ABSTRACT
This chapter is concerned with the problem of “non-malleability” of capital and the implications thereof for the optimal exploitation of renewable resource stocks over time. It deals with the case of perfectly non-malleable capital in which the depreciation rate is equal to zero and in which the capital has a negligible scrap value. The chapter examines the effects of irreversibility of capital investment upon optimal exploitation policies for renewable resource stocks. It demonstrates that although the long-term optimal sustained yield is not affected by the assumption of irreversibility, the short-term dynamic behavior of an optimal policy may depend significantly upon the assumption. Under the non-malleability assumption the dynamics of the optimally controlled fishery can be described in terms of short-run versus long-run behavior. The development of the fishery thus follows a complex pattern of expansion, “overcapacity,” and gradual contraction via depreciation, leading ultimately to the OSY equilibrium.
