1. CAPACITY EQUATED TO FISHING POWER MEASURED BY VESSEL ATTRIBUTES: CAPACITY AS THE CAPITAL STOCK
The vast majority of studies equated capacity with fishing power conceived of in terms of the capital stock, the first and most widely applied specification of available fishing effort. Studies that have used available or actual fishing effort to measure and/or conceptualize fleet capacity include Crutchfield and Pontecorvo (1969), Gulland (1974), Griffin, Cross, and Nichols (1977), Clark, Clarke, and Munro (1979), Clark and Kirkwood (1979), Herrick (1979), Crutchfield (1979), Fraser (1979), Pearce and Wilen (1979), Kaczynski (1979), Garrod and Shepherd (1981), Pearse (1982), Charles (1983), Clark, Charles, Beddington, and Mangel (1985), Hannesson (1987, 1993b), Taylor and Prochaska (1985), Fletcher, Howitt, and Johnston (1988), Pascoe (1988), Andersen (1989), Wilen (1989), Smith and Hanna (1990), Townsend (1990, 1992), Valatin (1991, 1992, n.d.), Government of Iceland (1992), Bishop and Smith (1993), Southwest Region, U.S. National Marine Fisheries Service (1993), Northwest Region, U.S. National Marine Fisheries Service (1993), Holden (1994), Garcia and Newton (1997), John (1994), Frost, Lanters, Smit, and Sparre (1995), Mid-Atlantic Fishery Management Council (1995), Augustyn (1996), Gates et al. (1996), Group of Independent Experts (1996), Matthiasson (1996), Salz (1996), Egner, Pope, and Rodgers (1996), Christy (1996), Smit (1996), Mace (1997), Porter (1997a,b), Matthiasson (1997), OECD (1997), Schrank (1997), and Wilen and Homans (1998).
Gulland (1974; page 152) used a given number of ships of a certain type to measure a given capacity. Matthiasson (1996) used the number of boats in the fleet. Hannesson (1987) observed that fishing effort is some measure of the activity directed at catching fish, e.g. the number of vessels employed per unit of time, adjusted for differences in efficiency. Hannesson (1987; page 15) subsequently represented available fishing effort by the cost of capital invested in fishing equipment, measured at the time of investment. Hannesson (1987; page 16) then related capacity to the largest quota that it is possible to take with optimal capacity. Hannesson (1987) also considered the effect of uncertainty with regard to future availability of fish on fishing capacity. Hannesson (1993b) distinguished between fishing effort, in the sense of fishing capacity used, and available fishing capacity. Clark, Clarke, and Munro (1979) equated capacity, called maximum effort capacity, with the available capital stock equal to the number of vessels available to the fishery. OECD (1997), on page 88 and in footnote 16 on page 118, observed that capacity may be measured in terms of horsepower, gross tons, or other dimensions of the fishing unit.
Mace (1997; page 4) observed, ... overcapacity to mean either excessive amounts of capital in the form of fishing vessels and gear (i.e. overcapitalization), or excessive number of participants, or both. Mace further noted the increase in fishing vessels world-wide, the rate of increase in fishing power due to technology improvements, and the exacerbation of the world overcapacity problem by latent effort (where the number of licenses in a fishery far exceeds the number of active participants). Until the overcapacity problem is solved, observed Mace, attempts to address many other important fisheries problems may largely be wasted, and that reductions in fleet capacity in overcapitalized fisheries are a precondition to the success of management measures designed to mitigate overfishing, solve bycatch issues, eliminate environmentally-destructive fishing practices, reduce underreporting, and improve government-industry relations. From an economic perspective, overcapacity is equated with an excessive quantity of vessels or fishing gear that are not fully utilized (overcapitalization). From a conservation (and social) perspective, the most important manifestation of the problem is too many people dependent on fisheries for their livelihood. Historically, attempts to freeze or reduce fleet capacity have failed due to factors such as lack of mobility of capital, prospects of short-term economic gain, lack of alternative employment opportunities, and local values and ideals.
Valatin (1992) observed that fleet capacity is generally defined as a fleet's capability to catch fish. For administrative purposes, capacity is usually defined in terms of an aggregate of those physical attributes of the vessels in the fleet which are considered important determinants of the fleet's ability to catch fish. Valatin (n.d.) noted that the underlying idea behind the notion of capacity is that of measurement of the catching power of fishing vessels (their ability to catch fish) while fishing effort is used to denote a combination of the catching power used and the amount of time spent fishing. Thus, fishing effort may also be thought of in terms of capacity utilization. In a model specification, capacity was taken to be synonymous with the stock of capital measured in terms of the total market value of vessels in the fleet; insurance values of the vessel (including gear and electronics) were observed to possibly be the best available approximation. Net investment is capacity adjustment. In addition, Valatin demonstrated the importance of allowing fleet capacity to be related to technological progress and technical efficiency.
Christy (1996) defined the capacity of an individual fishing unit as the quantity of fish that it can take, assuming there are no limits on the yield from the stock(s). Fleet capacity is then the sum of all the capacities of individual fishing units and equals the product of the number of fishing units and catchability coefficients of the units. A fishing unit generally includes a vessel, engine, gear, labor, and equipment. Fletcher, Howitt, and Johnston (1988) defined fleet capacity for the Eureka, California crab fishery in terms of a standardized measure of fishing effort, and specifically as the number of small boat vessels for two size classes, where the number of large vessels was multiplied by their relative efficiency (defined as the ratio of large vessel catch to small vessel catch). Crutchfield and Pontecorvo (1969; page 41) identified fishing capacity as the catching power of the fleet as a whole and observed that, The most obvious method of accomplishing a reduction would be, of course, to reduce the number of fishing units. Griffin, Cross, and Nichols (1977) used effort capacity or potential effort as a function of fleet and vessel characteristics.
The Fraser River conference on license limitation also touched on capacity. Crutchfield (1979; page 745) discussed potential capacity in terms of vessel capacity, and distinguished between potential and effective capacity. Fraser (1979) observed that for a decline in vessel numbers to represent proof of a decline in fishing capacity, it was necessary that the vessels represent a standard unit over time. Pearce and Wilen (1979) observed that the British Columbia Pacific salmon fleet control program employed vessel numbers and then subsequently net vessel tonnage as the surrogate for fleet capacity, and that the fishing capacity of a vessel is manipulable, even within a net tonnage constraint, so that the capacity of the fleet can increase without a corresponding increase in net tonnage.
The Boat Limitation Committee in South Africa used this concept, measured by vessel size and horsepower, in the early 1980s in the pelagic and demersal fleets in an attempt to limit the number of vessels (Augustyn 1996). Smit (1996) distinguished between the aggregate (potential) fishing capacity of the fleet, measured by the number of vessels, tonnage, or engine capacity of selected fleet segments, and the capacity used (effort exercised), measured in various denominations (e.g. days fished, horsepower- or ton-days).
In their survey of the literature on fishing capacity, Kenchington and Charles (1989) noted that fishing capacity is related in some (usually unspecified) way to the number of vessels in a fishing fleet, perhaps modified by their individual sizes, giving aggregate vessel tonnage, and fleet crew sizes. Kenchington and Charles (1989) cited the following authors as adopting this approach: Gulland and Robinson (1973), Thompson et al. (1973), Clark and Kirkwood (1979), Fraser (1979), MacKenzie (1979), Pearse and Wilen (1979), Clark (1980), Copes (1980), Pearse (1980, 1982), Garrod and Shepherd (1981), Mathiesen (1981), Shepherd and Garrord (1981), Bosford et al. (1983), Charles (1983), Troadec (1983), McMullan (1984), Scott (1984), DeVoretz and Schwindt (1985), Crutchfield (1986), Meuriot (1986), Wallace and Brekke (1986). Charles (1989) further noted that several authors adopting this view recognized that capacity is more than simply vessel numbers or even aggregate tonnage and fleet manpower, citing Fraser (1979), Pearse and Wilen (1979), Pearse (1982), Troadec (1983), and McMullan (1984). Charles (1989) observed that many of the same writers have seen capacity as equivalent to the level of capital investment in the fleet, citing Gulland and Robinson (1973), Clark et al. (1979), Charles (1983a,b, 1985, 1986), McMullan (1984), Scott (1984), Charles and Munro (1985), Crutchfield (1986), and Wallace and Brekke (1986). Charles (1989) further stated that Charles (1983ab, 1985, 1986) and Charles and Munro (1985) explicitly defined fleet capacity or harvesting capacity as equal to the capital stock of the fleet.
2. CAPACITY EQUATED TO FISHING EFFORT AS AN ACTIVITY MEASURE: CAPACITY AS A FLOW
The number of studies that account for fishing time (activity), the second and flow approach to available fishing effort, are far fewer. Herrick specified effort capacity as the maximum amount of time the vessel can engage in fishing activity during the year. Smith and Hanna (1990) observed that fishing capacity measures the capability to catch fish, and that capacity has four components: number of fishing vessels, size of each vessel, technical efficiency of vessel operation, and the time spent fishing. Clark and Kirkwood (1979) and Garrod and Shepherd (1981), used actual fishing effort as either fleet capacity itself or as a proxy variable.
3. MAXIMUM POTENTIAL CATCH: HOLD CAPACITY
Gertenback (1973) took the total hold capacity of a fleet, so that hold capacity sets a maximum limit on what can be harvested at an instant in time. Herrick (1979) noted that hold capacity does not account for the amount of fishing time that occurs during a year. When hold capacity is multiplied by the fishing time during a year, then this measure equals maximum annual output. Herrick also observed that variation in the availability of the fish stock gives variability in capacity, with a distinction between peak capacity (that associated with peak availability), and normal or intended capacity which is associated with average availability of the fish stock. Variations in the demand for output can also generate variations in capacity.
Flam and Story (1982) used this approach, the product of hold capacity and trips made per season. Prochaska (1978) added a third term to adjust for the incomplete filling of holds on many fishing trips. Anderson (1994) and Vestergaard (1996a) used hold capacity as the maximum potential output for an individual vessel when discussing discard behavior. Vestergaard (1996a) also distinguished sorting capacity from hold capacity. Flaaten, Heen, and Salvanes (1995) observed that the licensing system for the Norwegian purse seine fishery used the cargo capacity of the vessel as the regulatory measure. Gertenbach (1973) and Flam and Story (1982) observed that when catcher-processors are involved, processing plant capacity tightly constrains the catch (Kenchington and Charles, 1989).
4. ECONOMIC MEASURES OF CAPACITY
Salz (1996) observed that economic capacity represents the level of fishing effort (size of the fleet) with which the fleet can continue operating economically in the long run, assuming a certain price level. Stone (1997; page 9) defined excess capacity as, ...a state in which the value of inputs to fishing is greater than required for most efficiently achieving the desired level of fishing activity. That said, however, there is little consensus on what would constitute the 'right' capacity - the right level of inputs - against which excess should be measured and condemned. The approach of Stone is consistent with the dual-based approach to capacity and capacity utilization, where the shadow value of the capital stock is compared to the capital services price (Morrison, 1985).
4.1. Total revenue
Smit (1996) observed that aggregate fishing capacity, conceived as available fishing effort, can be measured by gross proceeds. Over a short period, such as one year, the financial proceeds are believed to fairly represent the vessels' productivity. Smit (1996) further observed that the considerably lower prices of more abundant species than scarcely available species do not detract from this assumption. Catch limitations may influence total proceeds in one year; they likely have only a negligible impact on proceeds per day. Thus proceeds per horsepower-day then gives a measure of productivity. Total revenue has thus been used to measure aggregate output. Smit (1996) further observed that nominal total revenue per horsepower-day cannot be used to assess a time series of vessel productivity by various horsepower groups since relative fish prices vary each year and inflation must be considered.
4.2. Under uncertainty
Hannesson (1993a; page 107-111) used the fleet size, measured by vessel numbers, to measure fishing capacity. Optimum fleet capacity is the optimum size of the fleet, where this optimum is a function of the probabilities of the different values of resource stock occurring, the cost of acquiring one unit of fishing capacity (the cost of building a vessel, for example), the present value of the annual expenses necessary to cover depreciation and maintenance, and the present value of revenue less operating cost; the marginal increment in fleet capacity occurs when the cost of the increase in capacity is less than or equal to the increase in the present value of net income. Turning to the optimum utilization of a given fleet capacity, optimum capacity utilization implies maximizing the expected revenue at a given price net of operating cost. Then the optimum capacity utilization, or catch, is a function of the stock size for a given fleet. The optimum catch varies with the size of the resource stock, depending on the different levels of fleet size.
4.3. Total allowable catches: linear programming
When total allowable catch (TAC) levels are taken as given, the focus has shifted to examining the optimal fleet size rather than the maximum potential catch level (DFO n.d.). Using a linear programming framework, Huppert and Squires (1987), Siegel et al. (1979), Garrod and Shepherd (1981), and Flam and Story (1982) calculated the fleet size that would provide the largest economic benefits given TACs. The reduction in the actual fleet required to realize these potential benefits provided a measure of excess economic capacity (DFO n.d.).
4.4. Break-even analysis
Break-even analysis is usually used to determine the increase in catch required for the average vessel in a given fleet to cover costs (DFO n.d., Kirkley and DuPaul 1990, Kirkley et al. 1991). Break-even analysis can also be used to measure excess capacity (DFO n.d.). With the break-even approach, excess capacity can be defined as the reduction in fleet size required to provide a break-even catch level to the remaining vessels. While this approach can provide a measure of excess capacity, it would not identify which plants have excess capacity.
4.5. Duality-based approaches
As discussed above, the economic measure of capacity specifies capacity output Y* either in terms of a primal measure, defined in terms of the firm's output level, or a dual measure defined in terms of the firm's costs (Klein, 1960; Hickman, 1964; Morrison, 1985; Nelson, 1989). The cost measure defines capacity output as that output level corresponding to the tangency between the short- and long-run average cost curves. This cost measure assumes that one or more inputs are quasi-fixed and that capacity utilization is determined by the level of the quasi-fixed input(s) relative to the level of output.2 In fisheries, this economic approach was extended to correspond to the levels of effort and catch associated with producing a TAC at least cost given the capital stock. This cost approach was discussed in detail in Gréboval and Munro (1999) and OECD (1997).
The economic measure of capacity utilization was extended to allow for profit maximization, rather than cost minimization, by Squires (1987) and Segerson and Squires (1993), and to revenue maximization by Segerson and Squires (1993; 1995). Both the profit maximization and revenue maximization approaches for multiproduct production allow for one or more endogenous outputs; that is, at least one output is allowed to be a choice variable of the firm, industry, or fishery manager (depending on the level of aggregation).
This economic approach, based on cost, profit, or revenue functions, with a single quasi-fixed input, readily accommodates multiproduct production which is otherwise possible only under fairly stringent conditions with the primal approach, as discussed by Segerson and Squires (1990) (discussed in greater detail below). This economic approach readily extends from the single-product to the multiple-product case, with a single quasi-fixed input, because the capacity utilization measure uses a scalar measure of the shadow price and rental (services) price of the quasi-fixed input, so that scalar measures are still involved.3 But as discussed in greater detail below, when there are multiple quasi-fixed factors in the economic approach (Berndt and Fuss, 1989), and/or multiple outputs in the primal approach (Segerson and Squires, 1990), scalar measures are either not possible or are limited in some manner, and more limited measures must be applied (Berndt and Fuss, 1989; Segerson and Squires, 1990).
The profit maximization economic measure was applied by Squires (1987) to the open-access multispecies New England groundfish trawl fishery. The cost-based measure was applied by Segerson and Squires (1990) to this same fishery. The revenue maximization approach was applied by Segerson and Squires (1993) and Squires and Kirkley (1996) to the open-access multispecies trawl fishery for thornyheads, sablefish, and Dover sole off northern California and southern Oregon. All of these studies evaluated multiproduct capacity utilization at the level of the individual vessel. The New England studies found that the individual vessels were in long-run static equilibrium, given the resource stocks, so that they did not face incentives to alter their capital stocks (measured as vessel size). The Pacific coast studies evaluated the impacts of trip limits or individual transferable quotas on incentives to invest or disinvest.
The innovative Dupont (1990) study of the Pacific salmon fishery can also be placed into this category of duality-based measures. Her simulation approach is an appropriate, and in fact superb, way to generalize the results from the level of the individual vessel to that of the entire fleet. Dupont directly evaluated fleet redundancy measured by a suboptimal capital stock and the suboptimal mix of heterogeneous vessels. Fleet redundancy referred to an excessive number of vessels and was specifically measured as the amount of excess capital (total tonnage of vessels in excess of optimal conditional upon the existing resource stock) in the British Columbia salmon fishery.
The study distinguished between variable inputs of labor and fuel and a quasi-fixed factor, capital, and statistically tested whether the vessel-level capital stock was at its optimum level. Dupont observed that to the extent that capital is nonmalleable, some portion of the additional cost of too many vessels may be a deadweight loss to society. Considerable rent dissipation was found even though the fishery was restricted access. One source of suboptimal mix of vessels came through government-determined total catch allocations for different types of vessels, which allow less efficient vessels to continue fishing. Another source of suboptimal mix of vessels was license limitation schemes which restrict changes in fleet compositions or restrictions on vessel types and mixes in other fisheries when vessels participate in multiple fisheries.
5. A FISHING MORTALITY (F) BASED APPROACH TO CAPACITY
Kenchington and Charles (1989) define capacity in terms of the level of fishing mortality that a boat or fleet could exert under specified conditions; this definition explicitly relates catch or output, fishing effort, fishing power, and capital investment in a fishery. Kenchington and Charles (1989) also discuss conditional and absolute fishing capacity, which are upper bounds on the mortality that could be exerted by a fleet. Their notion of capacity is a long-term average from which the fishing mortality exerted in a particular year will diverge under random variation. They note that their notion is conceptually related to fishing power, but is not a relative measure, but is instead the product of absolute fishing power and the time over which the power would be exerted during a single average year when subject to specified social, economic, and regulatory conditions.
They expect their notion to be approximately proportional to the capital stock invested in the fishing unit. Specifically, they define conditional fishing capacity of a single fishing unit as the fishing mortality that a fishing unit would exert on full recruited year classes of a particular resource, in an average year, when the unit is operated at its socially and economically optimal intensity in the presence of specified regulatory and other conditions.
They then define absolute fishing capacity of a single fishing unit as equal to its conditional fishing capacity when the specified regulatory conditions are such that they do not constrain the intensity of its use. They note that it is not a true absolute but is the greatest capacity that could be achieved solely by manipulation of fisheries management regulations. They also define nominal absolute and nominal conditional fishing capacities which bear the same relationship to the equivalent true capacities that nominal effort bears to fishing mortality. Nominal capacities would be expressed in units of nominal effort (e.g. horse power-ton-days).
Kenchington and Charles note that their notion cannot readily incorporate multiple species or multiple product fisheries or fisheries in which individual vessels move freely between various stocks. They also conclude that there are no obvious methods for defining and enumerating social and economic optima or the corresponding levels of fishing intensity.