Total Revenue Specifications
Cost Specification Biomass Utilization E-C Schaefer1
Short-run Cost:2
Effort (E*) 179,159 traps 198,523 traps
Catch (C*) 5,576,306 pounds 5,909,496 pounds
(31 pounds per trap) (30 pounds per trap)
Profit $13,720,529 $14,182,009
($76.58 per trap) ($71.44 per trap) Long-run Cost:
Effort (E*) 158,619 traps 178,655 traps
Catch (C*) 5,391,621 pounds 5,730,632 pounds
(34 pounds per trap) (32 pounds per trap)
Profit $14,278,428 $12,704,075
($90.02 per trap) ($71.11 per trap)
1Where q = 0.000001807
2Assuming each vessel owned 1,279 traps (the sample average) in order to calculate total fixed
national minimum wage. If the actual labor payment or opportunity costs of labor were higher, the estimated profits per trap and optimal number of traps would be
overestimated.
The total profits estimated from each MEY solution can be used to estimate the optimal certificate price under the assumption that the price of a certificate should equal the profits derived from its use. This price is the profit per trap when the total number of traps are at the optimum. Using the model that produced the most conserva- tive optimal effort level and highest profits (Table 13.1, short-run bioutilization model), the upper-bound estimate of the optimal certificate price for a one-year time period would equal approximately $90.
From the bioeconomic analysis, we know the value of each certificate (trap) if the total number of traps were optimal (i.e., from approximately 160,000 to 200,000). If the transfer market for trap certificates is working properly (e.g., buyers and sellers can exchange easily) and buyers anticipate the increased profits predicted by the
bioeconomic models, observed certificate transfer prices should closely match the esti- mated optimal certificate values. Differences between reported certificate prices and estimated optimal certificate values could be used as a rough approximation of the gains from certificate reductions, that is, the gains from moving toward the maximum economic yield solution.
During the 1996-97 season, 604,920 certificates were available — approximately three times the optimal number of traps — and reported certificate prices averaged from $4.47 to $15.52 depending on the certificate type and calculation method (Milon et al. 1998). Although lower than the price that would be expected if the number of traps were near optimal (i.e., $70-$90, Table 13.1), these prices are near the value expected with the current number of traps (544,000 in 1998-99). For example, given an average annual yield of 12.8 pounds per trap and average price of $3.79 per pound, gross returns are approximately $48.50 per trap. Net returns would range from $9.69 to $18.77 using the estimated long- and short-run marginal costs, respectively. For com- parison, the annual profit per trap from the BU model would equal $13.30 at the 1998- 99 certificate level. Consequently, the trap values from the estimated bioeconomic mod- els are similar to the average transfer prices reported to date, indicating that current certificate prices do not reflect potential future profits in the fishery.
CONCLUSIONS
Effort reductions under the Florida spiny lobster TCP have made progress toward the goal for the program established by the Florida Legislature. From the 1991-92 to 1998-99 seasons, the total number of traps declined approximately 35 percent and the average yield per trap increased 42 percent (Milon et al. 1998). As a result, the average reported transfer price has increased each year. The bioeconomic analysis revealed that if reductions were to continue until the economically efficient number of traps is
reached (i.e., approximately 60 percent of current trap numbers), economic efficiency in the fishery would reach a maximum. Certificate values would increase from less than
$20 to $70-$90 per certificate (the reported and optimal prices, respectively), conse- quently, industry profits would increase approximately four-fold. Resource managers could redistribute, if desired, a portion of the increased returns to the citizens of Florida in the form of an equitable rent per trap (Florida Statute 370.142(2)). However, given the current reduction schedule (10 percent reductions every two years), 10 additional reductions are required to reach the optimum (i.e., 20 years at best). This relatively slow adjustment period delays potential economic benefits to the industry. In addition, reductions are imposed in the form of percentages against each individual’s total cer- tificate holdings. This continual down-sizing is an inefficient means of removing effort since it requires each participant to repeatedly purchase certificates to return to their previous size; it does not allow participants to remain at their optimal size and may disproportionately impact small firms.
The bioeconomic analysis indicates that future effort reductions in the commercial spiny lobster fishery could significantly increase the profit per trap and the value of certificates. The estimated optimal number of traps, however, could imply a significant reduction in the total number of vessels in the fishery. For example, using the average number of traps per vessel (1,279) reported in the recent cost study by Milon et al. (1999) and the most conservative total effort level from this study (158,619 traps from the biomass utilization model), optimal fleet size would equal 124 vessels, a 75 percent reduction in the number of full-time operators.
The optimal bioeconomic solutions described in this paper are intended as a base- line against which other important factors can be considered, including: (1) equity issues within the fishery, such as the relative harvest of competing commercial or recre- ational participants; (2) social costs stemming from the re-allocation of effort to other fisheries; (3) the loss of jobs that might result from reductions in the total number of traps in the fishery; and (4) rising administrative costs. The bioeconomic analysis and the evaluation of the trap certificate program also provide valuable insights into the strengths and weakness of one of the nations first transferable rights programs. It pro- vides an example of how economic analysis can be used to evaluate the effects of one approach to correcting problems in fisheries management. Other fisheries considering transferable licensing/effort permits may benefit from the experiences of the trap cer- tificate program. Conducting a bioeconomic analysis prior to implementation would allow consideration of changes in the numbers of participants and effort levels that can be factored into feasibility and impact studies.
REFERENCES
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Ehrhardt, N.M. 1994. The lobster fisheries off the Caribbean Coast of Central America. B. Cambridge, Massachusetts: Phillips, J. Cobb, and J. Kittaka, eds. In Spiny Lobster Management, pp. 133-143. Blackwell Scientific Publications Inc.
Hartwick, J.M. and N.D. Olewiler. 1998. The Economics of Natural Resource Use, Second edi- tion. New York: Addison-Wesley Educational Publishers Inc.
Hunt, J.H. 1994. Status of the Fishery for Panulirus argus in Florida. B. Phillips, J. Cobb, and J. Kittaka, eds. In Spiny Lobster Management, pp. 158-168. Cambridge, Massachusetts: Blackwell Scientific Publications Inc.
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Milon, J.W., S.L. Larkin and N. Ehrhardt. 1999. A Bioeconomic Analysis of the Florida Spiny Lobster Fishery. SGR 117, Gainesville: Florida Sea Grant College Program.
Milon, J.W., S.L. Larkin, D.J. Lee, K.J. Quigley and C.M. Adams. 1998. The Performance of Florida’s Spiny Lobster Trap Certificate Program. SGR 116, Gainesville: Florida Sea Grant College Program.
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Prochaska, F.J. and J.C. Cato. 1980. Economic considerations in the management of the Florida spiny lobster fishery. Fisheries 5(4):53-56.
Economic analysis methods have been used in Florida to identify positive and negative financial impacts on those who are required to comply with proposed regulations for pro- tecting water resources. In the Northern Tampa Bay area, economic analyses were used to develop regulations that restrict groundwater withdrawals, while having minimal neg- ative financial impacts to the regulated entities, and to address concerns regarding potential significant negative economic effects. This case study describes how financial and economic analyses were used to establish minimum flows and levels for priority water resources. It also summarizes the environmental resource concerns, the legisla- tive and regulatory actions taken, the purpose and uses of the financial and economic analyses, and the methods and results of selected analyses undertaken during this process.