UC Santa Barbara

Managing natural resources under large-scale environmental fluctuations like the El Niño Southern Oscillation (ENSO) is likely to become increasingly important under climate change. Forecasts of environmental conditions are improving, but the best response to an unfavorable forecast remains unclear; many practitioners advocate reducing harvest as a more precautionary approach, while prior economic theory favors increasing harvest. Using logistic and age-structured fisheries models, we show that informational constraints — uncertain stock estimates and restrictions on harvest policies — play a central role in choosing how to respond to a forecasted shock. With perfect knowledge and no policy constraints, risk-neutral managers should increase harvest when a negative shock is forecast. However, informational constraints may drive the optimal response to a forecast of a negative shock toward or away from precaution. Precautionary forecast responses arise when informational constraints make the harvest policy insufficiently sensitive to the true resource status. In contrast, uncertainty about the stock size can lead to more aggressive forecast responses when stock dynamics are nonlinear and not all fish are susceptible to fishing.