Problems with the Economies of the Chesapeake Bay Blue Crab Fishery

Several economic crises currently exist within the blue crab, Callinectes Sapidus, fisheries in the Chesapeake Bay. The problem areas can be boiled down into three main obstacles. The fisheries must address these obstacles in order to be sustained, or at all economically efficient. The economic problems stem from the fisheries being open-access, or common property, the fisheries, or fisherman over-capitalizing and a lack of proper records to better facilitate the implementation of new economic strategies. The economic problems occurring because of the fisheries structural short-comings can be solved, or partially alleviated, using one of several different tactics. There are several possible strategies for attaining economic efficiency. Open-access solutions, individual transferable effort (ITE) programs, individual transferable quotas (ITQ) programs and buy back programs are a few of the more plausible solutions. Each program effects the economies surrounding the fisheries differently and must be thoroughly examined and inner-mixed to achieve economic equilibrium in the Chesapeake Bay fisheries.

The Chesapeake Bay fisheries have no boundaries to entry into the crab pot fishery market. New fisheries can enter the market at no cost when profits are observed. This happened in the Chesapeake Bay in the early eighties. Many entrepreneurs observed the growing international and domestic demand for soft crabs and crab meat, allowing profits to be reaped by those currently in the fisheries. These entrepreneurs entered the blue crab market causing the supply to increase, or in the long-run the marginal cost to increase. The shift of the supply outweighed the demand causing profits to be dissipated, pushing them to zero, or even allowing for negative profits to be observed. The open-access fails the fisheries economically through profit dissipation, not to mention that overfishing often occurs before the profits hit zero. Therefore, the profits to be made through the fisheries are innately limited by the finite number of blue crabs in the Chesapeake Bay. So the classic economic dogmaof scarcity is the root problem of the Chesapeake Bay fisheries.

To solve the open-access problem of the Chesapeake Bay the states bordering the bay, individual communities or the national government must create boundaries or impediments to entry. There are several limited entry solutions ranging from limiting the total number of fisheries in the bay, to limiting manpower. The predicament, surrounding the various limited entry solutions, lies in a secondary quandary "capital-stuffing", arising from the open-access format. The Chesapeake Bay blue crab fishery is primed to experience this, assuming it already has not, under a limited entry scheme. The blue crab fishery will increase their number of supplies and amount of gear because of the regulated entry. In turn, the total cost of production would increase drastically again, driving profits down. If the losses incurred become large enough the blue crab fishery will not be able to cover their variable costs of operation. When the firms, fisheries, can not cover variable costs, they will be forced to shut down.(Kirkely 1994)

The blue crab fisheries could also be driven to shut down by the another problem, over-capitalization of the Chesapeake Bay fisheries. Over-capitalization is the excessive emphasis directed at harvesting blue crabs from the Chesapeake Bay. The over-capitalization occurs due to an over investment in the blue crab fisheries by the waterman and investors. The problem can be stated by saying the fisheries revenues minus their costs, subtract their normal return to the blue crab fishery operator become zero. They become zero because harvesting costs increase relative to revenues.(Kirkely 1994)

These problems and concerns are not without possible solutions.

An Economic Overview of fisheries management

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