The market failure of the Tuna fishing regulations

The fishing habits have caused to destroy the life cycle of bluefin tuna in Denmark and are now continuing to spread through the northeast Atlantic and Mediterranean. Although the International Commission for the Conservation of Atlantic Tunas organization has already organized a recovery plan they have failed. The concern with Bluefin tuna is that it is overproduce and therefore, causing a lot of unnecessary environmental problems. To stabilize the tuna life cycle and to prevent bankruptcies of tuna companies, the government will have to adapt to new solutions for this problem.

Bluefin tuna is a common good which means that it is rival, however not excludable. One person’s use of the tuna can diminish other people from using it. However, no one can be excluded from fishing, since it is an open market to everyone. As tuna is not excludable it is a great concern in this case, as it gives anyone the chance of fishing as many tunas as possible for their own purpose. This situation lies under a tragedy of commons, meaning that common resources get used more than is desired form the population. Although fishers are aware that they are depleting the ocean, they do not stop selling tuna fishes. The tragedy is that the fishers continue depleting the ocean due to their self interests, not regarding the consequences for the ecosystem or the ocean. Therefore, fishing for tuna is a negative externality which people who don’t get charged for their usage are destroying the ecosystem.

The graph above shows the negative externality of production when dealing with tuna fish. Producers are fishing and selling too much tuna at a too low prize and therefore, they reach the point Q1 and P1. This point is not beneficial for the community since marginal private cost (MPC) is equal to marginal social benefit (MSB). In other words, this means that the producers are fishing too much tuna and sell them for a too low prize causing the benefit for the society to decrease since they are destroying the natural ecosystem. The production of tuna causes a negative externality on the 3rd party, which is the livestock of the ocean and the ecosystem, shown by the green dead weight loss. The government had already intervened by making laws and producing recovery plans. However, it is difficult for the recovery plan to succeed, as tuna is not only a very popular food, but also it lies under the tragedy of commons. Therefore, the government had failed with its plans and has to intervene with other possible solutions.
One solution to decrease the production of tuna is to tax the fishers on the amount they are fishing per day. When the fishers have to pay a tax they will automatically not fish as many tuna because they would not be able to afford the high taxation.

As one can see on the graph that with the taxation on the marginal private cost the quantity being produced would automatically decrease and the prize would increase. If the prize increases this would mean that people will stop consuming as much tuna because it would become a luxury good. When people are not consuming as much tuna anymore, then the production of tuna fish will decrease as well. However, in order for this to work all the countries will have to introduce this taxation and production as well. When not all countries have this taxation, then fishers from countries without the taxation will continue destroying the ecosystem of the ocean. Therefore, to make all countries attend this taxation the countries should be confronted with shocking facts and future catastrophes to make them realize how drastic the situation is.

These two solutions would reduce the tuna amount being fished and also it would stabilize the ocean’s ecosystem again. However, the danger of these two solutions could be that while other countries reduce their fishing amount, that others will continue depleting the ocean. In order to stabilize the life of the tuna and ocean the government will have to start introducing stricter laws in order not to start a market failure.

The sale of cars in the United States plunge

The financial crisis in the United States has not only effected banks and stock markets, but also the car industries. Since many American citizens fear that they will be affected by the financial crisis the number of buyers for cars reduced. Customers are not sure if their income will decline in the future and therefore, they do not want to take any risks.
This year Toyota’s sales in the United States decreased 32%, Nissan’s sales decreased 24% and Ford’s sales even dropped to 35%. For all three companies this decrease of demand first began with the high prices of gasoline. Customers did not want to pay the high petrol prices and therefore stopped buying trucks and pickups and changed to more fuel efficient car models. However, now the car industries have been affected by the financial crisis. Customers are now being more careful when spending their money, as they fear that the financial crisis could affect their incomes. Instead of buying cars immediately, the customers decide to wait and see how the finances would improve in the future.
964,873 vehicles have not been sold in the last year, which makes a decline of 27% of all industrial companies’ sales. The demand for trucks decreased 31% and the demand for cars dropped 22%. This does not only give the company a lack in income, but also a surplus of cars. As the cars are not being sold, the companies are losing money just by making all the cars.


As can be seen on the graph above the demand has dramatically decreased during the last year. As demand decreased people are not able or not willing to pay such a high amount of money for a car. Prices also decreased with the demand. However, the supply of new car models stayed the same. This gives a great amount of surplus for the company and also a budget problem. The companies are making great losses with the surplus because they are making more cars that can be sold. To stop the surplus from increasing the company would have to try and move its demand curve again or control the production of cars. Many car companies fear that the financial crisis would decrease their income even more. To change this, the car companies will have to adjust to the new financial conditions in the United States. Until that point the car companies can only hope that the financial crisis will not affect its selling’s in Europe.