AbstractWe present a general‐equilibrium (GE) bioeconomic model of Utah's Great Salt Lake (GSL) ecosystem that tightly links the lake's ecosystem with its regional economy and attendant international trading partners, thereby enabling full identification of dynamic feedback effects in the presence of prolonged drought. The drought modeled here mimics a drying climate's impact on the lake's nutrient pool. We demonstrate how prolonged drought affects key bioeconomic variables over time, and how the GSL bioeconomy recovers toward a new steady state. We also consider how two separate fishery‐specific regulatory tools—a temporary harvest moratorium and ad valorum tax on the fishery's factors of production—alter the bioeconomy's recovery path. Our main finding is that a fishery‐specific regulation can induce perverse social‐welfare effects in a GE context by inducing a shift of resources out of the fishery and into a sector of the economy that produces a negative externality, in our case pollution from the mining industry. These welfare effects are appraised with two different measures of equivalent variation—one based on an initial benchmark period and the other on expenditure differences that roll through time. Our model further demonstrates how these perverse‐welfare effects can be mitigated by imposing either an output or input tax on the mining industry.Recommendations for resource managers The general‐equilibrium bioeconomic model developed here for Utah's Great Salt Lake demonstrates how key bioeconomic variables can be tracked over time in response to an economic or ecological shock, such as prolonged drought. This numerical modeling tool provides an integrated perspective on the bioeconomic impacts of public policies that can be adopted to counteract these shocks. Estimates of the social net benefits associated with the public policies are provided. The context for assessing the net benefits of alternative fishery regulations is therefore broadened to account for a multispecies, multisector bioeconomy.