1. Market Failure Report: Bluefin Tuna in Japan Martha Al Mazroui

2. Context and Cause Globally approximately 75% of wild marine are either fully-exploited or overfished according to the United Nations Food and Agriculture Organisation (U.N.F.A.O) [1] 2 https://www.google.com/search?q=unfao&source=lnms&tbm=isch&sa=X&ved=0ahUK EwiGrY6ns5rfAhV0ThUIHfJJBmIQ_AUIDigB&biw=1440&bih=820#imgrc=tALM1mecj_ CRuM https://www.google.com/search?q=unfao&source=lnms&tbm=isch&sa=X&ved=0ahUK EwiGrY6ns5rfAhV0ThUIHfJJBmIQ_AUIDigB&biw=1440&bih=820#imgrc=tALM1mecj_ CRuM :

3. Cause Japanese fishing industry started declining in the 1980s. Around this time international overfishing was becoming more obvious. There was a rise in bluefin tuna and a shortage of supply [2] 3

4. Market equilibrium was at QP, but then demand increased to D1 which temporarily increased the price to P1 and created an excess in demand. The market reacted to this increase in demand by increasing the supply of bluefin tuna to S1. This creates a new equilibrium at Q2P. 4

5. The increase in the supply of bluefin tuna from Q to Q2 results in a negative externality of production Due to the negative externality of production the marginal social cost (MSC) is greater than the marginal private cost (MPC). This means that the socially desirable output at PQ where MSB=MSC is not achieved. Instead bluefin tuna is supplied in the free market at Q1 where MPB = MPC, creating a welfare loss 5

6. Effects on the community ➔ Overfishing of bluefin tuna decreases the fishermen’s standard of living ◆ Fishermen have to sell at lower prices ➔ Japanese culture and traditions could be disappearing ➔ Big companies overfish in season → local fishermen overfishing → less bluefin tuna → a decrease in bluefin tuna [3] 6

7. Actions taken ➔ The government: ◆ Fishermen submit periodic reports ◆ Penalise fishermen for catching more that is permitted of bluefin tuna ● 3 years in prison ● JPY 2 million [4] ➔ Community ◆ Some fishers have stopped fishing in order to help manage fishing ● The government will compensate for their losses [5] ➔ What I think they could do ◆ Introduce floor prices on bluefin tuna ◆ Tax big companies and subsidy local fishermen 7

8. 1. https://friedmanseconomy.wordpress.com/ 2012/12/03/over-fishing-market-failure/ https://friedmanseconomy.wordpress.com/ 2012/12/03/over-fishing-market-failure/ 2. https://scholar.harvard.edu/files/bestor/file s/bestor_2014_eaa.pdf https://scholar.harvard.edu/files/bestor/file s/bestor_2014_eaa.pdf 3. https://www.thenation.com/article/no- more-tuna-for-japans-sushi/ https://www.thenation.com/article/no- more-tuna-for-japans-sushi/ 4. https://www.undercurrentnews.com/2018/0 1/02/japanese-govt-to-start-penalizing- fishermen-overfishing-pacific-bluefin-tuna/ https://www.undercurrentnews.com/2018/0 1/02/japanese-govt-to-start-penalizing- fishermen-overfishing-pacific-bluefin-tuna/ 5. https://asia.nikkei.com/Politics/For-fish-to- recover-countries-must-cooperate-Japan- official https://asia.nikkei.com/Politics/For-fish-to- recover-countries-must-cooperate-Japan- official 8