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

• Main Authors: Larkin, Sherry, Harte, Michael, Quigley, Kate, Sylvia, Gil
• Format: Publication
• Language: English
• Published: International Institute of Fisheries Economics and Trade 2001
• Subjects: Bioeconomic Modeling : Conceptual and Applied Issues; Fisheries Economics; Modeling and Economic Theory

International Institute of Fisheries Economics and TradeU.S. National Marine Fisheries ServiceMG Kailis Group The role of discounting in determining the optimal harvest of natural resources has been extensively debated inthe economic and natural resources literature. Differing approaches to discounting to address sustainability andintergenerational equity issues have the potential to significantly affect the allocation of resources between harvesting andconservation for this generation and the stock of resources available for future generations. This presents a very realproblem in New Zealand where legislation requires fisheries managers to maintain the potential of the resources to meetthe “reasonably foreseeable needs of future generations.” This paper investigates the appropriate use of discount rates inevaluating policy decisions that involve the intergenerational allocation of fisheries resources. Dynamic bioeconomicoptimisation is used to model the effect of discount rates on the optimal harvest of a stock characterized by moderatelongevity and growth. The economic and biological effects of alternative rebuilding strategies that are assumed to meet theneeds of future generations are explored under alternative prices, variable costs, and rebuilding horizons. The preliminaryempirical analysis revealed that higher discount rates produce lower net present values, slower rebuilding rates, and morepronounced harvest reductions as the rebuilding deadline approached. However, at discount rates that are common andjustified in the literature, the effects may be insignificant. Whether these results are dependent on the assumed moderategrowth characteristic of the stock, the failure to account for perceptions regarding biological and economic risk, or the useof a common discount rate are subjects of continuing research.