Keynote Day 2 - 1 Martin Quaas

Resilience and sustainability of resource-economic
systems
Martin F. Quaas
July 10, 2014
Martin Quaas
University of Kiel Resilience and sustainability of resource-economic systems
1/28
INTERACTIONS IN MULTI-SPECIES FISHERIES

ecological interactions: predator-prey, competition, symbiosis
economic interactions: technical (bycatch), demand-side
Martin Quaas
2/28
INTERACTIONS IN MULTI-SPECIES FISHERIES

ecological interactions: predator-prey, competition, symbiosis
economic interactions: technical (bycatch), demand-side
global trade in fishery products (FAO SOFIA 2014, Fig. 19)

Martin Quaas
2/28
OVERFISHING AND COLLAPSE OF FISH STOCKS
collapse of stocks at world-wide scale

has become focus of scientific interest
and public concern
Worm et al. (2006, Science)
Costello et al. (2008, Science)

Heal and Schlenker (2008, Nature)
empirical definition: a stock is
collapsed if catch is below z% of
historic maximum (z = 3, 6, 10)
Costello et al. (2008)
Quaas/Requate (2013). Sushi or Fish Fingers? Seafood Diversity, Collapsing Fish Stocks,
and Multi-species Fishery Management. Scandinavian Journal of Economics.
3/28
OVERFISHING AND COLLAPSE OF FISH STOCKS

consumer value seafood diversity: love of variety

collapse of fish stocks is economic problem on top of
inefficiently low stocks and yields from individual fisheries
4/28
CONSUMER PREFERENCES FOR SEAFOOD DIVERSITY
quasi-linear in income y and fish consumption

sub-utility function for fish captures love of variety (Dixit and Stiglitz 1977)
U(y , h1 , . . . , hi , . . . , hn ) = y + ln
n
X
hi
i=1
hi 0
consumption of fish species i
>1
elasticity of substitution between fish species
>0
constant aggregate expenditures for fish
5/28
MULTI-SPECIES MODEL
consumer demand for species i
hit =
pit
n
P
pjt1
j=1
pjt market price for species j at time t
from estimates of own and cross-price elasticities for

crustaceans and salmon (Asche et al. 1997): = 1.66
6/28
MULTI-SPECIES MODEL
hit =
pit
n
P
pjt1
j=1

equation of motion for stock xi of fish species i

xit
hit
x it = i xit 1
i
i intrinsic growth rate of species i
i carrying capacity of species i, normalized to i = 1
hi harvest of species i
note: no ecological interaction between species

6/28
MULTI-SPECIES MODEL
hit =
pit
n
P
pjt1
j=1

equation of motion for stock xi of fish species i
x it = i xit (1 xit ) hit
i intrinsic growth rate of species i
i carrying capacity of species i, normalized to i = 1
hi harvest of species i
note: no ecological interaction between species

6/28
MULTI-SPECIES MODEL
harvesting cost
ci (xi , hi ) = ci xii hi
ci > 0 and 0 < i 1
note: no technical interactions; perfectly malleable capital

Gordon-Schaefer: i = 1
species/stock
38 cod fisheries (mean)
98 flatfish fisheries (mean)
Baltic cod
bigeye tuna
North Sea herring
value for i
0.75
0.65
0.64
0.60
0.56
reference
Harley, Myers, and Dunn (2001)
Harley, Myers, and Dunn (2001)
Kronbak (2005:472)
Grafton et al. (2007, SI p. 7)
Bjrndal and Conrad (1987),
Nostbakken and Bjorndal (2003:351)
pollock
0.50
Quinn and Deriso (1999:28)
Northern anchovy
0.39
Opsomer and Conrad (1994:29)
Australian Northern prawn 0.40
Grafton et al. (2007)
yellow fin tuna
0.23
Grafton et al. (2007)
7/28
OPEN ACCESS
zero-profit for fishing firms

pi hi ci xii hi = pi ci xii hi = 0
hi =
pi
n
P
pj1
j=1
8/28
OPEN ACCESS

hi =
pi
n
P
pj1
j=1
market equilibrium: harvest of species i

hi =
ci xi i
n
P
j=1
(1) j
cj1 xj
8/28
OPEN ACCESS

hi =
pi
n
P
pj1
j=1
market equilibrium: harvest of species i

hi =
ci xi i
n
P
j=1
(1) j
cj1 xj
xi
n
c P
(1)
xj
j=1
assume ci = c and i = for all i for theoretical analysis

8/28
OPEN ACCESS
Lemma
Assuming 1 < 2 < ... < n , steady-state stocks under open
access are ordered according to intrinsic growth rates,
x1oa x2oa . . . xnoa .
stocks xi
0.8
0.7
0.6
0.5
0.4
0.3
species 1
species 2
species 3
0.1
species 4
species 5
0
1 1.5 2 2.5 3 3.5 4 4.5 5
0.2
elasticity of substitution
9/28
OPEN ACCESS
Lemma
Assuming 1 < 2 < ... < n , steady-state stocks under open
access are ordered according to intrinsic growth rates,
x1oa x2oa . . . xnoa .
Proposition
For all there exists some species i0 with 1 i0 < n such that
such in the neighborhood of we have:
dxioa
>0
d
dxioa
0
d
dxioa
<0
d
for all i < i0

for i = i0
for all i > i0
stocks xi
0.8
0.7
0.6
0.5
0.4
0.3
species 1
species 2
species 3
0.1
species 4
species 5
0
1 1.5 2 2.5 3 3.5 4 4.5 5
0.2
9/28
OPEN ACCESS
stocks xi
0.8
0.7
0.6
0.5
0.4
0.3
species 1
species 2
species 3
0.1
species 4
species 5
0
1 1.5 2 2.5 3 3.5 4 4.5 5
0.2
Proof:
OPEN ACCESS
Proof:
harvest
differentiate open-access
hi =
xi
n
c P
(1)
xj
j=1
stocks xi
0.8
with respect to :
0.7
0.6
0.5
hioa
= hioa
ln xi
0.4
0.3
species 1
species 2
species 3
0.1
species 4
species 5
0
1 1.5 2 2.5 3 3.5 4 4.5 5
0.2
n
P
j=1
(1)
xj
n
P
j=1
ln xj
(1)
xj
OPEN ACCESS
Proof:
harvest
differentiate open-access
hi =
xi
n
c P
(1)
xj
j=1
stocks xi
0.8
with respect to :
0.7
0.6
0.5
hioa
= hioa
ln xi
0.4
0.3
species 1
species 2
species 3
0.1
species 4
species 5
0
1 1.5 2 2.5 3 3.5 4 4.5 5
0.2
n
P
j=1
(1)
xj
n
P
j=1
ln xj
(1)
xj
differentiate steady-state condition

i xi (1 xi ) = hi implictly w.r.t. :

dhioa dxioa
hioa
oa
i (1 2 xi ) oa
=
dxi
d
{z
}
|
<0 (stability)
PREFERENCES FOR DIVERSITY MAY EXPLAIN CASCADING

COLLAPSE OF FISH STOCKS UNDER OPEN ACCESS
stocks xi
0.8
0.6
0.4
5 = 0.6
4 = 0.4
3 = 0.3
2 = 0.26
1 = 0.25
0.2
0
0
20
40
60
80
100
120
140
160
time t
high elasticity of substitution = 2
low elasticity of substitution = 1.2
11/28
PREFERENCES FOR DIVERSITY MAY EXPLAIN CASCADING

COLLAPSE OF FISH STOCKS UNDER OPEN ACCESS
stocks xi
5 = 0.6
4 = 0.4
3 = 0.3
2 = 0.26
1 = 0.25
0.8
0.6
0.4
5 = 0.6
4 = 0.4
3 = 0.3
2 = 0.26
1 = 0.25
0.2
0
0
20
40
60
80
100
120
140
time t
high elasticity of substitution = 2
160
20
40
60
80
100
120
140
160
time t
low elasticity of substitution = 1.2
11/28
OPEN ACCESS
Proposition
If the stock of some species collapses, it will do so in finite time.
Proposition
Assume 1 < 2 < ... < n and consider n species in an initial
open-access equilibrium at some given level of . If
(n + 1 i) i <
(2 )2
c (1 )1
for species i = 1, . . . , n
a threshold value (1 < < ) for the elasticity of substitution

exists such that the stocks of the n (1 n n) least resilient
species will sequentially collapse under open access fishing if the
elasticity of substitution falls from to a level equal to or below .
12/28
STRONGER PREFERENCES FOR DIVERSITY:

MORE STOCKS COLLAPSE ON AVERAGE
i
open-access harvest of species i: hi =
n
P
j=1
ci xi
(1) j
cj1 xj
percentage of steady-state stocks
open-access equilibrium stocks of all species with i > 1

strictly positive.
100
Monte-Carlo simulation
80
50 samples for 33 stocks
60
randomly drawn intrinsic

growth rates i
40
randomly drawn unit cost

ci of harvesting
randomly drawn stock

optimal # of stocks
lower bound on optimal # of stocks
elasticities of harvesting i
open-access # of stocks
lower bound on open-access # of stocks
0
1
1.4
1.8
2.2
2.6
3
13/28
20
EMPIRICAL TEST: FIRST STAGE

data: RAM legacy database (Ricard et al. 2012)
use time series of harvest (hit ) and spawning stock biomass
(for xit ) from stock assessments for n = 177 fisheries
assume open-access conditions before 1992
estimation for stock i
ln(hit ) = ln(i ) + i t + i ln(xit ) + it
point estimate
for i
Fricke/Quaas (2014). The Economic Causes of Regime Shifts in Marine Ecosystems.

Manuscipt, University of Kiel.
14/28
EMPIRICAL TEST: SECOND STAGE

are stocks with i < 1 more likely to collapse?
define dummy

D0<i <1 =
1 if 0 < i < 1
0 else

15/28

are stocks with i < 1 more likely to collapse?
define dummy

D0<i <1 =
1 if 0 < i < 1
0 else
second stage: probit

P(Dcollapse = 1) = F (1 + 2 D0<i <1 + . . .)
collapse dummy Dcollapse = Dz%
Worm et al. (2006), Costello et al. (2008): catch hit below z%
of historic maximum
here: stock xit below z% of historic maximum at any t 2002

15/28

P(Dz% = 1)
D10%
D6%
D3%
Marginal Effects (at means)

D0<i <1
ln
i
i
0.12**
-0.02
-0.49
regressor #
log likelihood
n
ncollapsed
bootstrap
replications
4
-85.41
177
36
1000
0.08
2
-88.53
177
36
1000
0.08***
-0.01**
-0.70**
4
-49.05
177
16
900
0.08***
2
-52.06
177
16
900
0.06***
-0.01***
-0.58***
4
-37.09
177
11
683
0.06***
2
-39.59
177
11
683
Significance *** 1% ** 5% * 10%. OLS in first, probit in second stage.

16/28
FIRST-BEST management of all species
SECOND-BEST management of one species k

other species i 6= k harvested under open access
effects of management on other stocks taken into account
MYOPIC management of one species

other species harvested under open access
effects of management on other stocks ignored
17/28
FIRST-BEST management of all species

maximize present-value of consumer well-being
Z
max
y + ln
y ,{hi }
t=0
X
hj
!
e t dt
taking stock dynamics of all species into account

> 0: social discount rate
2
SECOND-BEST management of one species k

other species i 6= k harvested under open access
effects of management on other stocks taken into account
constraint to optimization:
1
X 1
1
1
hk
= ci xii
hi
+
hj
for all species i 6= k
j6=k
MYOPIC management of one species

other species harvested under open access
effects of management on other stocks ignored
prices of other species assumed to remain at current levels
17/28
stocks xi
MANAGEMENT SCENARIOS
second-best management of one fish species must be less
strict than first-best managment of the same species
myopic management of one fish species is too strict compared
to second-best managment of the same species
myopic management may lead to collapse of fish stocks that
would not collapse under open access
first-best
second-best
myopic
0.8
0.7
0.6
0.5
0.4
0.3
species
species
species
species
species
0.2
0.1
0
species
species
species
species
species
1
2
3
4
5
50
100
time t
150
1
2
3
4
5
50
species
species
species
species
species
100
time t
150
1
2
3
4
5
100
200
300
time t
400
500
Model of a natural-resource-dependent economy

two resources, identical growth and harvesting cost functions
dynamically optimal harvest of natural resource
Z
X
1
1
e t dt
max
y + ln
hj1
0
j=1,2
1 > 0: degree of complementarity

> 0: social discount rate
> 1: complements
consumption res. 2, h2
< 1: substitutes
Quaas/van Soest/Baumg
artner (2013). Complementarity, impatience, and the resilience
of natural-resource-dependent economies. J. Environmental Economics and Management.19/28
pictures: http://en.wikipedia.org/wiki/Easter island
(higher-level) ecosystem services are often complements for well-being
SUBSTITUTES < 1
LOW DISCOUNT RATE < 0
1
< 1; > 0
stock of resource 2, x2
< 1; < 0
HIGH DISCOUNT RATE > 0

1
A
O
0
A0
O
1
SUBSTITUTES < 1
LOW DISCOUNT RATE < 0
1
< 1; > 0
< 1; < 0
HIGH DISCOUNT RATE > 0

1
A
O
0
A0
O
1
> 0 : A = A0 = (0, 0) for < 1
degree of complementarity
()
III
IV
II
0
social discount rate
>
() > 1: symmetric steady state is locally unstable
>
(); < 0
A
III
>
(); > 0
IV
S
A0
0
O
0
O
0
1<<
(); < 0
O
0
1
C
1<<
(); > 0
II
S
A0
C0
1
RESILIENCE MANAGEMENT
resources hit by one-time random shock = (1 , 2 ) with
bounded support at unkown time T (constant hazard rate )
(x1T , x2T ) (x1T + 1 , x2T + 2 )
(x1T , x2T ) (x1T + 1 , x2T + 2 )
optimal resilience management:
max E
ZT
0
y + ln
X
hj1
1
1
e t dt + V (x1T + 1 , x2T + 2 )
j=1,2
(x1T , x2T ) (x1T + 1 , x2T + 2 )
optimal resilience management:
max E
ZT
0
y + ln
X
hj1
1
1
e t dt + V (x1T + 1 , x2T + 2 )
j=1,2
value function of post-shock optimization problem

V (x1T + 1 , x2T + 2 )
Z
X
1
1
= max
y + ln
hj1
e t dt
T +dt
j=1,2
resource stocks xi
resource stocks xi
0.33
x1? (t) = x2? (t)
0.32
0.31
0.3
0.33
x1? (t) = x2? (t)
0.32
0.31
0.3
xS
0.29
xS
= 1.5, = 0.17
0
100
200
300
400
0.29
500
= 1.8, = 0.17
0
100
time t
200
300
400
1
C
C0
C0
500
time t
1
1
0.18
probability of regime shift
0.16
0.14
0.12
0.1
0.08
0.06
0.04
0.02
0
1.5
1.55
1.6
1.65
1.7
degree of complementarity,
1.75
1.8
SUMMARY AND CONCLUSIONS

preferences for seafood diversity and collapse of fish stocks
preferences for seafood diversity may explain cascading
collapse of fish stocks under open access
strong consumer preference for seafood diversity may lead to
low fish biodiversity
the difference between the equilibrium and optimal number of
stocks incerases with preferences for diversity
complementarity, limited resilience and collapse of economies

optimality < resilience
resilience < sustainability
(Derissen, Quaas, and Baumgartner 2011)
the coupled resource-economic system may exhibit limited
resilience, although objective is concave and ecological
dynamics are logistic
ignoring demand-side interactions may lead to false optimism

with regard to sustainability of natural resource use
Martin Quaas
27/28
Asche, F., F. Steen, and K. G. Salvanes (1997). Market Delineation and Demand Structure. American Journal of Agricultural Economics,
79(1): 139150.
Bjrndal, T. and J. M. Conrad (1987). The Dynamics of an Open Access Fishery. The Canadian Journal of Economics, 20(1): 7485.
Clark, C. W. (1990). Mathematical Bioeconomics. Wiley, New York, 2nd edition.
Costello, C., S. D. Gaines, and J. Lynham (2008). Can Catch Shares Prevent Fisheries Collapse? Science, 321(5896): 16781681.
Derissen, S., M. F. Quaas, and S. Baumg

artner (2011). The relationship between resilience and sustainable development of ecologicaleconomic systems. Ecological Economics, 70: 11211128.
Dixit, A. K. and J. E. Stiglitz (1977). Monopolistic Competition and Optimum Product Diversity. American Economic Review, 67(3):
297308.
Fricke, L. and M. F. Quaas (2014). The Economic Causes of Regime Shifts in Marine Ecosystems. Manuscript, Department of Economics,
University of Kiel.
Grafton, R. Q., T. Kompas, and R. Hilborn (2007). Economics of Overexploitation Revisited. Science, 318: 1601.
Harley, S., R. Myers, and A. Dunn (2001). Is catch-per-unit-effort proportional to abundance? Can. J. Fish. Aquat. Sci., 58(9): 17601772.
Heal, G. and W. Schlenker (2008). Sustainable fisheries. Nature, 455: 10441045.
Kronbak, L. G. (2005). The Dynamics of an Open-access Fishery: Baltic Sea Cod. Marine Resource Economics, 19: 459479.
Nostbakken, L. and T. Bjorndal (2003). Supply Functions for North Sea Herring. Marine Resource Economics, 18(4): 345361.
Opsomer, J.-D. and J. Conrad (1994). An Open-Access Analysis of the Northern Anchovy Fishery. Journal of Environmental Economics
and Management, 27(1): 2137.
Quaas, M. F. and T. Requate (2013). Sushi or Fish Fingers? Seafood Diversity, Collapsing Fish Stocks and Multi-species Fishery
Management. Scandinavian Journal of Economics, 115(2): 381422.
Quaas, M. F., D. van Soest, and S. Baumg

artner (2013). Complementarity, impatience, and the resilience of natural-resource-dependent
economies. Journal of Environmental Economics and Management, 66(1): 1532.
Quinn, T. and R. Deriso (1999). Quantitative fishery dynamics. Oxford University Press, Oxford.
Ricard, D., C. Minto, O. P. Jensen, and J. K. Baum (2012). Examining the knowledge base and status of commercially exploited marine
species with the RAM Legacy Stock Assessment Database. Fish and Fisheries, 13(4): 380398.
Worm, B., E. Barbier, N. Beaumont, J. Duffy, C. Folke, B. Halpern, J. Jackson, H. Lotze, F. Micheli, S. Ralumbi, E. Sala, K. Selkoe,
J. Stachowicz, and R. Watson (2006). Impacts of biodiversity loss on ocean ecosystem services. Science, 314: 787790.
Martin Quaas
28/28

Keynote Day 2 - 1 Martin Quaas

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Resilience and sustainability of resource-economic

July 10, 2014

INTERACTIONS IN MULTI-SPECIES FISHERIES

INTERACTIONS IN MULTI-SPECIES FISHERIES

global trade in fishery products (FAO SOFIA 2014, Fig. 19)

OVERFISHING AND COLLAPSE OF FISH STOCKS

collapse of stocks at world-wide scale

Costello et al. (2008, Science)

OVERFISHING AND COLLAPSE OF FISH STOCKS

CONSUMER PREFERENCES FOR SEAFOOD DIVERSITY

quasi-linear in income y and fish consumption

consumption of fish species i

elasticity of substitution between fish species

constant aggregate expenditures for fish

pjt market price for species j at time t

from estimates of own and cross-price elasticities for

pjt market price for species j at time t

from estimates of own and cross-price elasticities for

note: no ecological interaction between species

pjt market price for species j at time t

from estimates of own and cross-price elasticities for

note: no ecological interaction between species

note: no technical interactions; perfectly malleable capital

market equilibrium: harvest of species i

market equilibrium: harvest of species i

assume ci = c and i = for all i for theoretical analysis

for all i < i0

differentiate steady-state condition

PREFERENCES FOR DIVERSITY MAY EXPLAIN CASCADING

low elasticity of substitution = 1.2

PREFERENCES FOR DIVERSITY MAY EXPLAIN CASCADING

low elasticity of substitution = 1.2

a threshold value (1 < < ) for the elasticity of substitution

STRONGER PREFERENCES FOR DIVERSITY:

open-access harvest of species i: hi =

percentage of steady-state stocks

open-access equilibrium stocks of all species with i > 1

50 samples for 33 stocks

randomly drawn intrinsic

randomly drawn unit cost

randomly drawn stock

EMPIRICAL TEST: FIRST STAGE

Fricke/Quaas (2014). The Economic Causes of Regime Shifts in Marine Ecosystems.

EMPIRICAL TEST: SECOND STAGE

Fricke/Quaas (2014). The Economic Causes of Regime Shifts in Marine Ecosystems.

EMPIRICAL TEST: SECOND STAGE

second stage: probit

Fricke/Quaas (2014). The Economic Causes of Regime Shifts in Marine Ecosystems.

EMPIRICAL TEST: SECOND STAGE

Marginal Effects (at means)

Significance *** 1% ** 5% * 10%. OLS in first, probit in second stage.

Fricke/Quaas (2014). The Economic Causes of Regime Shifts in Marine Ecosystems.

FIRST-BEST management of all species

SECOND-BEST management of one species k

MYOPIC management of one species

FIRST-BEST management of all species

taking stock dynamics of all species into account

SECOND-BEST management of one species k

for all species i 6= k

MYOPIC management of one species

Model of a natural-resource-dependent economy

1 > 0: degree of complementarity

Significance * 1% 5% * 10%. OLS in first, probit in second stage.