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An Ecological Golden Rule

Ram Fishman and Chandra Kiran Krishnamurthy

Abstract:

Most renewable biotic resources are subject to random variability in natural growth. We investigate the implications of such variability for long-term management by a risk averse social planner who maximizes expected long-run utility. In a simple model of a stochastic fishery, we show that the optimal level of harvesting effort need not necessarily be reduced by the introduction of variability in stock growth. However, optimal effort is reduced if the variability of growth increases for smaller base populations, as suggested in the ecology literature.

Keywords: Stochastic Growth, Natural Resource, Golden Rule

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