ANDERSON: OPTIMUM ECONOMIC YIELD 



i>Wx 



Figure 3. — Each point on the curve represents a distribution of 

 the fishery where one country cannot be made better off without 

 hurting the other. B represents the point where it is distributed 

 on the basis of abiUty to harvest fish. C represents the distribu- 

 tion that is obtained by open-access exploitation. While both 

 countries can benefit from changes from this point, note that in 

 this case a move to the "ability" distribution at B represents a 

 decrease in the welfare of country Y. 



on the catch in the other country, a point such as B 

 on the possibility curve will be reached. The 

 wealth from the fishery will have been distributed 

 between the two countries on their ability to pro- 

 duce the effort to harvest it. In fact, if the cost of 

 effort was always less in one country, then at the 

 MEY point, that country would be doing all the 

 fishing and gaining all the wealth from the fish 

 stock. The other country would gain from trade in 

 goods but not from the fishery itself There is noth- 

 ing inherently superior about point B, however. 

 There does not appear to be a moral argument that 

 one country deserves the wealth from an interna- 

 tional common property resource simply because 

 it has a comparative advantage in the ability to 

 capture it. 



Under open-access conditions, the two countries 

 will operate somewhere inside the welfare possi- 

 bility curve, say at point C. This point is analogous 

 to the solution of Equations (11a) and (lib). It is 

 possible for both countries to increase their wel- 

 fare by moving to a point such as D. Just how these 

 gains can be obtained is discussed in detail below. 

 But for now notice that in the case depicted here, if 

 the countries are forced to move to point B (i.e. the 



point where the wealth from the fishery is distrib- 

 uted on the basis of ability to produce effort), 

 country Y will suffer a decrease in welfare. This 

 will not always be the case but will depend upon 

 the position of C relative to that of B. 



The point to be made from all this is that dis- 

 tribution is a critical part of determining the 

 makeup on an international MEY. It is important 

 to separate who obtains the wealth from the 

 fishery from who harvests the fish. When the two 

 are linked together, economic efficiency can be 

 obtained only if the fishery is distributed accord- 

 ing to ability to harvest. Under these conditions, 

 therefore, one of the countries may suffer a de- 

 crease in welfare in the process of obtaining an 

 international MEY. However if distribution and 

 harvesting can be separated, an international 

 MEY can be obtained using any criterion for dis- 

 tribution. Further, one can be obtained whereby 

 both countries will improve their welfare from 

 that at the open-access equilibrium. 



The remainder of this paper will discuss a pro- 

 cess for reaching an international MEY making 

 explicit the distributional problem and its rela- 

 tionship with Condition (14). Let us consider how 

 two countries that are operating at a point such as 

 C in Figure 3 can move to an international MEY at 

 a point such as D. Such a move would entail up to 

 four mutually inderdependent types of trades be- 

 tween the two countries, including trade in 

 mutual changes in fishing effort (essentially 

 trades that alter, to the mutual advantage of both 

 countries, the property rights to the fishery from 

 those established by the rule of capture in the 

 open-access fishery), trade in fishing effort or 

 rights to fish when one country has the right to fish 

 but the other can produce effort with less cost, and 

 trade in the produced goods F and M. The first of 

 these trades establishes a distribution of the 

 fishery, and the rest insure that Condition (14) 

 will hold for that distribution. These trades are 

 interdependent since any trade can alter demand 

 conditions if the gains are large relative to wealth. 

 Each of these trades will be discussed separately 

 so as to clarify the concepts involved. It should be 

 remembered however, that the theoretical max- 

 imum advantage from international cooperation 

 can not be achieved unless the trades are consid- 

 ered simultaneously. 



First let us consider the potential for mutual 

 gain from trade in mutual changes in fishing ef- 

 fort. Assume that two countries have reached an 

 international open-access equilibrium with coun- 



59 



