Renewable Resource Harvesting Under Correlated Biological and Economic Uncertainties: Implications for Optimal and Second-Best Management
Biologists have long recognized environmental disturbances impact both the growth of renewable resources and the efficiency of harvest effort. However, models of renewable resource management under uncertainty have commonly assumed economic and biological uncertainties to be uncorrelated. We present examples of valuable fish species that experience correlated variation in biological growth and catchability, in response to a common environmental disturbance. Building correlation into a model of renewable resource management under uncertainty, we find correlation to alter the optimal response by managers to cost disturbances, and impact the value of retaining intra-period flexibility over harvest targets. Examining the performance of three harvest control mechanisms—harvest quotas, effort quotas, and taxes—reveals that positive correlation between costs and growth favors harvest quotas over effort quotas, and effort quotas over taxes (and vice versa). The model is then applied numerically to the Pacific bigeye tuna fishery, which experiences positively correlated shocks driven by the El Niño Southern Oscillation. Correlation qualitatively changes the optimal response to a cost shock, and harvest quotas are found to be strongly favored over both effort quotas and taxes.