1
Ragnar Arnason*
On Applied Fisheries Economics
A paper given at the
XIII EAFE Conference
Salerno
April 18-20 2001
FIRST ROUGH DRAFT
Not to be quoted without consulting the author
* University of Iceland
1
0.Introduction
In this lead-off talk, the organizers of this conference have asked me to talk about “research in applied fisheries economics” or alternatively “economic theory as applied to fisheries economics”. Clearly these topics are far to broad to do any kind of justice in the time that has been allotted. Therefore, I will be forced to be quite selective in my address. More precisely, what I propose to do is to restrict my talk to certain sub-topics:
First I would like to consider briefly what we mean when we are talking about applied fisheries economics models. This will inevitably take us into the field of the philosophy of science. My contention is that virtually all fisheries economics models are applied. The difference is only the degree of applicability.
Then, in place of model classification based on applicability, I will propose a classification based on the content of the models. In particular I will divide all fisheries models into either theoretical or empirical models acknowledging, of course, that the dividing line between the two may often be quite unclear. The third class of fisheries models, numerical fisheries models may be either empirical or theoretical although most empirical models are numerical.
In the third section of the paper, I will briefly recount the essential history of applied fisheries economics modelling since the early 1950s. This I will do within the framework for classification presented in the previous section, discussing in turn theoretical, management, empirical and numerical models.
Following this in the fourth section of the paper, I would discuss specifically a particular type of applied fisheries economics models that I have given some thought in recent years, namely endogenous optimization fisheries models. My contention there is that this type of models constitutes a theoretical advance on the more traditional type of models and, with recent advances in computer technology, perfectly feasible.
Finally, in the last section of the paper, I will say a few words about the future of empirical fisheries modelling as I see it?
- What is Applied Fisheries Economics
It seems useful to begin by briefly reviewing some fundamental concepts of the philosophy of science.
Positive vs. normative science
The philosophy of science distinguishes between positive and normative science. Positive science is the science that is concerned with describing and explaining phenomena. It is in a sense passive. It does not, or at least it does not intend to, change anything. Normative science, on the other hand, is concerned with achieving or, more precisely, describing how to achieve objectives. Normative science, by its very nature, is not passive. It explicitly aims at a change.
It is illuminating to note that normative science needs description and explanation of the phenomenon in question to be effective. Normative science, in other words needs positive science. It is not the other way around. Positive science can be conducted perfectly well without normative science. Hence positive science is more fundamental than normative science.
Normative science as applied science
Normative science is concerned with describing ways to change the conditions of the physical and social world, in accordance with some specified objectives. It is, moreover, based on positive science. Thus, normative science seems very close to what we often call applied science. It applies positive science to achieve objectives.
Fisheries economics as a normative science
Fisheries economics, since its inception in the 1950s[1], has always been motivated by the desire to solve what is generally called the fisheries problem, i.e. the severe economic inefficiency characterizing traditional fisheries. The bulk of accumulated work in fisheries economics is of this nature, i.e. descriptions and prescriptions as to how to solve the fisheries problem. Hence, one would not be far off by saying that fisheries economics is essentially a normative science. One might even say that fisheries economics as a whole is one of the normative appendages of economic science.
Fisheries economics as applied economics
If fisheries economics is essentially a normative science then it also follows that fisheries economics as a whole may be regarded as applied science. From this perspective it is merely the application of economic and biological science to the particular problems arising in the area of fisheries.
This, of course, does not mean that there are no positive elements in fisheries economics. As already stated, any normative science has to be based on positive science, i.e. a careful description and analysis of the facts of the matter. Hence the same applies to fisheries economics. Applied fisheries economics must be based on (a) positive economic and biological theory and (b) a positive description and analysis of the situation at hand.
So where do we stand?
We have concluded that fisheries economics is essentially an applied branch of positive economics. However, to be effective, it needs not only the general economic theory. It also needs positive description and analysis, i.e. positive fisheries economics. Thus, as in any other area of normative or applied science, the normative results are found to be based on a positive scientific description and inseparable from the normative elements
This of course raises the question whether it is actually useful in practice to attempt to separate applied economics from the other parts of economics. Isn’t all economics in the end normative and applied? Isn’t the ultimate purpose of all science to change the world for the better?
A practical definition?
These considerations suggest the need for a practical definition of applied fisheries economics. There are many possibilities. Here is one:
Applied fisheries economics is any fisheries economics designed to improve the operation of actual fisheries.
It will be immediately noted that this is a very wide definition. At first glance, it seems to include virtually all that currently passes for fisheries economics. After all, isn’t all fisheries economics concerned with improving the performance of actual fisheries directly and indirectly?
That may be the case. However, it is clear that some areas of fisheries economics are less concerned with the improvement of actual fisheries than others. Consider for instance studies of the impacts of fisheries management systems on the income distribution, geographical habitation or social structures, and the study of quota prices to find out whether exhibit random walk behaviour over time. Of course these kinds of studies have a potential application to the improvement of real fisheries. The point, however is that these applications are somewhat remote from the actual studies. Hence, it seems that this definition excludes some research within what would normally be regarded as fisheries economics.
What then about theoretical papers. For instance, Scott Gordon´s famous 1954 paper was clearly concerned with improving the operation of actual fisheries. Yet it did not deal with any particular fishery. Neither did it produce much recommendations as to how to improve the operation of fisheries in general. Was that an applied piece of fisheries economics research or not?
Another adaptation of a common definition of applied scientific research to fisheries economics can be phrased as follows:
Applied fisheries economics consists of the application of theory to real world situations.
This definition however does not help much. With this definition, it is for instance still unclear whether Gordon´s (1954) paper is applied research or not. After all it is the application of economic and biological theory to the problem of fisheries. On the other hand it the theory (in the definition) is fisheries economic theory, the paper, since it develops that theory, seems to be non-applied. The above-mentioned types of studies the impacts of fisheries management systems on the various economic and social variables and the random walk behaviour of quota prices would however, clearly be applied research according to this definition
A continuum of applied research
As the foregoing discussion indicates, it is difficult to provide a precise definition for applied fisheries economics or, for that matter applied science in general. Theoretical (or basic) and applied research bare simply too interwoven. One blends into the other almost seamlessly. Moreover, it is difficult to think of any research that does not have any practical application. This suggests that the whole thing may be more usefully regarded as a continuum from the least applied to the most with no clear demarcation point where basic research turns into applied research.
This, of course, applies to fisheries research also. It ranges from the least applied to the most applied. Whether we characterize a particular piece of research as applied or not is largely a matter of perspective and of little practical consequence. We have already stated that most fisheries research can be regarded as applied. Of course funding agencies may want to encourage research in some particular area of this spectrum. It is not uncommon for them to seek strongly applied research. In so doing they should, however, be mindful that heavily applied research must be founded on basic research, so an excessive emphasis on practical, applicable results may ultimately reduce the supply and quality of such results.
- Fisheries Model Classification
Rather than attempt to classify research according to applicability which, as we have seen, is a somewhat pointless exercise, it may be more useful to consider another dimension for research classification. This is the dimension of theoretical research vs. empirical research and the corresponding classification of fisheries models into theoretical models and empirical models. This will help us to locate particular models that we may come across in the general landscape of all fisheries models. Remember that fisheries models are in our parlance synonymous with fisheries research.
Broadly speaking we may divide all fisheries models into two main classes; (i) theoretical models and (ii) empirical models. The difference between these two types of models is that the former does not have any particular empirical content, i.e. it does not contain a description of any particular fisheryonly fisheries in general, while the latter contains a specific empirical description often (but not always) in a numerical form of the features of one or more particular fishery.
While this classification of fisheries models into theoretical and empirical models is analytically useful, the distinction is often blurred in reality. Of course, theoretical models must have some empirical content. Otherwise, they would not be of much interest. Similarly, many empirical models, for instance the so-called stylized models, have little specific empirical content. Thus, we should recognize that there are cases where it is actually difficult to classify a model as either theoretical or empirical. To emphasize this, we have, in Figure 2, where we have divided the set of economic fisheries models into theoretical and empirical models, drawn a broad grey dividing line between the two.
There is a third category of fisheries models of considerable importance. This is the class of numerical models. Numerical models contain numerical descriptions of the subject and, as a result, are capable of produce numerical outcomes. Most empirical models are numerical. But this is not logically necessary. It is easy to think of empirical models as consisting only of a qualitative description. Thus, generally speaking, there are empirical models that are non-numerical. Theoretical models are usually not numerical. Theoretical models generally consist of analytical relationships of a fairly general nature. However, in some cases, the analytical relationships are too intractable and theoretical analysis also resorts to numerical methods, but not necessarily empirically based, to obtain results. Thus a relatively small part of theoretical models is also numerical. This is illustrated in Figure 3, where the set of numerical models intersects both the theoretical and empirical sets of models.
It is, of course, fairly obvious why numerical models are needed as a part of empirical modelling. After all numbers are a standard way of representing empirical reality. On the other hand on may wonder why numerics are useful for theoretical modelling as well. .The main reason is that the analytical methods, by which theoretical models are examined, are only able to deal with simplest of fisheries models. As soon as the theoretical models reach the degree of complexity necessary do describe all but the simplest of fisheries situations, the analytical methods no longer suffice to derive the outcomes. Under those circumstances numerical models and numerical simulations are needed to complement the theoretical analysis.
- Applied Fisheries Models: A Brief History
Let us now briefly look at the evolution of applied fisheries models during the about 50 year history of the science. To assist us in reviewing this history the following diagram in Figure 3 may be useful.
A. Theoretical Models
The first theoretical models of consequence emerged in 1950s. These were the standard static fisheries economics models of the type developed by Gordon (1954) and Scott (1955)[2] although the latter attempted to indirectly account for dynamic considerations. With little modification these models are still with us today forming the core of undergraduate teaching in fisheries economics and, indeed, renewable natural resource economics. They also continue to form the basis of simple policy thinking in the area.
These models may be regarded applied models for at least three reasons. First they were developed in order to improve the economic operation of fisheries. Gordon, for instance was commissioned to study the fisheries problem by the Canadian government. Second, by explaining the root cause of the fisheries problem and providing a model structure to describe it, they suggested various ways to overcome the problem. Thus, the Gordon type of analysis suggested the curtailing of fishing effort and the reduction of fisheries profitability by the imposition of taxes. The Scott type of analysis focussed attention on the number of owners and, consequently, the property rights structure. Third, these simple models provided a structural form description of the fishery that could be estimated by real data and thus turned into an numerical, empirical model.
The 1960s saw further advances in the applied static modelling. Thus, e.g. Turvey (1964) extended the Gordon-Scott model to indirectly take account of multi-cohort fisheries with the help of the so-called eumetric yield curve. His analysis generated the policy advice to seek ways to increase fish gear selectivity (by area closures and mesh size adjustments).
More importantly, however, the 1960s and early 1970s saw the emergence of explicitly dynamic models and the application of control theory to the problem of fisheries. The first step of note in this respect was the Crutchfield-Zellner empirical study of the Pacific halibut fishery in 1962. In that study, which was otherwise based on the static Gordon-Scott type of anlaysis, Arnold Zellner, then a young research assistant, set out in an appendix the essential equations of the dynamic fisheries model that was to be extensively studied for the next two decades.
In the late 1960s, Vernon Smith, completed this analysis by developing, in a number of papers (Smith 1968, 1969), explicit models describing the dynamic evolution of competitive fisheries (and other renewable natural resource extraction). Ultimately, in collaboration with Quirk (Quirk and Smith 1970) Vernon Smith managed to derive equations describing the dynamics of an optimally managed fishery.
The 1970s and was the period of the development of optimal dynamic analysis in theoretical fisheries modelling. Several pathbreaking papers emerged. Papers by Quirk and Smith (1970) and Plourde (1970) set out the essential equations describing the optimal dynamics of fisheries. Clark and Munro (1975) explicity solved the linear type of fisheries model employing control theory. In so doing they managed to explain completely the capital theoretic nature of the fisheries problem and to highlight the importance of the rate of discount for the optimal equilibrium solution. Finally, Colin Clark summarized the state of the theoretical modelling in his book in 1976
Following these works there was a flurry of papers deriving optimal solutions to the various specifications of the dynamic fisheries model. One may say that this path of research came to an end with the paper by Clarke, Clark and Munro (1979) which derived the optimal solution paths to the standard dynamic fisheries model with two stock variables, i.e. the fish stock and stock of fishing capital. The extreme analytical complexity of this paper, demonstrated to the profession that this was as far as it was possible to progress in analytical optimal dynamic.
The application aspect of these dynamic models was very similar that of the Static models. First, the motivation for the studies was the same as before, namely to improve the operation of real fisheries. Second, the outcomes of the dynamic models alerted fisheries managers to certain complicating aspects of real fisheries, i.e. their inherent cycles and the possibility of stock collapses along dynamic adjustment paths. Thirdly, these models suggested a more appropriate functional structure for empirical models describing the fisheries than the Gordon-Scott type of analysis.
Consequently, from the 1980s to the end of the century, theoretical analysis has not sought to probe much deeper into the nature of optimal dynamics. It has been primarily concerned with various extensions and elaboration of the existing simple models. Among these we may mention (i) simple multispecies models, (ii) stochastic fisheries models and optimal stochastic control, (iii) migratory fish stocks, (iv) transboundary and high seas fisheries, (v) heterogeneous fishermen and (vi) the downstream implication of the fisheries problem on the fish markets and the processing industry. Various authors have contributed to these theoretical refinements. Again the applications are obvious.
B. Management Theory
The theoretical fisheries model of the 1950-1980 were primarily concerned with describing the nature and extent of the economic inefficiency of common property fisheries and to derive and to compare them with the optimal harvesting paths. These models were not particularly concerned with the fisheries management problem. The implicit assumption seems to have been that it would be a relatively simple matter, primarily a question of political will, to implement the optimal harvesting paths. Towards the end of the 1970s, as the main tenets of fisheries economics theory had become fairly well understood and accepted and more fishing nations were seriously trying to improve their fisheries, it became increasingly clear that effective fisheries management was no easy matter. It turned out to be easier said than done to generate and maintain economic rents from the fisheries.