Abstract:
The role of discounting in determining the optimal harvest of natural resources has been extensively debated in
the economic and natural resources literature. Differing approaches to discounting to address sustainability and
intergenerational equity issues have the potential to significantly affect the allocation of resources between harvesting and
conservation for this generation and the stock of resources available for future generations. This presents a very real
problem in New Zealand where legislation requires fisheries managers to maintain the potential of the resources to meet
the “reasonably foreseeable needs of future generations.” This paper investigates the appropriate use of discount rates in
evaluating policy decisions that involve the intergenerational allocation of fisheries resources. Dynamic bioeconomic
optimisation is used to model the effect of discount rates on the optimal harvest of a stock characterized by moderate
longevity and growth. The economic and biological effects of alternative rebuilding strategies that are assumed to meet the
needs of future generations are explored under alternative prices, variable costs, and rebuilding horizons. The preliminary
empirical analysis revealed that higher discount rates produce lower net present values, slower rebuilding rates, and more
pronounced harvest reductions as the rebuilding deadline approached. However, at discount rates that are common and
justified in the literature, the effects may be insignificant. Whether these results are dependent on the assumed moderate
growth characteristic of the stock, the failure to account for perceptions regarding biological and economic risk, or the use
of a common discount rate are subjects of continuing research.
