, and seasonal closures, for example, affect the amount of effort supplied since each fisherman will adjust at the relevant margins. To ignore supply response by individual fishermen in an open-access fishery, or even a regulated one, implies either that the harvesting costs do not matter and/or that effort is somehow exogenously determined. Estimates of economic trade-offs that ignore fishing effort changes due to regulation are primarily biological measures. They are likely to overstate the economic benefits.