DOES MAKE CENTS? A BIOECONOMIC MODEL OF THE ANTARCTIC MINKE AND THE JAPANESE WHALING INDUSTRY

A THESIS

Presented to

The Faculty of the Department of Economics and Business

The Colorado College

In Partial Fulfillment of the Requirements for the Degree

Bachelor of Arts

By

Samuel Prescott Buchanan

May/2010 DOES WHALING MAKE CENTS? A BIOECONOMIC MODEL OF THE ANTARCTIC AND THE JAPANESE WHALING INDUSTRY

Samuel Buchanan

May,2010

Economics

Abstract

Japan's whaling fleet and environmental organizations are clashing in the Antarctic Ocean as continues to conduct lethal scientific research on , specifically on the (AMW). This conflict and issues surrounding other cetaceans have received substantial media attention in the past few years due to the Sea Shepherds Society's television show entitled and the movie The Cove. These productions succeeded in spreading awareness of Japan's lethal research on whales and harvests of , but insufficiently explained why Japan is engaging in practices that damage her international reputation. These media productions do not provide bioeconomic analysis modeling whether or not the species is threatened by Japan's actions nor the economics of whaling and Japan's market for whale products. Scientific articles related to the biology of whales, and historical, political, and cultural investigations that provide the foundation for the whaling conflict do not explore if Japan's lethal scientific research threatens the AMW with extinction nor explore the economics of Japan's whaling industry and domestic market if commercial whaling were to resume. This thesis aims to answer these questions by constructing a bioeconomic model composed of biological parameters and data from Japan's whaling fleet to estimate various sustainable catch yields and the corresponding AMW population sizes, Japan's seasonal effort in catcher-boat hours, and seasonal sustainable revenues. The eventual equilibrium population and sustainable catch yield if Japan maintains its current harvest effort, the maximum sustained yield, the condition of zero net revenue, and the condition in which the discounted total present value for all future whaling revenue is achieved will be explored in particular. The results conclude that Japan's current scientific research does not endanger the AMW, and furthermore concludes that whaling is not only profitable, but the industry capacity, high costs, and shrinking domestic demand discourage overharvesting that could lead to the collapse of the species.

KEYWORDS: (Minke, Antarctic, whale, whaling, Japan, bioeconomic, sustainable yield) ON MY HONOR, I HAVE NEITHER GIVEN NOR RECEIVED UNAUTHORIZED AID ON THIS THESIS

Signature

TABLE OF CONTENTS

ABSTRACT III ACKNOWLEDGEMENTS iv 1 INTRODUCTION

1.1 BACKGROUND...... 3 1.2 CHARACTERISTICS OF THE WHALING INDUSTRy...... 8 1.3 DESCRIPTION OF THE ANTARCTIC MINKE WHALE...... 14 1.4 DESCRIPTION OF FOLLOWING CHAPTERS...... 18

2 PRESENTATION OF MODELS AND DESCRIPTIONS OF PARAMETERS 20

2.1 PRESENTATION OF MODELS...... 20 2.1.1 Dynamic ModeL...... 23 2.1.2 Sustainable Revenue Expressions...... 25 2.2 DESCRIPTIONS OF PARAMETERS...... 30 2.2.1 Sole Owner Assumption...... 30 2.2.2 Region Unification Assumption...... 32 2.2.3 Carrying Capacity...... 34 2.2.4 Intrinsic Growth Rate...... 35 2.2.5 Current Population of Antarctic Minke Whales ...... 36 2.2.6 Fishing Effort...... 37 2.2.7 Costs...... 39 2.2.8 Price Per Antarctic Minke Whale...... 41 2.2.9 Real Interest Rate...... 42 2.2.10 Catchability Coefficient...... 44

3 RESULTS AND SENSITIVITY ANALYSIS 45 3.1 RESULTS...... 45 3.1.1 X* Condition...... 46

3.1.2 XMSY Condition...... 49

3.1.3Xbar Condition ...... 51 3.1.4 X# Condition...... 53 3.2 SENSITIVITY ANALySIS...... 56

4 ANAL YSIS AND CONCLUSIONS 62

SOURCES CONSULTED...... 71 LIST OF TABLES

2.1 Models' Names and Mathematical Expressions...... 22

2.2 List of Parameters and Value Assumptions...... 22

2.3 Assumed Characteristics of Japan's Whaling Fleet...... 39

3.1 Description of Equilibrium Population Terms...... 46

3.2 Sustainable Revenue Equilibrium Antarctic Minke Whale Populations...... 54

3.3 Japan's Maximum Total Present Value from Future Whaling Revenues...... 55

3.4 Sensitivity of Results to a One Percent Change in One Parameter When the Remaining Parameters Are Held Constant...... 56

3.5 Sensitivity of Results to a One Percent Change in One Parameter When the Remaining Parameters Are Held Constant Using the Arc Elasticity Method.. 57

4.1 Results with Corresponding Meat Production...... 64 LIST OF FIGURES

2.1 POPULATION TREND OF THE ANTARCTIC MINKE WHALE...... 26

2.2 IWC'S SIX DESIGNATED REGIONS OF THE ANTARCTIC OCEAN...... 33

3.1 SUSTAINABLE CATCH YIELD AS A FUNCTION OF EFFORT ...... 47

3.2 REVENUE AND COST CURVES AS A FUNCTION OF STOCK SIZE ..... 52 CHAPTER 1

INTRODUCTION

The Antarctic Ocean is the battleground for a conflict unlike one ever witnessed before. In the Antarctic Ocean, there are no strong claims to territory; there are not clear or uniform laws, nor even an authority with power to enforce the laws. The conflict is not between specific countries or even companies. All parties feel like they have a moral high ground over the others and that the law is on their side. Yet like most conflicts, this one is rooted in resources. However, the parties are not competing to consume the resources, but rather battling for the rights to consume and conserve. There is no simple answer or compromise to this conflict and the parties to not seem interested in negotiation. What is at the crux of this conflict? The answer is the Antarctic minke whale (AMW) and Japan's commitment to perform lethal research with the intention of returning to commercial whaling, and conservation groups' dedication to protect

Antarctic Ocean and all its inhabitants. The following aims to provide background information pertaining to the regulatory framework of the whaling industry; present and explain the current issues surrounding whaling; detail a brief history of the Japanese whaling industry; describe the AMW; and outline the rest of the thesis. This thesis hypothesizes that even if the AMW population is large enough to support harvest and the

International Whaling Commission (IWC) voted in favor for the return of commercial 2 whaling, Japan's domestic demand for whale products is weak and not capable of purchasing enough whale products for Japan to break-even or profit from the endeavor without the support of government subsidies. To test this hypothesis, bioeconomic models will estimate the current AMW population, various equilibrium AMW populations, sustainable catches, annual sustainable revenues, and the discounted maximum total present value of Japan's whaling operations. The bioeconomic models rely on thoroughly researched values for biological parameters of the AMW and on

Japan's whale industry data.

Before the hypothesis is tested, a detailed review of the literature establishes what facts and theories are generally agreed upon, but also where is there sharp contention.

Over the past 25 years, there has been little progress on a compromise between nations that support whaling and nations against whaling. Much of the whaling discourse moved away from science towards arguments based on ethical and moral judgments. There needs to be more dialogue based on science and economics that explores questions regarding population size, genetic diversity, sustainable harvests, whaling industry regulation and capacity, and market demand for whale products. This thesis will hopefully add to the scientific and economic research regarding Japanese whaling and spur constructive discussion though an empirical study about the economic and ecologic feasibility of harvesting the AMW. A bioeconomic model will be developed that depends upon AMW biological parameters and data from Japan's whaling fleet .This will model will explore various AMW populations of sustainable catch yields. The theory behind the model is explained in chapter 2; the model is implemented and tested for 3 sensitivity in chapter 3; and the results, analysis, and conclusions are presented in chapter

4.

BACKGROUND

Since World War II (WWII), Japan has been one of the strongest Asian allies to the United States, other western nations, and Australia. These nations' interests have aligned on a broad range on international affairs; however, since 1982 one issue in particular has severely strained these relationships, namely Japan's lethal scientific research on the AMW and Japan's desire to return to commercial pelagic whaling in the

Antarctic. Many nations have a cultural heritage of whaling and some nations still have consumers that demand whale products, but whaling no longer plays a critical role in most nations' economies. Cheap and effective substitutes for whale products developed after the 19th century made all commercial whaling, expect for meat production, obsolete.

I In addition, most meat consumers have not eaten ; nor do they seem intent on trying it. Globally influential non-state actors formed in response to pro-whaling

th nations' continued harvests of whales in the 20 and 21 5t centuries. The Sea Shepherds

Conservation Society, one of the most infamous environmental protection organizations, known for its confrontational tactics, has drawn considerable media attention to Japan's lethal scientific research with its television series called Whale Wars. As a result the greater public has been exposed to Japan's whale research and the organizations that oppose it. However, discussions of whaling remain emotional and moral, instead of scientific and economic, even within the organization responsible for whaling policy.

I Lance E. Davis, Robert E. Gallman, and Teresa D. Hutchins, "The Decline of U.S. Whaling: Was the Stock of Whales Running Out?" The Business History Review 62, no. 4 (Winter 1988): 572. 4

The IWC was formed by the International Convention for the Regulation of

Whaling in December 1946 in Washington, DC. 2 Nations of the world, weary of conflict, chose to peacefully unite and discuss concerns. "The purpose of the Convention is to provide for the proper conservation of whale stocks and thus make possible the orderly development of the whaling industry".3 Certain species of whales were nearly harvested to extinction, so the IWC was given authority over member nations to engage in protection of certain species, determine areas to be whale sanctuaries, impose limits on the quantity and size of whales that may be harvested, designate open and closed seasons for whaling, and forbid capturing suckling calves or female whales that are with calves.4

The IWC was founded for the preservation of whaling, not for the protection of whales. The initial quota system is largely to blame for the over-harvest of the megafauna. Instead of issuing quotas for individual species, the IWC issued quotas in terms of units (BWU). One Blue whale equaled one BWU, two fin whales equaled one BWU, and similar ratios were established for the other whale species.s This system encouraged larger whale species to be taken over smaller whale species because a fleet would expend less effort by filling their quota with a few large whales rather than many small whales. This system was reformed to issue quotas according to species, but the damage was already done.

2 "International Convention for the Regulation of Whaling, 1946," available from http://sedac.ciesin.org/entri!texts/intl.regulation.ofwhaling.1946.html; Internet; accessed on September 30, 2009.

3 Institute for Cetacean Research, "Commission Information," available from http://vvww.iwcoffice.org/comrnission/iwcrnain.htrn; Internet; accessed on September 30,2009.

4 International Convention for the Regulation of Whaling 1946.

5 Hiroyuki Watanabe and Hugh Clarke, Japan's Whaling: The Politics a/Culture in Historical Perspective. Melbourne, Vic.: Trans Pacific Press, 2009, 126. 5

Over the following decades many IWC member nations developed economies that did not depend on commercial whaling and people around the world developed an affinity for whales. In 1982 a monumental development occurred when IWC member nations agreed on a moratorium on commercial whaling to go into effect in 1986.6 The agreement was not unanimous; Japan along with some northern European countries adamantly opposed the measure. Japan deeply wishes to see the IWC return to an international organization that stands for regulated commercial whaling, maintenance of whale stocks, and expansion of whaling. 7 Working to that end, Japan has tried to strengthen cooperation among pro-whaling nations in the IWC, recruit new members that are supportive of Japan's whaling policy, encourage the new members to vote with Japan at the IWC meetings, and to weaken or fragment anti-whaling organizations.s

However, the moratorium did not effectively halt whaling because Article VIn of the IWC charter states: "any Contracting Government may grant to any of its nationals a special permit authorizing that national to kill, take and treat whales for purposes of scientific research".9 Information such as a whale's age, diet, and biological data can only be learned from dissection ofthe animal. In response to the 1982 moratorium, Japan began lethal scientific research on whales under Article VIII in 1988. Each year Japan catches between 400 to 1000 AMW; harvests have also included fin whales, endangered

6 Institute for Cetacean Research, "About ICR, " available on http://www.icrwhalc.org/abollticr.htm; Internet; accessed from March 23, 2010.

7 Japan Whaling Association, "Organization," available from http://www.whaling.jp!english!intro.html; Internet; accessed September 29,2009.

8 Jun Morikawa, : Power, Politics and Diplomacy. New York: Columbia University Press, 2009, 83.

9 International Convention for the Regulation of Whaling, 1946, Article VIII. 6 sei whales, and Japan has planned to harvest humpback whales. '0 The IWC requires

Japan to submit its research, but many member nations argue that considering the length of study and amount of whales caught, Japan has submitted an inadequate amount of research. Critics believe that the research does not meet standards for legitimate science; the research often lacks relevancy to management of the whales. They claim that Japan refuses independent analysis of information and that studies have lacked a credible hypothesis." Also, Japan is accused of submitting unusable data summaries to make any analysis impossible.'2 The precious raw data available may be skewed as well. The number of whales sighted comes from the scout boats, part of an armada including and catcher boats. They are usually in areas where whales are expected to be. This can skew estimates of the real population of whales when only high density areas are considered. 13

Anti-whaling parties are also alarmed that Japan is selling the whale meat after research is completed to subsidize the scientific whaling operations, but in fact nations that conduct lethal research are required to sell the meat. Article VIII states that "Any whales taken under these special permits shall so far as practicable be processed and the proceeds shall be dealt with in accordance with directions issued by the Government by which the permit was granted". '4 This practice ensures that the meat is not wasted in the

10 International Whaling Commission, "Catches taken: under scientific permit," available from http://www.iwcoflicc.org/conscrvalion/tablc pcrmit.hlm; Internet; accessed on September 29,2009.

11 Gordon Orians et aI., eds., ''''Scientists versus Whaling": Whose Errors of Judgment?" Bioscience 53, no. 3 (2003): 202.

12 Sidney Holt, "Aiding and Abetting the Whaling Industry." Bioscience 53, no. 5 (2003): 449.

13 Ibid

14 International Convention for the Regulation of Whaling 1946 Article VIII 7 name of research, but it is also in Japan's national security interests to preserve whaling.

Japan does not have enough domestically produced protein to satisfy her population and therefore must import significant quantities. Whaling provides access to protein sources that are not owned by any nation. Scientific whaling also ensures that whaling specific knowledge and infrastructure does not fade from Japan's memory. Thus if Japan were to face a national food emergency suddenly, then she would be capable of effective whaling.

Countries engaged in whaling for scientific research have not hid their intentions to return to commercial whaling. IS A return to limited commercial whaling is probable, but first the question of whether or not to return to commercial whaling needs to be examined critically through science and economics. Before commercial whaling may resume, it is pertinent to establish population numbers for the various whale species.

Currently there are estimates, but the margin for error is very high. 16 No nations are suggesting that the Blue whale should be hunted, because its population numbers are agreed to be very low. Yet population estimates for whales like the fin, humpback, and minke are much more unclear. The existing data must be examined to determine if sustainable harvest yields will threaten the species from a biological perspective and if the venture will be profitable from an economic perspective. A myriad of factors like breeding characteristics, social patterns, feeding habits, and distinct groups within species need to be considered as well.

15 Institute for Cetacean Research, "Questions & Answers: Japan's research whaling in the Antarctic," available from hllp:i/www.icrwhalc.org/OandARcscarch.htm; Internet; accessed on March 23, 2010.

16 International Whaling Commission, "Whale Population Estimates," available from http://www.iwcortice.org/conservationiestima1e.htm#assessmen1; Internet; accessed on February, 17,2010. 8

In addition to advancing our biological knowledge of whales, the feasibility of whaling operations needs to be questioned. Whaling is not only expensive, but risky to life and capital. The ships' costs and maintenance, fuel, crews, insurance, and other costs at the margin need to be determined if they are below, equal to, or over the marginal revenue for the final product. Furthermore, the current and potential future market demand for whale products in Japan needs to be examined relative to the biological and harvest limits to determine if these factors can be balanced or compromised.

For the purpose ofthis study, examination will be limited to the AMW, Japan's whaling operations, and Japan's domestic demand. The analysis assumes that modeled commercial whaling falls under the authority of the IWC, the Convention on

International Trade in Endangered Species of Wild Fauna and Flora (CITES), and all existing regulatory framework within Japan.

CHARACTERISTICS OF THE WHALING INDUSTRY

Whales and the whaling industry are extensively studied fields, but there is still much to learn. During the 1800s, the industrial revolution and an increase in the human population drastically increased the demand for whale products. 17 Whales not only provided meat to coastal communities, but also were instrumental in the development of industry. was used for machinery, trains, illumination, cleansing agents, and chemical products. In addition, whales' sieve material was used in many applications where plastic and spring steel products are used today. 18 In the 1800s, the

United States of America (USA) dominated whaling, but the industry sharply declined

17 Davis, 570.

18 Davis, 570-571.