Future Generations, Discount Rates and the Optimal Harvest of Fisheries Resources

Abstract

The role of discounting in determining the optimal harvest of natural resources has been extensively debated in the economic and natural resources literature. Differing approaches to discounting to address sustainability and intergenerational equity issues have the potential to significantly affect the allocation of resources between harvesting and conservation for this generation and the stock of resources available for future generations. This presents a very real problem in New Zealand where legislation requires fisheries managers to maintain the potential of the resources to meet the “reasonably foreseeable needs of future generations.” This paper investigates the appropriate use of discount rates in evaluating policy decisions that involve the intergenerational allocation of fisheries resources. Dynamic bioeconomic optimisation is used to model the effect of discount rates on the optimal harvest of a stock characterized by moderate longevity and growth. The economic and biological effects of alternative rebuilding strategies that are assumed to meet the needs of future generations are explored under alternative prices, variable costs, and rebuilding horizons. The preliminary empirical analysis revealed that higher discount rates produce lower net present values, slower rebuilding rates, and more pronounced harvest reductions as the rebuilding deadline approached. However, at discount rates that are common and justified in the literature, the effects may be insignificant. Whether these results are dependent on the assumed moderate growth characteristic of the stock, the failure to account for perceptions regarding biological and economic risk, or the use of a common discount rate are subjects of continuing research. (Click here for paper)

Source: Larkin, S., Harte, M., Quigley, K., and G. Sylvia. 2000. “Future generations, discount rates and the optimal harvest of fisheries resources.” In: Proceedings of the Tenth Biennial Conference of the International Institute of Fisheries Economics & Trade: Macrobehavior and Macroresults, July 10-14, 2000, Corvallis, Oregon. Corvallis, OR: International Institute for Fisheries Economics and Trade (IIFET).

For more information, please contact: Kathryn.Quigley@noaa.gov