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Economic and biological data needs in fisheries research
Economic and biological data needs in fisheries research
Hans Frost and Richard S. Johnston
Activities within a fishery are biological, technical and economic. Biological activities pertain to the dynamics of fish stocks, such as the relationship between stock size and growth, factors affecting natural mortality, and the extent and nature of species interdependency. Technical activities refer to the physical harvest process, ie the relationship between catch and the amount of equipment, gear, labour, vessels, etc used. Economic activities include processes which determine prices, costs and income levels. All three sets of activities are interdependent and the purpose of this article is to illustrate this interdependence through the use of two examples: fisheries management and economic sector analysis. Keywords: Fisheries gy; Economics
management;
Biolo-
Hans Frost is with the Institute of Fisheries Economics, Esbjerg, Denmark. Richard Johnston is with the Department of Agricultural and Resource Economics, Oregon State University, USA. Helpful comments on an earlier draft were provided by Susan Hanna, Bruce Rettig, and Fred Smith. Partial support was provided by the Oregon State University Sea Grant Program. A modified version of a portion of this paper was presented at the 71 st Statutory Meeting of the International Council for the Exploration of the Sea. ‘Colin
W. Clark, Mathematical
mics: The Optima/ Management
Bioeconoof Renewand Sons,
able Resources, John Wiley New York, 1976. *Briefly, rent is the difference between revenues and costs associated with the fishery. For a more complete discussion, continued on page 63
62
For purposes of classification, activities within a fishery may be labklled as biological, technical and economic. In fact, there is a large degree of interdependence among them. This suggests that biologists and economists should be sensitive to the data needs of each other. The purpose of this paper is to illustrate this interdependence through the use of the two examples: fisheries management and economic sector analysis. The paper concludes with a call for cooperation. To the biologist, fisheries management has its foundations in conservation and stock preservation. The economist intrudes on this notion with the introduction of costs and benefits. A fish not harvested today - an investment decision - represents foregone current consumption (cost), to be weighed against the expected future return on this investment (benefit). Alternatively, the cost of harvesting for current consumption includes the foregone opportunity to consume larger and more abundant fish in the future, as well as the value of goods and services which could have been produced by the resources (effort) used in current harvest. Some appreciation of what determines these costs and benefits is gained through understanding the results of private economic decisions, such as why the movement of fishing effort into a fishery during periods of rising revenues is more rapid than the exit of effort from the same fishery when revenues are declining.
Economics,
biology and fisheries policy
With resource allocation decisions in a growing share of the world’s oceans being made by public bodies which have (often vaguely-defined) responsibility for the social good, increasing attention is being paid to the economist’s cost-benefit calculus. This permits consideration of not only the biological consequences of such decisions but also the e&nomic: who gains, who loses, and what are the impacts on local, regional, national and, in some cases, international product? When costs and benefits transform a biological into a ‘bioeconomic’ objective,’ the notion of sustainable yield is replaced by that of economic yield, which, at least theoretically, is a measure of the rent2 that would accrue to the open-access fishery were it in the hands of
0308-597X/85/010062-07$03.00
0
1985 Butterworth
& Co (Publishers)
Ltd
Economic continued
from
page 62
see Lee G. Anderson, 1977. The Economics of Fisheries Management, Johns Hookins Universitv Press. Baltimore. 1977. Chapter 2. 3An excellent discussion of the interdependencies among stock abundance, landings, and prices in a particular setting is found in Daniel D. Huppert, ‘Economic analysis for northern anchovy management’, in Lee G. Anderson, ed, Economic Analysis for Fisheries Management Plans, Ann Arbor Science, Ann Arbor, 1981, Chapter 3. 4James A. Crutchfield, ‘Some economic aspects of the halibut program’, in James A. Crutchfield, ed, Biological and Economic Aspects of Fisheries Management, University of Washington, Seattle, 1959, pp 76-79. %ee, for example, Pacific Fishery Management Council, ‘Socioeconomic trends in the ocean salmon fisheries and potential socioeconomic impacts of proposed management measures’, in Proposed Plan for Managing the 1983 Salmon Fisheries Off the Coasts of California, Oregon, and Washington, Portland, Oregon, 1983. ‘Yutaka Hirasawa, ‘Demand and market conditions for fishes in Japan, especially minced Alaska pollock’, Proceedings of the International Seafood Trade Conference, Anchorage, Alaska, 812 September 1982, Alaska Sea Grant Report No 83-2, Fairbanks, Alaska, 1983. ‘Frederick Bell, Food From the Sea: The Economics and Politics of Ocean Fisheries. Westview Press, Boulder. Colorado. 1978. ‘Frederick Waugh and Virgil Norton, ‘Some analvses of fish prices’, Workinc Paper No -22, Bureau ‘of Commercial Fisheries, 1969. ‘Nancv E. Bockstael, ‘Diseauilibrium and seafood trade modelling’, Pioceedings of the International Seafood Trade Conference, Anchorage, Alaska, 8-12 September 1982, Alaska Sea Grant Report No 83-2, Fairbanks, Alaska, 1983. “‘William S. Jensen, The Salmon Processing Industry Part One: The Institutional Framework and Its Evolution, Oregon State University Sea Grant College Program Publication No ORESU-T-003, Corvallis, Oregon, 1976. “Rebecca J. Lent, ‘Wholesale price determination in the salmon market’, Proceedings of the International Seafood Trade Conference, Anchorage, Alaska, 8-l 2 September 1982, Alaska Sea Grant Report No 83-2, Fairbanks, Alaska, 1983. ‘*A. Nelson Swartz, ‘The Pacific coho salmon fishery: an intraseasonal and interregional economic analysis of the exvessel market’, PhD dissertation, Oregon State University, 1979. 13A Desmond O’Rourke, ‘Marketing and distribution problems with extended jurisdiction’, in Lee G. Anderson, ed, Economic Analysis of Extending Fisheries Jurisdiction, Ann Arbor Science, Ann Arbor, 1977, continued on page 64
MARINE
POLICY January
1985
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research
private, competing owners - a potential contribution to social product. Rents and other economic values are reflected in prices - at least at the margin - and, thus, it is understandable that some attention is devoted to how these prices are determined. When fishing effort is curtailed by government fiat, for example, there may be profound effects on the price of fish and on the financial returns to vessels, labour, and other factors of production, both those which are removed from the fishery and those which remain. New degrees of uncertainty resulting from changes in management authority may have similar results. When these effects are among the factors considered by fishery managers and policy makers, as is the case when the income levels of their constituents are at stake, modifications in policy may emerge. Thus there are interdependencies among management policies and biological and economic results. Prices and policies Public policies which affect landings may importantly affect prices.” In addition there may be other price effects of management actions. Regulations which limit the frequency of landings and/or the quantity of some species delivered at each landing may create disincentives to fish by larger vessels in favour of smaller boats, reducing the market value of the former and increasing that of the latter. Prices of fish and shellfish are affected by seasonal availability, product form (fresh, frozen, canned, etc), size of the animal and other ‘quality’ characteristics. These, in turn, may be determined by regulations on gear type, season length, size and species mix, and fishing areas (see Crutchfield for further discussion). Policies, then, affect prices and prices affect policies. Indeed economic considerations are often stated explicitly in fishery management plans.” But fishery policies are not the only factors to play a role in the price-formation process and, if only to isolate the policy-price relationship, the role of other factors must be uncovered. Other economic factors and price determination What are these other factors? Hirasawa’ has recently reported that, in Japan at least, consumers substitute among seafood and non-seafood protein sources and that their choices depend on both income levels and relative prices. Indeed, the socioeconomic status of consumers, together with the availability and prices of substitute foods, are important arguments in the demand for, and thus prices of, seafoods (see Bell,’ Chapter 3, and Waugh and Nortons). The structure of the market plays a role in prices at various levels in the market channel and in how one studies price-determination. 9-l’ To assume that prices are determined in the presence of active competition among both buyers and sellers may obscure understanding of the actual process in particular markets. This issue has been treated by Clark and Munro in the context of fishery policy goals. l4 With increased volumes of seafood being traded internationally, exchange rates’” and trade barriersI play important roles in seafood markets. Of course the costs of harvesting, processing, and marketing fish and shellfish, including the costs of storage and transportation, all enter into the determination of seafood prices, from ex-vessel to retail leve1.‘7,18 Finally, government policies aimed at seafood markets labelling requirements, for example” - as well as those with very
Economic and biological
data needs in fisheries research
different objectives, such as foreign exchange restrictions2” have pricing implications. The study of how seafood prices are determined is a complex undertaking with heavy data demands. Biological and fisheries research
continued from page 63 Chapter 12. 14C. W. Clark and G. Ft. Munro, ‘Fisheries and the processing sector: some implications for management policy’, The Bell Journal of Economics, Autumn 1980, pp 603-616. 15Biing-Hwan Lin, ‘The role of exchange rates in the capital allocation of the multinational corporation’, Proceedings of the International Seafood Trade Conference, Anchorage, Alaska, 8-12 September 1982, Alaska Sea Grant Report No 83-2, Fairbanks, Alaska, 1983. ‘%enzo France, ‘International trade in fishery products: issues for developing countries’, Proceedings of the Internationa/ Seafood Trade Conference, Anchorage, Alaska, 8-12 September 1982, Alaska Sea Grant Report No 83-2, Fairbanks, Alaska, 1983. 17James Crutchfield and Arnold Zellner, ‘Economic aspects of the Pacific halibut fishery’, Fishery IndustrialResearch, Vol 1, No 1, Washington, DC, 1962. “J, J. Charbonneau and R. Marasco, A Positive Spatial Equilibrium Model of Oyster Markets: A Simultaneous Equation Approach, University of Maryland Agricultural Experiment Station MP873, College Park, Maryland, 1975, lgDer Hsiung Wang, ‘An econometric study of the Canadian sockeye salmon market’, PhD dissertation, Oregon State University, 1976. “Robert E. Dignon, ‘Selected European seafood markets’, Proceedings of the International Seafood Trade Conference, Anchorage, Alaska, 8-l 2 September 1982, Alaska Sea Grant Report No 83-2, Fairbanks, Alaska, 1983. “J. R. Gould, ‘Externalities, factor proportions and the level of exploitation of free Economica, 22 resources’, access November 1972, pp 383402. 22R. Bruce Rettiq and Jav J. C. Ginter, eds, Limited Entry ai a Fishery Management Tool, Proceedings of a National Conference to Consider Limited Entry as a Tool in Fishery Management, Denver, Colorado, 17-19 July 1978, University of Washington Press, Seattle, 1978. 23David Bernard et al, System Dynamic Mode/ for Pacific Hake. Prepared for Northwest and Alaska Fisheries Center, Seattle, 1981.
Indeed, the student of fish population dynamics and the research economist have much in common. Both must generate and test their hypotheses in the absence of controlled experiments. They must use data originating in events having nothing to do with research (eg market transactions, migratory patterns). Furthermore, these data must display enough variation to permit the testing of cause and effect hypotheses; otherwise, how can yield-effort and landings-price relationships be estimated? Thus it is often necessary to use data generated over long periods of time. In some cases, time series data are available (eg landings) while, in others, they are not (eg information on the tastes and preferences of both fish and humans). Beyond this a clear interpretation of existing data is often lacking, with the meaning of ‘effort’ figures being a topical example.2’*22 Conservation Fishery biologists and fishery economists can help each other. At least one recent experiment has demonstrated that meaningful insights into the interaction between biological and economic systems can result from interdisciplinary work.2” Biologists need not understand market processes or know how to study them as long as they recognize their importance in modelling human-fish relationships. Something is undoubtedly lost in treating fishing activity as exogenous in such models, for example. This activity is importantly determined by market forces (via prices) which, themselves, are influenced by the results of fishing activity (landings). Similarly, the fishery economist who fails to appreciate prey-predator relationships and other elements of fish population dynamics is tempted to treat landings exogenously and, hence, may fail to capture the importance of activities in one fishery on the observed results in another. Furthermore, there is an intimate relationship between the sources of fishing activity and the viability of the fishery sector. Here, again, biological, technical, and economic factors are involved. To understand their interdependence requires data on all three sets of activity. It is to this example that the paper now turns.
Fisheries sector models and data needs The fishery as an economic activity Suppose that the objective of the fishermen at a given point in time is to catch the largest amount of fish possible with the existing capital stock (vessels and equipment) under prevailing biological and regulatory constraints. If it is assumed that fish is supplied independently of price in the very short run, the price of fish is determined by the demand for fish. The amount of fish landed and the price result in gross income from the fishery. This income is spent to cover raw material expenditures, wages, interest including depreciation of the invested capital, and profit. The amounts of raw materials and labour are determined by technical
MARINE
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Economic
and biological data needs in fisheries research
demands of the production process and legal constraints often impose minimum requirements on the use of labour and raw materials. The prices of raw materials and labour are determined exogenously. The profit earned by the invested capital is defined as the difference between gross income and the cost of raw materials and labour. This profit minus the amount used for consumption by the owner of the capital determines, together with other financial sources, the level of investment. Now the circle is closed. The investments add to the existing capital stock. With this new capital stock fishing activity resumes, and so on. A sector
24Victor Bulmer-Thomas, Input-Output Analysis in Developing Countries, John Wiley and Sons, Chichester, 1992. z5Hans Frost, ‘An input-output table with particular reference to the Danish fishing industry’, Proceedings of the lnternafional Seafood Trade Conference, Anchorage, Alaska, 8-12 September 1982, Alaska Sea Grant Report No 83-2, Fairbanks, Alaska, 1983.
model
This interdependence can be captured within a fishery sector model. With such a model one may be able to examine the relationship between fishing activity and such economic variables as incomes, employment and prices within the sector. However, it is first necessary to describe a sector model. To begin, one might look at macroeconomic models.24 These models describe economic and technical activities for an entire country. A sector model can be constructed in accordance with the same guidelines, but only for one sector within that country. A fishery sector model, for example, should include all the main activities related to catching, processing and distribution of fish.‘” In Figure 1, the elements and the flows, measured in physical terms, are outlined for the fishery and the processing industry. Starting at the upper left corner, the basic components of demand for fish are shown.
Economic
I
I
activities
Block A
I 1 I
,
Exports
I
TOtal final demand for fish and f,shery products
DomestIc consumption
1 I I 1 Inventories I I. I
n
Actlvitv
Note: Biological activities are not specified, because the goal is to enlighten activities forming complement to biological activities.
MARINE POLICY January 1985
Figure 1. Flow chart showing
0P activities
Price
within
-
the fishery
Physical
flow direction
sector.
65
Economic
and biological data needs in fisheries research
The total demand for fish or fishery products, shown in block A, consists of exports, domestic private and public demand for human consumption and additions to inventories. To meet that demand, fishermen and processing plants produce fish and fishery products. To be able to produce, processing plants and fishing vessels require raw materials, either domestic or imported, and labour. In a short-term model, depicted here, the capital stock (plants, vessels and gear) is fixed. The term ‘fishing effort’ can be defined as the activities of vessels, gear and labour devoted to exploiting fish stocks per unit of time. Fishing effort implies fishing mortality. Changes in landings - output can be caused by changes in fishing effort as well as by changes in the abundance of fish stocks. Therefore, to produce fish it is necessary to combine production factors, fishing effort and fish stock. This implies that production of output is dependent on the characteristics of both blocks B and C. As the flow chart of Figure 1 is regarded from the demand side, the impact (monetary flows) goes from left to right. Corresponding to monetary flows, physical flows go in the opposite direction. Transformation of physical flows into economic flows is determined by prices. Price determination can be a result of the economic activities whose magnitude is determined within the flow chart (or model), or they can be fixed exogenously. Price determination takes place several times in the flow chart and the most important are shown by circles. Exogenously fixed prices can be caused by institutional factors such as labour market agreements or they can be determined on a ‘world market’ and are therefore insensitive to changes in local demand and supply. Only part of the income earned in the fishery and the processing industry flows back into the sector. Most of the income is used to purchase goods for private consumption and for investments. In the flow chart, investments in vessels or equipment impose a long-term impact on fish stocks. Short-term impacts are imposed by the amount of income, mostly earned in other sectors, people wish to spend on fish and fishery products. But the determinants of this income and factors influencing the availability of investment funds are, in general, treated outside of, rather than within, the fishery sector. Therefore, in a sector model, the entire range of economic activity is not determined endogenously, as in macroeconomic models. Data demands The purpose of constructing a flow chart is to reveal flows and stocks within the fishing sector. Model construction demands consideration of actual causal relationships with an emphasis on simplicity. The relationships selected are categorized for taxonomic and analytical convenience. Their specification is suggestive of the kinds of data needed. Final demand data (block A). Block A is composed of exports, private and public consumption and inventories. Data needs include: species for final consumption (quantities, prices); final products (quantities, prices); exports, classified by countries (quantities, prices). For most countries, statistics specify foreign trade on a satisfactory level of detail, while the statistics for domestic production and inventories do not. The reason is that it is difficult to establish a solid
66
MARINE
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Economic
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basis for collection of data on domestic consumption of fresh fish. Domestic consumption often has to be estimated, but it must be done on a continuous basis in order to create a sufficiently long time series for statistical analysis. However, very few countries provide such estimates. Furthermore, inventories of fish and fishery products are covered poorly by the official statistics. While stocks of fresh fish normally are very small, substantial stocks of fish in other forms, especially canned and frozen fishery products, might exist, depending on the market conditions. Such data are rarely available because holders of inventories are reluctant to release such information. Data on imports of fish and fishery products should be similar to those for exports. Prices, which are formed between blocks A and B, should be specified at the consumer level, thereby often including taxes and subsidies, and at other levels of the market channel (sector output prices). Production data (block B). The volume demanded, which includes domestic consumption, exports, and additions to inventory, must, by definition, be the same as the volume produced by domestic firms plus imports. Data requirements for this sector include information on: species (quantities, value), fishery products (quantities, value), and market channels (the fishing, processing, and wholesale subsectors). Processed seafoods require inputs and thus data on raw materials, including fish, are needed. These include landings by species (quantities, value) and information on other raw and subsidiary materials (quantities, value). All of these inputs may be of either foreign or domestic origin. Other factors of production for which data are needed (generally specified in physical units) are number of people employed, number and types of firms and plants, number and types of vessels and gear, production capacity, stocks (inventories), hours of daily work, and productivity. Corresponding to these physical measures are their value counterparts, which include wages, total investments (stock of real capital), interest on real capital, depreciation, profit, and value of inventories. Biological data (block C). The link between the B and C blocks is strictly physical, as no money is paid to the resources owners when fish stocks are exploited. Therefore the data are of a biological nature. Some, but by no means all of the important variables needed for economic consideration are: stock sizes (abundance indices), natural mortality, catchability, growth, and character of the fishing grounds.
Cooperation At present, many of the data needs identified in this paper are not being met. But to initiate new data-collection activities without a clear understanding of the uses to which they would be put would be counterproductive. Because the data are needed by analysts around the world, it may be appropriate to seek international cooperation. An effort to draw upon individuals around the world who are involved in public and/or private decision-making processes may result in improved consistency of data in terms of both quantity and quality. Data collection is not costless, however. Furthermore, there are political considerations involved. Biological data shared among nations
MARINE
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67
Economic
and biological data needs in fisheries research
%ternational Council for the Exploration of the Sea, General Information on the tntemational Council for the Exoloration of the Sea by the General Secretary, Charlottenlund, Denmark, 1979. 27The International Institute of Fisheries Economics and Trade, Newsletter, Summer 1983, Corvallis, Oregon. *‘Ibid. %obert L. Stokes, ‘Fisheries economics and fisheries management’, in Lee G. Anderson, ed, Economic Analysis for Fisheries Management Plans, Ann Arbor Science, Ann Arbor, 1981, Chapter 13.
are not always unbiased, especially where such data emanate from the catch figures of harvesting nations. Sharing of economic data is even more difficult. What incentives do competing countries have to exchange information on their markets? One solution to this may lie in international organizations which operate in an environment which is relatively free of political allegiances. Thus there are two missions. One is to bring biological and social sciences together; the other is to foster cooperation among scientists across political boundaries. Fishery managers and policy makers have demonstrated some understanding of the role that can be played by both biological and social scientists. Despite the refinement of bioeconomic models, interaction between the two disciplines generally takes place on an ad hoc basis. Perhaps it is time for new fora. International cooperation among biologists has already been demonstrated. A duty of the International Council for the Exploration of the Sea (ICES), for example, is ‘to promote and encourage research and investigations for the study of the sea, particularly those related to the Among the goals of the International living resources thereof’.26 Institute of Fisheries Economics and Trade,27 whose members are economists and individuals with public and private management responsibilities, is one ‘to facilitate dialogue and research on managebioeconomic modelling and data exment questions, aquaculture, change’ as well as ‘cooperative research on . . . international trade questions’.‘” For these two organizations, at least, the objectives appear to be complementary. Opportunities for cooperation may lie in the areas of data exchange, sharing of ideas on appropriate specification of and familiarizing each other with our bioeconomic relationships, respective paradigms.2” A cooperative undertaking in these areas, calling for a liaison between these and other scientific bodies, could provide a unique and productive laboratory.
MARINE
POLICY January 1985
Hans Frost and Richard S. Johnston
Activities within a fishery are biological, technical and economic. Biological activities pertain to the dynamics of fish stocks, such as the relationship between stock size and growth, factors affecting natural mortality, and the extent and nature of species interdependency. Technical activities refer to the physical harvest process, ie the relationship between catch and the amount of equipment, gear, labour, vessels, etc used. Economic activities include processes which determine prices, costs and income levels. All three sets of activities are interdependent and the purpose of this article is to illustrate this interdependence through the use of two examples: fisheries management and economic sector analysis. Keywords: Fisheries gy; Economics
management;
Biolo-
Hans Frost is with the Institute of Fisheries Economics, Esbjerg, Denmark. Richard Johnston is with the Department of Agricultural and Resource Economics, Oregon State University, USA. Helpful comments on an earlier draft were provided by Susan Hanna, Bruce Rettig, and Fred Smith. Partial support was provided by the Oregon State University Sea Grant Program. A modified version of a portion of this paper was presented at the 71 st Statutory Meeting of the International Council for the Exploration of the Sea. ‘Colin
W. Clark, Mathematical
mics: The Optima/ Management
Bioeconoof Renewand Sons,
able Resources, John Wiley New York, 1976. *Briefly, rent is the difference between revenues and costs associated with the fishery. For a more complete discussion, continued on page 63
62
For purposes of classification, activities within a fishery may be labklled as biological, technical and economic. In fact, there is a large degree of interdependence among them. This suggests that biologists and economists should be sensitive to the data needs of each other. The purpose of this paper is to illustrate this interdependence through the use of the two examples: fisheries management and economic sector analysis. The paper concludes with a call for cooperation. To the biologist, fisheries management has its foundations in conservation and stock preservation. The economist intrudes on this notion with the introduction of costs and benefits. A fish not harvested today - an investment decision - represents foregone current consumption (cost), to be weighed against the expected future return on this investment (benefit). Alternatively, the cost of harvesting for current consumption includes the foregone opportunity to consume larger and more abundant fish in the future, as well as the value of goods and services which could have been produced by the resources (effort) used in current harvest. Some appreciation of what determines these costs and benefits is gained through understanding the results of private economic decisions, such as why the movement of fishing effort into a fishery during periods of rising revenues is more rapid than the exit of effort from the same fishery when revenues are declining.
Economics,
biology and fisheries policy
With resource allocation decisions in a growing share of the world’s oceans being made by public bodies which have (often vaguely-defined) responsibility for the social good, increasing attention is being paid to the economist’s cost-benefit calculus. This permits consideration of not only the biological consequences of such decisions but also the e&nomic: who gains, who loses, and what are the impacts on local, regional, national and, in some cases, international product? When costs and benefits transform a biological into a ‘bioeconomic’ objective,’ the notion of sustainable yield is replaced by that of economic yield, which, at least theoretically, is a measure of the rent2 that would accrue to the open-access fishery were it in the hands of
0308-597X/85/010062-07$03.00
0
1985 Butterworth
& Co (Publishers)
Ltd
Economic continued
from
page 62
see Lee G. Anderson, 1977. The Economics of Fisheries Management, Johns Hookins Universitv Press. Baltimore. 1977. Chapter 2. 3An excellent discussion of the interdependencies among stock abundance, landings, and prices in a particular setting is found in Daniel D. Huppert, ‘Economic analysis for northern anchovy management’, in Lee G. Anderson, ed, Economic Analysis for Fisheries Management Plans, Ann Arbor Science, Ann Arbor, 1981, Chapter 3. 4James A. Crutchfield, ‘Some economic aspects of the halibut program’, in James A. Crutchfield, ed, Biological and Economic Aspects of Fisheries Management, University of Washington, Seattle, 1959, pp 76-79. %ee, for example, Pacific Fishery Management Council, ‘Socioeconomic trends in the ocean salmon fisheries and potential socioeconomic impacts of proposed management measures’, in Proposed Plan for Managing the 1983 Salmon Fisheries Off the Coasts of California, Oregon, and Washington, Portland, Oregon, 1983. ‘Yutaka Hirasawa, ‘Demand and market conditions for fishes in Japan, especially minced Alaska pollock’, Proceedings of the International Seafood Trade Conference, Anchorage, Alaska, 812 September 1982, Alaska Sea Grant Report No 83-2, Fairbanks, Alaska, 1983. ‘Frederick Bell, Food From the Sea: The Economics and Politics of Ocean Fisheries. Westview Press, Boulder. Colorado. 1978. ‘Frederick Waugh and Virgil Norton, ‘Some analvses of fish prices’, Workinc Paper No -22, Bureau ‘of Commercial Fisheries, 1969. ‘Nancv E. Bockstael, ‘Diseauilibrium and seafood trade modelling’, Pioceedings of the International Seafood Trade Conference, Anchorage, Alaska, 8-12 September 1982, Alaska Sea Grant Report No 83-2, Fairbanks, Alaska, 1983. “‘William S. Jensen, The Salmon Processing Industry Part One: The Institutional Framework and Its Evolution, Oregon State University Sea Grant College Program Publication No ORESU-T-003, Corvallis, Oregon, 1976. “Rebecca J. Lent, ‘Wholesale price determination in the salmon market’, Proceedings of the International Seafood Trade Conference, Anchorage, Alaska, 8-l 2 September 1982, Alaska Sea Grant Report No 83-2, Fairbanks, Alaska, 1983. ‘*A. Nelson Swartz, ‘The Pacific coho salmon fishery: an intraseasonal and interregional economic analysis of the exvessel market’, PhD dissertation, Oregon State University, 1979. 13A Desmond O’Rourke, ‘Marketing and distribution problems with extended jurisdiction’, in Lee G. Anderson, ed, Economic Analysis of Extending Fisheries Jurisdiction, Ann Arbor Science, Ann Arbor, 1977, continued on page 64
MARINE
POLICY January
1985
and biological
data needs in fisheries
research
private, competing owners - a potential contribution to social product. Rents and other economic values are reflected in prices - at least at the margin - and, thus, it is understandable that some attention is devoted to how these prices are determined. When fishing effort is curtailed by government fiat, for example, there may be profound effects on the price of fish and on the financial returns to vessels, labour, and other factors of production, both those which are removed from the fishery and those which remain. New degrees of uncertainty resulting from changes in management authority may have similar results. When these effects are among the factors considered by fishery managers and policy makers, as is the case when the income levels of their constituents are at stake, modifications in policy may emerge. Thus there are interdependencies among management policies and biological and economic results. Prices and policies Public policies which affect landings may importantly affect prices.” In addition there may be other price effects of management actions. Regulations which limit the frequency of landings and/or the quantity of some species delivered at each landing may create disincentives to fish by larger vessels in favour of smaller boats, reducing the market value of the former and increasing that of the latter. Prices of fish and shellfish are affected by seasonal availability, product form (fresh, frozen, canned, etc), size of the animal and other ‘quality’ characteristics. These, in turn, may be determined by regulations on gear type, season length, size and species mix, and fishing areas (see Crutchfield for further discussion). Policies, then, affect prices and prices affect policies. Indeed economic considerations are often stated explicitly in fishery management plans.” But fishery policies are not the only factors to play a role in the price-formation process and, if only to isolate the policy-price relationship, the role of other factors must be uncovered. Other economic factors and price determination What are these other factors? Hirasawa’ has recently reported that, in Japan at least, consumers substitute among seafood and non-seafood protein sources and that their choices depend on both income levels and relative prices. Indeed, the socioeconomic status of consumers, together with the availability and prices of substitute foods, are important arguments in the demand for, and thus prices of, seafoods (see Bell,’ Chapter 3, and Waugh and Nortons). The structure of the market plays a role in prices at various levels in the market channel and in how one studies price-determination. 9-l’ To assume that prices are determined in the presence of active competition among both buyers and sellers may obscure understanding of the actual process in particular markets. This issue has been treated by Clark and Munro in the context of fishery policy goals. l4 With increased volumes of seafood being traded internationally, exchange rates’” and trade barriersI play important roles in seafood markets. Of course the costs of harvesting, processing, and marketing fish and shellfish, including the costs of storage and transportation, all enter into the determination of seafood prices, from ex-vessel to retail leve1.‘7,18 Finally, government policies aimed at seafood markets labelling requirements, for example” - as well as those with very
Economic and biological
data needs in fisheries research
different objectives, such as foreign exchange restrictions2” have pricing implications. The study of how seafood prices are determined is a complex undertaking with heavy data demands. Biological and fisheries research
continued from page 63 Chapter 12. 14C. W. Clark and G. Ft. Munro, ‘Fisheries and the processing sector: some implications for management policy’, The Bell Journal of Economics, Autumn 1980, pp 603-616. 15Biing-Hwan Lin, ‘The role of exchange rates in the capital allocation of the multinational corporation’, Proceedings of the International Seafood Trade Conference, Anchorage, Alaska, 8-12 September 1982, Alaska Sea Grant Report No 83-2, Fairbanks, Alaska, 1983. ‘%enzo France, ‘International trade in fishery products: issues for developing countries’, Proceedings of the Internationa/ Seafood Trade Conference, Anchorage, Alaska, 8-12 September 1982, Alaska Sea Grant Report No 83-2, Fairbanks, Alaska, 1983. 17James Crutchfield and Arnold Zellner, ‘Economic aspects of the Pacific halibut fishery’, Fishery IndustrialResearch, Vol 1, No 1, Washington, DC, 1962. “J, J. Charbonneau and R. Marasco, A Positive Spatial Equilibrium Model of Oyster Markets: A Simultaneous Equation Approach, University of Maryland Agricultural Experiment Station MP873, College Park, Maryland, 1975, lgDer Hsiung Wang, ‘An econometric study of the Canadian sockeye salmon market’, PhD dissertation, Oregon State University, 1976. “Robert E. Dignon, ‘Selected European seafood markets’, Proceedings of the International Seafood Trade Conference, Anchorage, Alaska, 8-l 2 September 1982, Alaska Sea Grant Report No 83-2, Fairbanks, Alaska, 1983. “J. R. Gould, ‘Externalities, factor proportions and the level of exploitation of free Economica, 22 resources’, access November 1972, pp 383402. 22R. Bruce Rettiq and Jav J. C. Ginter, eds, Limited Entry ai a Fishery Management Tool, Proceedings of a National Conference to Consider Limited Entry as a Tool in Fishery Management, Denver, Colorado, 17-19 July 1978, University of Washington Press, Seattle, 1978. 23David Bernard et al, System Dynamic Mode/ for Pacific Hake. Prepared for Northwest and Alaska Fisheries Center, Seattle, 1981.
Indeed, the student of fish population dynamics and the research economist have much in common. Both must generate and test their hypotheses in the absence of controlled experiments. They must use data originating in events having nothing to do with research (eg market transactions, migratory patterns). Furthermore, these data must display enough variation to permit the testing of cause and effect hypotheses; otherwise, how can yield-effort and landings-price relationships be estimated? Thus it is often necessary to use data generated over long periods of time. In some cases, time series data are available (eg landings) while, in others, they are not (eg information on the tastes and preferences of both fish and humans). Beyond this a clear interpretation of existing data is often lacking, with the meaning of ‘effort’ figures being a topical example.2’*22 Conservation Fishery biologists and fishery economists can help each other. At least one recent experiment has demonstrated that meaningful insights into the interaction between biological and economic systems can result from interdisciplinary work.2” Biologists need not understand market processes or know how to study them as long as they recognize their importance in modelling human-fish relationships. Something is undoubtedly lost in treating fishing activity as exogenous in such models, for example. This activity is importantly determined by market forces (via prices) which, themselves, are influenced by the results of fishing activity (landings). Similarly, the fishery economist who fails to appreciate prey-predator relationships and other elements of fish population dynamics is tempted to treat landings exogenously and, hence, may fail to capture the importance of activities in one fishery on the observed results in another. Furthermore, there is an intimate relationship between the sources of fishing activity and the viability of the fishery sector. Here, again, biological, technical, and economic factors are involved. To understand their interdependence requires data on all three sets of activity. It is to this example that the paper now turns.
Fisheries sector models and data needs The fishery as an economic activity Suppose that the objective of the fishermen at a given point in time is to catch the largest amount of fish possible with the existing capital stock (vessels and equipment) under prevailing biological and regulatory constraints. If it is assumed that fish is supplied independently of price in the very short run, the price of fish is determined by the demand for fish. The amount of fish landed and the price result in gross income from the fishery. This income is spent to cover raw material expenditures, wages, interest including depreciation of the invested capital, and profit. The amounts of raw materials and labour are determined by technical
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demands of the production process and legal constraints often impose minimum requirements on the use of labour and raw materials. The prices of raw materials and labour are determined exogenously. The profit earned by the invested capital is defined as the difference between gross income and the cost of raw materials and labour. This profit minus the amount used for consumption by the owner of the capital determines, together with other financial sources, the level of investment. Now the circle is closed. The investments add to the existing capital stock. With this new capital stock fishing activity resumes, and so on. A sector
24Victor Bulmer-Thomas, Input-Output Analysis in Developing Countries, John Wiley and Sons, Chichester, 1992. z5Hans Frost, ‘An input-output table with particular reference to the Danish fishing industry’, Proceedings of the lnternafional Seafood Trade Conference, Anchorage, Alaska, 8-12 September 1982, Alaska Sea Grant Report No 83-2, Fairbanks, Alaska, 1983.
model
This interdependence can be captured within a fishery sector model. With such a model one may be able to examine the relationship between fishing activity and such economic variables as incomes, employment and prices within the sector. However, it is first necessary to describe a sector model. To begin, one might look at macroeconomic models.24 These models describe economic and technical activities for an entire country. A sector model can be constructed in accordance with the same guidelines, but only for one sector within that country. A fishery sector model, for example, should include all the main activities related to catching, processing and distribution of fish.‘” In Figure 1, the elements and the flows, measured in physical terms, are outlined for the fishery and the processing industry. Starting at the upper left corner, the basic components of demand for fish are shown.
Economic
I
I
activities
Block A
I 1 I
,
Exports
I
TOtal final demand for fish and f,shery products
DomestIc consumption
1 I I 1 Inventories I I. I
n
Actlvitv
Note: Biological activities are not specified, because the goal is to enlighten activities forming complement to biological activities.
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Figure 1. Flow chart showing
0P activities
Price
within
-
the fishery
Physical
flow direction
sector.
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The total demand for fish or fishery products, shown in block A, consists of exports, domestic private and public demand for human consumption and additions to inventories. To meet that demand, fishermen and processing plants produce fish and fishery products. To be able to produce, processing plants and fishing vessels require raw materials, either domestic or imported, and labour. In a short-term model, depicted here, the capital stock (plants, vessels and gear) is fixed. The term ‘fishing effort’ can be defined as the activities of vessels, gear and labour devoted to exploiting fish stocks per unit of time. Fishing effort implies fishing mortality. Changes in landings - output can be caused by changes in fishing effort as well as by changes in the abundance of fish stocks. Therefore, to produce fish it is necessary to combine production factors, fishing effort and fish stock. This implies that production of output is dependent on the characteristics of both blocks B and C. As the flow chart of Figure 1 is regarded from the demand side, the impact (monetary flows) goes from left to right. Corresponding to monetary flows, physical flows go in the opposite direction. Transformation of physical flows into economic flows is determined by prices. Price determination can be a result of the economic activities whose magnitude is determined within the flow chart (or model), or they can be fixed exogenously. Price determination takes place several times in the flow chart and the most important are shown by circles. Exogenously fixed prices can be caused by institutional factors such as labour market agreements or they can be determined on a ‘world market’ and are therefore insensitive to changes in local demand and supply. Only part of the income earned in the fishery and the processing industry flows back into the sector. Most of the income is used to purchase goods for private consumption and for investments. In the flow chart, investments in vessels or equipment impose a long-term impact on fish stocks. Short-term impacts are imposed by the amount of income, mostly earned in other sectors, people wish to spend on fish and fishery products. But the determinants of this income and factors influencing the availability of investment funds are, in general, treated outside of, rather than within, the fishery sector. Therefore, in a sector model, the entire range of economic activity is not determined endogenously, as in macroeconomic models. Data demands The purpose of constructing a flow chart is to reveal flows and stocks within the fishing sector. Model construction demands consideration of actual causal relationships with an emphasis on simplicity. The relationships selected are categorized for taxonomic and analytical convenience. Their specification is suggestive of the kinds of data needed. Final demand data (block A). Block A is composed of exports, private and public consumption and inventories. Data needs include: species for final consumption (quantities, prices); final products (quantities, prices); exports, classified by countries (quantities, prices). For most countries, statistics specify foreign trade on a satisfactory level of detail, while the statistics for domestic production and inventories do not. The reason is that it is difficult to establish a solid
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basis for collection of data on domestic consumption of fresh fish. Domestic consumption often has to be estimated, but it must be done on a continuous basis in order to create a sufficiently long time series for statistical analysis. However, very few countries provide such estimates. Furthermore, inventories of fish and fishery products are covered poorly by the official statistics. While stocks of fresh fish normally are very small, substantial stocks of fish in other forms, especially canned and frozen fishery products, might exist, depending on the market conditions. Such data are rarely available because holders of inventories are reluctant to release such information. Data on imports of fish and fishery products should be similar to those for exports. Prices, which are formed between blocks A and B, should be specified at the consumer level, thereby often including taxes and subsidies, and at other levels of the market channel (sector output prices). Production data (block B). The volume demanded, which includes domestic consumption, exports, and additions to inventory, must, by definition, be the same as the volume produced by domestic firms plus imports. Data requirements for this sector include information on: species (quantities, value), fishery products (quantities, value), and market channels (the fishing, processing, and wholesale subsectors). Processed seafoods require inputs and thus data on raw materials, including fish, are needed. These include landings by species (quantities, value) and information on other raw and subsidiary materials (quantities, value). All of these inputs may be of either foreign or domestic origin. Other factors of production for which data are needed (generally specified in physical units) are number of people employed, number and types of firms and plants, number and types of vessels and gear, production capacity, stocks (inventories), hours of daily work, and productivity. Corresponding to these physical measures are their value counterparts, which include wages, total investments (stock of real capital), interest on real capital, depreciation, profit, and value of inventories. Biological data (block C). The link between the B and C blocks is strictly physical, as no money is paid to the resources owners when fish stocks are exploited. Therefore the data are of a biological nature. Some, but by no means all of the important variables needed for economic consideration are: stock sizes (abundance indices), natural mortality, catchability, growth, and character of the fishing grounds.
Cooperation At present, many of the data needs identified in this paper are not being met. But to initiate new data-collection activities without a clear understanding of the uses to which they would be put would be counterproductive. Because the data are needed by analysts around the world, it may be appropriate to seek international cooperation. An effort to draw upon individuals around the world who are involved in public and/or private decision-making processes may result in improved consistency of data in terms of both quantity and quality. Data collection is not costless, however. Furthermore, there are political considerations involved. Biological data shared among nations
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%ternational Council for the Exploration of the Sea, General Information on the tntemational Council for the Exoloration of the Sea by the General Secretary, Charlottenlund, Denmark, 1979. 27The International Institute of Fisheries Economics and Trade, Newsletter, Summer 1983, Corvallis, Oregon. *‘Ibid. %obert L. Stokes, ‘Fisheries economics and fisheries management’, in Lee G. Anderson, ed, Economic Analysis for Fisheries Management Plans, Ann Arbor Science, Ann Arbor, 1981, Chapter 13.
are not always unbiased, especially where such data emanate from the catch figures of harvesting nations. Sharing of economic data is even more difficult. What incentives do competing countries have to exchange information on their markets? One solution to this may lie in international organizations which operate in an environment which is relatively free of political allegiances. Thus there are two missions. One is to bring biological and social sciences together; the other is to foster cooperation among scientists across political boundaries. Fishery managers and policy makers have demonstrated some understanding of the role that can be played by both biological and social scientists. Despite the refinement of bioeconomic models, interaction between the two disciplines generally takes place on an ad hoc basis. Perhaps it is time for new fora. International cooperation among biologists has already been demonstrated. A duty of the International Council for the Exploration of the Sea (ICES), for example, is ‘to promote and encourage research and investigations for the study of the sea, particularly those related to the Among the goals of the International living resources thereof’.26 Institute of Fisheries Economics and Trade,27 whose members are economists and individuals with public and private management responsibilities, is one ‘to facilitate dialogue and research on managebioeconomic modelling and data exment questions, aquaculture, change’ as well as ‘cooperative research on . . . international trade questions’.‘” For these two organizations, at least, the objectives appear to be complementary. Opportunities for cooperation may lie in the areas of data exchange, sharing of ideas on appropriate specification of and familiarizing each other with our bioeconomic relationships, respective paradigms.2” A cooperative undertaking in these areas, calling for a liaison between these and other scientific bodies, could provide a unique and productive laboratory.
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