a change in price and are therefore the pri- 

 mary source of uncertainty. This effect will 

 be dampened if the demand function is highly 

 elastic, a condition that seems applicable to 

 many fisheries. 



In the long run, however, the situation is 

 different. The dynamics of short run supply 

 changes continue through time but in the 

 long run the demand function tends to be 

 responsive to income changes and therefore 

 shifts to the right, adding to the degree of 

 uncertainty. 



Given the high level of uncertainty inherent in 

 fisheries, the workability of fisheries as in- 

 dustries is highly dependent on their economic 

 efficiency, i.e., their ability to operate profit- 

 ably and not dissipate the rent from the re- 

 source among redundant inputs. 



Sources of Short Run Economic Instability 



If, for the moment, however, we limit our 

 argument to the short run and we hypothe- 

 size that the source of instability is on the 

 supply side then it is correct to say that 

 regulations aimed at either maximizing phys- 

 ical yield or net revenue are not significantly 

 different from each other in terms of the level 

 of uncertainty involved. An analogy may be 

 useful in putting this problem in better per- 

 spective. 



Academic economists are virtually unani- 

 mous in the opinion that some degree of flexi- 

 bility in exchange rates is desirable. Central 

 bankers and to a lesser extent businessmen 

 are generally opposed to the creation of the 

 uncertainty that flexible rates would bring. 

 At the heart of this debate are two different 

 views of the stability of the underlying system. 

 If equilibrium not disequilibrium is the norm 

 then jjroblems involving the short run adjust- 

 ment process are minimal. But if short run 

 variations are inherent and important in the 

 system then the regulatory process must be 

 flexible to be consistent with the dynamics of 

 the short run. 



The .short run economic adjustment process 

 in fisheries, unlike certain industries, is par- 

 ticularly responsive to changes in market con- 

 ditions. Common property and easy entry, a 

 relatively low level of specialization of inputs. 



and the possibility of shifts of economic units 

 between fisheries, have combined to create 

 this condition. 



Let us define the short iTin to be a period 

 sufficiently brief to exclude new entry. By 

 new entry we mean that fishing effort would 

 be carried on by units of capital and labor 

 with no previous experience in the fishery 

 in question. Fisheries (except in initial growth 

 stages or periods of significant technological 

 change) tend to be characterized by excess 

 capacity. In these circumstances short run 

 shifts in the price/cost ratio brought about 

 by changes in either supply or demand can 

 generate wide swings in fishing effort. This 

 effort may come from gr-eater productivity 

 (longer hours, better organization, harder 

 work), by the activation of units previously 

 participating in this fishery but currently "on 

 the beach," or by the response of economic 

 units that work in several fisheries on a part- 

 time basis to the enhanced profit position in 

 this one.-' If the excess profits continue in 

 the face of the increase in fishing effort, new 

 entry will take place fairly rapidly. 



The labor and capital utilized in many 

 fisheries may be characterized as having three 

 elements, one is a core of labor and capital 

 that is primarily identified with the particu- 

 lar fishery in question and this core may ex- 

 pand and contract its efforts in response to 

 market conditions but it lacks the mobility 

 required to shift rapidly to alternative fisheries. 



The second element is a stock of standby 

 capacity, either currently employed elsewhere 

 or unemployed, that can and does respond to 

 changes in profit prospects. These two com- 

 ponents, possibly each individually if restric- 

 tions on productivity are considered, represent 

 more capacity than is needed to harvest any 

 average level of catch and perhaps even more 

 capacity than is required to land the upper 

 limits of the frequency distribution of the 

 abundance of the stock. 



-' These responses are not symmetrical, i.e., fishinK 

 effort increases more rapidly in response to profit op- 

 portunities than does exit to a reduction in earnings. 

 Inertia, the possibilities of windfall gains and the 

 inadequacy of the forecasts of short run supply all 

 contribute to the asymmetry. It is particularly im- 

 portant to note that we have not mentioned changes 

 in technology. In many fisheries the relationship be- 

 tween technological change and fishing effort is cir- 

 cumscribed by the regulatory process. 



18 



