The Role of Economics in Achieving Welfare Gains for Animals 9CHAPTER

Jennifer Fearing and Gaverick Matheny

Introduction he demand for animal prod- schools of economic study, macro- product market. In the factor mar- ucts and services is a power- economics and microeconomics. ket, households (or firms) that Tful economic force in society, Most often references to “the own the factors of production sell and multibillion-dollar industries economy” are related to macroeco- their labor, land, and capital to are organized around this demand. nomic concerns: interest rates, firms that produce products in These industries often face in- employment figures, trade bal- exchange for wages, rent, and creased costs by improving animal ances, inflation levels, commodi- interest. In the factor market, welfare and are quick to use eco- ties prices, and other aggregate households are the sellers, and the nomic arguments against proposed measures of market behavior. companies are the buyers. welfare reforms (see sidebar on Macroeconomic figures are helpful In the product market, compa- page 169). These arguments, while for making broad comparisons nies sell the products they have often specious, can influence con- between today’s “economy” and produced to households that pay sumers, voters, and policy makers. that of earlier periods or the money to purchase them. The Citizens are less likely to support economies of other countries/ money flows in the opposite direc- animal welfare reforms they’ve been regions/states. Those who study tion this time: people buy products told will double their shopping bill microeconomics focus on the from firms that produce them. In or impoverish family farmers. behavior of, and interactions this way, money flows circularly— Animal welfare advocates cannot among, individual consumers, pro- creating an economic marketplace respond to these economic argu- ducers, and industries. where money goes from the produc- ments with moral rhetoric alone. Changes in the welfare of ani- ers to the workers in the form of Instead, non-governmental ob- mals—whether the animals are the wages and back to the producers in servers (NGOs) must challenge the products themselves (e.g., meat, the form of payment for products. economic assumptions, calcula- hunting trophies, fur coats) or Consider the market for eggs. In tions, and conclusions of animal in- whether animals are used in the factor market, an egg farmer dustries and produce reliable eco- process or production (e.g., eggs, needs factors of production, in- nomic arguments of their own. To dairy products, cosmetics testing, cluding land on which to build do so they should understand some circus entertainment)—are made structures and pens to house his basic economic principles, which at the firm level in response to hens; the hens themselves; equip- we review below, and, when possi- changes in costs (supply side) or ment to collect, sort, clean, and ble, enlist the help of economists. consumer preferences (demand package the eggs; feed and medi- side). As such, we focus here on cines to keep the hens alive; car- microeconomic principles. tons and packaging; trucks to ship The Economy In Figure 1, the economy is illus- the cartons; and employees to People often refer to “the econ- trated as two concentric circles. In assist with all aspects of produc- omy” without much understanding a market economy, there are two tion. Having invested in these fac- of its fundamentals. There are two markets: the factor market and the tors, the farmer produces eggs for 159 stores alongside thousands of other Figure 1 products, each with its own unique “The Economy” market at play. As such, firms can- not “price discriminate,” that is, set a different price for every con- sumer’s unique willingness to pay. Product Market Goods and Services Even though you might be willing to pay $2 for a bag of peanuts, and Money one of the authors is only willing to (Payments for goods pay $1, the selling firm must select and services) a single price–one it hopes will maximize its profits given our dif- Firms And don’t forget about the taxes.... ferent preferences. Households What becomes relevant then is the overall supply and demand Money schedules. Supply is measured as (Wages, rent, and interest) the sum of individual firm supply schedules, and demand is the sum Factors of Production Factor Market (Capital, land, and labor) of individual household demand schedules. The “market clearing” price and quantity for the good are sale to the public. In the product and subsidies that may further set by the intersection of the will- market, when the eggs are sold, alter his cost structure. We discuss ingness of suppliers to supply and the payments received by the egg the role of government in creating consumers demand for the product. farmer go to pay for the costs asso- or eliminating distortions in mar- This relationship is illustrated in ciated with producing the eggs. kets through use of the tax system, Figure 2. At any given price, the The farmer pays wages to his subsidies, or other policies later. firms in this product market are will- employees, rent to a property ing to supply some quantity of a owner (or bank, if there’s a mort- good that is demanded by con- gage), and interest on any loans Supply and sumers. The higher the price people taken to purchase the equipment are willing to pay, the higher quan- or otherwise manage cash flow. Demand tity a firm will be willing to supply. The relative volume of products The government’s role in these The converse is also true: if the will- and money that flows between markets is pervasive. Taxes are ingness to pay for a given product is households and firms in the econ- taken or expressly relieved at lower, firms will supply a lesser quan- omy is driven by supply (availability almost every juncture. The farmer tity. The demand curve declines of specific goods) and demand may be exempted from sales taxes because consumers are allocating (desire for those goods). Each that would otherwise be levied on among scarce resources. At higher product has its own market and his equipment purchases and also prices for any given goods, fewer supply and demand characteris- may deduct business expenses consumers are willing or able to pur- tics. Each firm in a given product from annual income taxes, but he chase them. Conversely, as goods market has its own supply curve pays taxes on wages paid to become widely available at lower driven by its cost structure—that employees and any profits earned prices, more people are willing or is, the firm can calculate for any from the business. Households, able to purchase them. given price what quantity of goods which pay taxes on other nonfood The market is said to “clear” at it can produce and still earn a rea- goods, are expressly exempt from equilibrium: supply and demand sonable profit margin. Each con- sales taxes on eggs because of gov- intersect where the amount de- sumer in a given product market ernment policy. The farmer’s work- manded equals the amount sup- has an individual demand curve: ers pay taxes on their income plied, at what’s called the “market each of us has a personal schedule earned, and the banks, landlords, clearing” price. In Figure 2, given of prices we’re willing to pay for and equipment makers also pay Demand , this happens at a quan- various quantities of that good. 1 taxes on any profits earned from tity of Q and a price of P , the In today’s complex product econ- 1 1 their business dealings with the product of which determines the omy, few buyers and sellers meet egg farmer. Finally, beyond the tax total revenue received by the firms. to negotiate specific terms. In- effect, the farmer may be eligible The slope of the two curves stead, most products are sold in for various government programs is determined by the degree of

160 The State of the Animals IV: 2007 increases. If the price of freshly Figure 2 baked bread from the bakery rose Supply and Demand somewhat, for example, many con- sumers would decide to switch to Supply processed bread from the bread aisle. On the supply side, firms have varying flexibility to respond to

P2 price changes with contraction or expansion of the number of goods supplied. For some products they

P1 may be able to expand supply rapidly to take advantage of higher prices in a market; for others, they might have more limited ability to react. Demand2 Short- and long-term scenarios can adjust the price elasticity of both

Demand1 supply and demand over time, but P x Q = Revenue measuring elasticity plays a key role in evaluating consumer and firm responses to changes in the market Q1 Q2 environment, including changing information, cost structures, and preferences relating to improving animal welfare. Figure 3 The characteristics and observa- Trade-off: Welfare and Efficiency tions that drive supply and de- mand curves can and do change in reaction to endogenous (within the market) and exogenous (be- B yond the market) factors. Endoge- A nous factors might be new ver- sions of products or marketing C campaigns that alter supply or Animal demand or both. Exogenous fac- Welfare tors can include new information (e.g., independent research show- D ing ill health effects associated with a given product), disasters (natural, disease outbreaks, ter- rorist attacks), or the introduc- tion of competing products with different (better) characteristics. Minimum = Cruelty Production Efficiency When changes like this occur, sup- ply and demand can shift in or out, causing a new equilibrium “elasticity” in the market. Elastic- these products tend to “need” to manifest. In Figure 2 demand ity indicates the degree of flexibility them, they are less sensitive to is shown to be shifting out; for in buying or selling an item at prices—as prices go up, they may every given price of the good, a higher prices. On the demand side, purchase somewhat fewer goods, higher quantity is demanded. Sup- consumers may have relatively but they will likely continue to pur- pliers, whose schedules did not inelastic demand for staples like chase them. A person has more change, react by shifting their pro- milk, flour, or eggs and for items elastic demand for less necessary duction to the quantity Q2 and like gas for their car, prescription (to them) goods. Luxury items or charging P2, and the total money medications, or cigarettes (if one is “splurge” products may quickly involved increases. a smoker). Because consumers of become off-limits if the price

The Role of Economics in Achieving Welfare Gains for Animals 161 indirectly by the extent to which function or cardiovascular and Applying human consumers value animal skeletal health. Animal mortality Economics to welfare when making their eco- caused by intensification is eco- nomic decisions. For instance, a nomically acceptable to producers, Animal Welfare hen’s preference not to be caged so long as the gains in efficiency Economics in its application may has market value only when a con- outpace the increase in mortality. seem a cold and hard science: in sumer recognizes this preference, If unregulated, producers moti- fact, it was famously deemed the feels some obligation to respect it, vated solely by efficiency will oper- “dismal science” by Thomas Carlyle and chooses not to buy eggs laid by ate at D. Beyond this point, ani- in the mid-1800s. But at its most caged hens. mals begin to fall sick or die in basic level, economics is fundamen- sufficiently large numbers that tally a study of what people value or total efficiency declines. prefer, thus it has its roots in moral Presumably to the left of D is a philosophy. Whereas moral philoso- Animal Production point C, where the welfare of ani- phy concerns itself with what pref- and Welfare mals is socially optimal from erences people ought to have, eco- A production process transforms humans’ point of view. For reasons nomics concerns itself with what inputs into outputs. In the case of discussed below, C is likely to be preferences people actually have, animal production, inputs such as much closer to B than it is to the and how they can best be satisfied. animals, feed, housing, human existing level of welfare provided by People do not always express labor, and veterinary services are producers in a free market. their preferences, making meas- transformed into outputs such as urement difficult. Modern econom- meat, eggs, milk, fur, zoo amuse- ics has sought to measure the pref- ments, and product testing assur- erences revealed by individuals’ ances. To maximize profits, animal Problems in behaviors in markets, where goods producers may attempt to maxi- the Market for and services are exchanged using mize the efficiency of this transfor- money. For example, if one is will- mation. The implications for ani- Animal Welfare A society’s attitudes toward animal ing to spend $2 for a bag of mal welfare are illustrated in welfare could be revealed by con- peanuts but only $1 for some pop- Figure 3 (McInerney 2004). The sumer demand for animal welfare- corn, one is said to reveal a vertical axis indicates animal wel- friendly products. However, the stronger preference for peanuts fare, while the horizontal axis indi- socially optimal level of animal wel- than for popcorn. More controver- cates the efficiency of animal pro- fare may not be achieved through sially, money may also be used as a duction in terms of some product the market because the market common currency to compare the for human consumption, such as suffers from a number of failures: preferences belonging to different eggs per unit of production cost. aspects of animal use and produc- people. If one is willing to spend $2 Point A represents a completely tion create “negative externali- on peanuts, but another is willing unmanaged, wild existence for ani- ties”; the “opportunity costs” of to spend only $1 on peanuts, then mals. Arguably, there is some level animal use are rarely, if ever, fac- the first is considered to have a of management that increases wel- tored in; the failure to consider stronger preference for peanuts fare above this level; for instance, “substitution effects” for compet- than the second has. (This is providing food, shelter, and protec- ing or alternative products; the imprecise, since $1 may have more tion from predators to otherwise high and increasing market con- value for the second person than it free-roaming animals. From the centration of many animal-using does for the first, if, for instance, animals’ perspective, the ideal industries; animal welfare, which the second has a lower income. level of welfare is B. has both public good and merit But economists argue about how Beyond B, producers sacrifice good characteristics; and con- such imprecision can be cor- animal welfare for the sake of sumers who are not well-informed rected.) A market is considered to increased productivity. This may about animal welfare. be economically efficient when, on involve intensive confinement, to the whole, society is able to maxi- decrease housing costs, and inten- Negative Externalities mize the satisfaction of its mem- sive breeding, to increase produc- A negative externality is a cost that bers’ preferences. tivity per animal. As more of an a product causes to society that is Because nonhuman animals do animal’s metabolism is dedicated not reflected in the product’s price. not participate in markets, within to production, less is available to For instance, a producer that an economic framework, their support central determinants of causes pollution in manufacturing preferences can be measured only animal welfare, such as immune a product may cause a negative

162 The State of the Animals IV: 2007 externality if neither the producer relative to hunters’ impact of $20.6 failing to account for substitution nor the consumer is taxed to offset billion (U.S. Fish and Wildlife Ser- effects distorts the market and the pollution abatement costs. vice 2002). The opportunity costs potentially reduces opportunities Externalities can be corrected by of increased hunting, then, may be for increasing animal welfare. some form of government action. reduced wildlife watching, which For instance, a government can brings with it an offsetting, unfac- Increasing Market restrict or tax pollution or the sale tored economic impact. Concentration of polluting products. Left uncor- A truly competitive market is pos- rected, negative externalities push Substitution Effects sible only when enough buyers and adverse impacts onto people who In characterizing the economic sellers participate. When many are not party to the production or impact of a proposed increase in firms vie for the same consumers, consumption of the product. animal welfare, firms, trade associa- competition doesn’t just put down- Poor animal welfare causes sev- tions, or government officials often ward pressure on prices—which is eral negative externalities. A num- overlook the existence of “substitu- usually a good thing—but it also ber of consumers feel discomfort tion effects.” Consumer demand for creates pressure for individual about other people’s mistreatment a given good can and does change firms to react more quickly to of animals. People who live or work in response to changes in prices, changing consumer preferences. near concentrated animal-feeding laws, social mores, and the availabil- People are generally familiar with operations (or CAFOs, where ani- ity of alternative products. When the notion of monopoly: a single mals are raised indoors in large the market contracts due to lower firm produces a product, and no numbers at high densities), often consumer demand, the reduced rev- other firms find it profitable to are adversely affected by the air enue in that product market does enter the market (owing to patent and water pollution generated. Not not show the whole picture. Con- protection, scale economies, first- only is their health compromised, sumers likely have shifted their pur- mover advantages, or other fac- but often they find their property chases to another substitute prod- tors). A monopoly allows a firm to values are depressed, owing to the uct that is more desirable. To control the entire supply curve, pollution caused by their CAFO measure the true impact of an in- puts upward pressure on prices, neighbors. Both the discomfort crease in animal welfare, these pur- and tends to be slower at innova- and the pollution are negative chases must be included. tion or product improvement externalities, genuine social costs For example, local officials have (hence, the characterization of the that are not reflected in the mar- defended continuing circus shows “lazy monopolist”). ket prices of the animal products. with exploitative animal acts in But a market doesn’t have to be publicly owned arenas because strictly monopolized by a single firm Opportunity Costs such shows generate revenue for to show signs of these failures. Mar- Justifications for animal use or the city and for proximate restau- kets with high levels of seller concen- reduced animal welfare rarely take rants, parking garages, and the tration (that is, with very few sellers) “opportunity costs” into account. like. But local officials rarely factor can significantly reduce their com- The opportunity cost of any deci- in the economic impact that might petitiveness and be slow to respond sion is what was forgone in favor be generated by animal-free cir- to changing consumer demands. of what was selected. For example, cuses or other children’s entertain- Livestock markets are particu- state government agencies with ment that would substitute for the larly concentrated and increasingly purview over natural resources animal events. In some cases the vertically integrated along the sup- often claim that providing new substitution effect might be so ply chain (i.e., where once farmers hunting opportunities (e.g., new great that it might more than off- sold to slaughterhouses, who sold species, new seasons, lower age set the loss of revenue from the cir- to packers, now one company owns requirements, or increased bag lim- cuses, especially in light of the all three levels). Rapid expansion its) provides economic benefits to decreasing popularity of such of industrial farming has dramati- states. But these officials do not shows with the public. In the cally reduced the number of meat, factor in the reduced opportunities absence of a traveling animal show, dairy, and egg producers, turning for wildlife enjoyment that neces- more families might opt to take the family farm into a novelty. A sarily result from more hunting. advantage of local attractions that March 2005 USDA study of market According to the latest U.S. Fish hire residents as employees, in structure in the meat, poultry, and Wildlife Service national sur- contrast to the circus employees dairy, and grain-processing indus- vey, wildlife watchers outnumber who reboard the train or bus and tries concluded that hunters by a factor of five to one spend their incomes in other parts [T]he drop in the number of and generate $38.4 billion per year of the country. What’s clear is that plants, sharp rise in plant size,

The Role of Economics in Achieving Welfare Gains for Animals 163 and a leveling or decline in the Public and Merit Goods believes that CAFOs are inhumane, per capita consumption of red Animal welfare has characteristics for example, those who do may be- meat, fluid milk, and flour of both public goods and merit lieve it so strongly that aggregate products led to a 50 percent goods. A public good is a good val- social welfare, as a whole, might be increase in average four-firm ued by everyone in society, whose increased by banning CAFOs. concentration levels—to about benefit is nonexcludable (it can be 46 percent for all nine indus- enjoyed by anyone) and non-rival Imperfect Information tries.(Ollinger et al. 2005, iv) (one person enjoying it has no The market for animal welfare also On average, four companies effect on another enjoying it). suffers from imperfect information. accounted for about half of the total Clean air is an example of a public Producers and retailers do not have production in each of these indus- good. When the air is clean, every- complete information about the tries. Perhaps the most notable ex- one can enjoy it: one person’s degree of consumer demand for ample of market concentration is enjoyment has no effect on animal welfare; producers often the hog industry. Between 1975 and another’s. Wildlife is another exam- lack full information about the 2005, the number of hog farmers ple of a public good. One person costs associated with improving in America fell from 660,000 to admiring the neighborhood mourn- animal welfare; and consumers are 67,300—nearly 90 percent (U.S. De- ing doves does not diminish a not given (and often cannot partment of Agriculture, National neighbor’s enjoyment from watch- obtain) accurate information about Agricultural Statistics Service ing the same birds. In a free mar- the animal welfare aspects of prod- [USDA/NASS] 2005). This is not ket, producers have no incentive to ucts they purchase. due to a decline in demand for pork supply public goods in sufficient Most consumers value animal products. The number of pigs raised quantities, since they cannot cap- welfare but may know little about on U.S. farms actually increased ture full payment. As a result, pub- how their purchases affect animals. over that same period—from 69 lic goods often must be provided— For instance, a recent poll found million pigs per year to 104 million or protected—by governments or that 71 percent of respondents pigs per year (USDA/NASS 2006). other collective bodies with the believe “in general, farm animals Four major companies control more power to regulate their use. Using are fairly treated in the United than 64.1 percent of the hog the mourning dove example, soci- States” (Zogby International 2003). slaughter and packing industry in ety must decide whether or how to But when asked about standard the United States (U.S. Congres- balance the interests of those who farming practices in the United sional Research Service 2006). favor watching or feeding the birds States, most of these same people Even the National Pork Produc- with the interests of those who deemed them objectionable. A ers Council, the trade association enjoy shooting them. 2000 Zogby poll found that 86 per- representing pork packers and pro- A merit good is a good that is not cent of adults feel the crowding of ducers, told Congress that this valued by everyone in society but hens in commercial egg production level of concentration raises issues: has broad social benefits. Public is “unacceptable” (Yahoo News While not a guarantee of con- schools and vaccinations are exam- 2000). A 1995 poll by Opinion duct that increases consumer ples of merit goods. All members of Research Corporation found that prices and/or reduces pro- society indirectly benefit from pro- 90 percent of respondents disap- ducer prices, these levels and vision of these goods, even if they proved of the standard practices of their trends increase the possi- are not a direct consumer of them. confining veal calves, pigs, and hens bility of such conduct and pro- A merit good may be provided or (Swanson and Mench 2000). The vide ample incentive for subsidized by governments if there majority of Americans object to heightened vigilance. (Caspers is sufficient public support for such standard agricultural practices— 2000, n.p.). action. Alternatively, governments but only after they’re told what As of mid-2006, federal antitrust may spend money increasing de- those practices are. This suggests officials were reviewing Smith- mand for merit goods by educating that Americans are largely ignorant field’s proposed acquisition of its society about the good’s merits. about factory farming, so their pur- biggest rival, Premium Standard Animal welfare has aspects of chases do not accurately reflect Farms, which followed on Smith- both public and merit goods. Some their stated preferences. field’s acquisition of ConAgra’s level of animal welfare is a public The problem is exacerbated by refrigerated meats subsidiaries good: nearly everyone in society the lack of transparency in animal earlier in the year (Associated believes animals should not be products. Animal welfare is a quality Press 2006). starved or beaten, for instance. But characteristic of a product, an some level of animal welfare is a aspect that consumers value and merit good. While not everyone use to differentiate competing

164 The State of the Animals IV: 2007 products. However, unlike some Last, it is worth noting a funda- from an improvement in animal characteristics—like taste, smell, mental market failure: the largest welfare. If this number is greater or touch—it can rarely be observed group of stakeholders in decisions than the total cost of the improve- in the final product. Consumers affecting animal welfare—the ani- ment, then the improvement is a cannot determine from an unla- mals, themselves—do not partici- net benefit to society and should beled product how animals were pate in the market. Their prefer- be instituted. treated during production. As a ences, and their suffering, are of Consumers report a willingness to result animal products are consid- no direct account. pay more for products labeled with ered “credence goods,” goods animal welfare assurances. In a 2004 whose characteristics (in this case, Willingness to Pay poll, three-quarters of respondents animal welfare) cannot be dis- A fundamental proposition in eco- said they were willing to spend two cerned by a consumer before or nomics is that the extent to which cents more for a fried-chicken meal after purchase. society values a good is indicated by with welfare assurances (Zogby Credence goods cause market the level of consumers’ willingness International 2004). In fact, the inefficiency, since consumers may to pay (WTP) for it. Some con- KFC Corporation (parent of Ken- inadvertently buy lower-quality (in sumers are not willing to pay much tucky Fried Chicken) has estimated terms of animal welfare) goods and, for animal welfare, while others are that meeting NGOs’ (nongovern- therefore, drive higher-quality (in willing to pay a considerable mental observers) demands for wel- terms of welfare) goods from the amount. From the perspective of fare improvements would increase market. The market failure sur- society, the optimal level of animal costs by less than this amount rounding credence goods is justifica- welfare is that which corresponds to (Blum 2004). tion for government intervention, society’s aggregate WTP. Other research suggests that typically in the form of standards Many consumers willing to pay consumers are willing to pay an and labeling requirements. Some considerable amounts for animal average 17–60 percent more for labeling programs have sought to welfare have no opportunity to do eggs from cage-free systems (HSUS provide information about animal so in the market. This includes 2006). One study found that con- welfare, though these are often consumers who choose not to par- sumers were willing to pay average found to be inadequate (at best) or ticipate in a market (for instance, taxes of $8 per person per year to deceptive (at worst). More complete vegans); consumers who cannot fund practices they believed would and accurate labeling improves eco- participate in the market because improve conditions for hens (Ben- nomic efficiency by helping con- the products they want to buy are nett and Larson 1996). This WTP sumers to target expenditures unavailable; and consumers who exceeds the additional cost of cage- toward products they most want. participate, and are willing to pay free production, as discussed in the The use of animals in cosmetics some amount for welfare improve- sidebar on page 170. testing provides a good example of ments, but not as much as what is Consumers’ statements do not improved labeling that has resulted currently charged. always translate into actual pur- in a more efficient market where Society’s revealed WTP for ani- chases, as revealed by the low market consumers’ purchases can accu- mal welfare, as embodied in mar- shares of non-CAFO products. The rately reflect their preferences. ket behavior, may thus be signifi- misfit between consumers’ inten- There are a number of different cantly lower than its actual WTP. tions and their behavior might owe labels, each providing different lev- To capture the residual WTP, econ- to the unavailability of non-CAFO els of assurances about the use of omists try to measure society’s products in many supermarkets and animals (as testers or ingredients). declared WTP by asking people restaurants; absent or poor labeling; Some labels indicate that animals what they would be willing to pay or perceptions that the responsibility were not tested for the finished to see a specific improvement take for animal welfare lies with govern- product (meaning the individual place, for instance, “How much ment, producers, or retailers (Bland- ingredients themselves may have would you be willing to pay to see ford et al. 2000). There are also con- been tested on animals), while a ban on whaling?” WTP research cerns about the accuracy of declared others assure not only no testing of typically involves the use of surveys WTP. People who feel strongly about the finished product or ingredients of a large sample to represent the an issue could declare a WTP that is but also the absence of animals as attitudes of society. unrealistically high. Therefore, a an ingredient. These labels give Society’s aggregate WTP can be number of research methods have consumers additional information derived from estimates of average been devised to improve the accu- about cosmetics products, which WTP multiplied by the total popu- racy of declarations. allows them to consider their pref- lation size. This number represents erences when they shop.1 the total benefit society receives

The Role of Economics in Achieving Welfare Gains for Animals 165 demanding as those applied in successfully negotiating welfare Taking Account their own countries (Poultry World gains with a major retailer can lead of Free Trade 2006). Trade restrictions are one to a “race to the top” and to a push Animal welfare legislation in Europe way to solve the problem, but inter- for harmonizing regulation so that and the states of Florida and Arizona national trade rules limit the kinds costs are shared. outlawed the use of particular ani- of restrictions that are possible. mal production systems within their Rather than modify trade rules, national or state boundaries. How- the most practical means of pro- How Animal ever, both sets of legislation may tecting animal welfare may be to have a limited effect on animal wel- educate consumers and to con- Welfare Campaigns fare as long as consumers continue vince retailers to carry only accept- Affect the to demand, and are supplied with, able products. While trade agree- products imported from other ments can force nations to allow Economics of nations or states that use the out- imports, they can’t force supermar- Animal Production lawed systems. Trade thus repre- kets or restaurants to sell them: NGOs can work to affect both the sents a special problem for animal Retailers are becoming the demand for and supply of animal welfare legislation. As the European most potent force in setting welfare. On the demand side, NGOs Commission noted, animal welfare standards and can educate consumers about ani- [A]nimal welfare standards, will be the major engine for mal welfare. On the supply side, notably those concerning farm influencing animal welfare NGOs can educate producers and animal welfare, could be under- change. They can move faster retailers about animal welfare; mined if there is no way of than governments, can cut off encourage voluntary production ensuring that agricultural and a supplier’s livelihoods by stop- and retail standards; promote food products produced to ping contracts, and can ignore research on alternative production domestic animal welfare stan- international trade agree- methods; promote subsidies for dards are not simply replaced by ments. While Europe as a animal welfare improvements and imports produced to lower stan- whole has to adhere to the challenge subsidies for animal wel- dards. (European Commission World Trade Organization and fare abuses; and help advance and 2000, 1) cannot bar imports on animal enforce regulations governing the This concern applies just as readily welfare grounds, retailers are treatment of animals and the sale to interstate trade within the United free to do so. (Bayvel 2005) of animal products. These strate- States. In Switzerland compliance with gies vary in the level of distortion As an example, the United King- animal welfare standards was lim- they introduce to the market. dom maintains higher animal wel- ited until the major retailers selling The least distorting strategy is to fare standards for sows than do most eggs, following pressure from con- allow producers to treat animals European Union (EU) countries. sumers and NGOs, announced they however they wish and allow con- Since the country’s ban on sow ges- would sell only eggs from cage-free sumers to purchase any level of ani- tation crates and tethers went into operations (Studer 2001). Swe- mal welfare they demand. Such an effect in 1999, U.K. pork costs den’s ban on battery cages has also approach is likely to create a variety increased and production volume been helped by retailers’ refusal to of welfare levels, catering to con- declined by 40 percent. In 2005 stock battery eggs (Agra CEAS sumers who care strongly about ani- more than half of all pork products Consulting 2004). Major Austrian mal welfare, those who care moder- in British supermarkets were im- supermarkets have volunteered to ately, and those who care weakly. ported, and more than two-thirds of end the sale of cage eggs by 2007 Such an approach is supported by these imports were produced using (M. Balluch, personal communica- farm assurance schemes that meet systems illegal in the United King- tion with G.M., April 14, 2006). And strictly enforced welfare standards dom (Meat News 2005). in the United Kingdom, Germany, and by government regulation of In one survey, 92 percent of Austria, and Switzerland, McDon- labeling. At the same time, NGOs British respondents believed im- ald’s, Europe’s largest food service and governments can work to edu- ported meat should be produced to operator, uses only free-range eggs cate consumers about the value of U.K. minimum standards (Meat (Pickett 2006). animal welfare, increasing demand News 2005). Similarly, 95 percent The visibility and name recogni- for higher-welfare products. of respondents in an EU-wide sur- tion of retailers make them sensi- Market distortions that now favor vey said that imported products tive targets of animal welfare cam- abusive industries can also be dis- should be produced under animal paigns. As retailers compete with mantled. For instance, feed grain welfare regulations at least as each other over public perception, subsidies disproportionately benefit

166 The State of the Animals IV: 2007 CAFOs that do not grow their own humane regulations concerning For example, suppose an NGO feed; research and extension serv- the slaughter and transport of has two projects, each of which lasts ices at land grant universities dispro- some farm animals. one year. Project A costs $100,000, portionately study and encourage brings in $80,000 in donations, and CAFO production; and CAFOs are saves an estimated two thousand offered tax breaks to purchase cages Cost-Benefit animals. Project B costs $200,000, and pens. Similarly, state fish and brings in $50,000 in donations, and game commissions subsidize hunt- Analysis saves an estimated five thousand Individuals, organizations, and soci- ing activities, including in many animals. The cost-benefit ratios for eties have an unlimited number of cases the purchase and provision of the projects are: preferences but have only limited “stocked” animals (e.g., fish, pheas- Project A: resources to invest in satisfying ants) to provide recreational animal ($100,000–$80,000)/2,000 = $10 these preferences. To satisfy the use activities that are in no way con- per animal saved greatest number of preferences, nected to conservation efforts. And Project B: people must choose the most effi- in the United States, the U.S. Food ($200,000–$50,000)/5,000 = $30 cient investments. Cost-benefit and Drug Administration continues per animal saved analysis (CBA) is an economic tool to require the institutional use of Project A has a lower cost-bene- used to measure efficiency. Here we animals in repetitive, uninformative, fit ratio and is thus more efficient. discuss how CBA can help organiza- or unnecessary testing of cleaning All else being equal, the organiza- tions prioritize projects. products, cosmetics, or medicines— tion should invest its funds in Pro- With CBA the marginal costs where viable nonanimal alternatives ject A rather than Project B to save and benefits of a project are meas- or earlier research exists. the greater number of animals. ured and discounted. Marginal Because of the negative external- costs are typically measured in dol- ities of animal abuse, and the pub- lars and include any additional lic good and merit good aspects of expenses an organization incurs by Moving Forward animal welfare, some level of mar- If the objective is to do the great- funding a project. Future costs are ket distortion is justified. Produc- est good for the greatest number, often multiplied by a discount rate, ers and consumers could be taxed then animal protection NGOs (and as costs incurred in the present (subsidized) at an amount equal to the donors who support them) represent a greater loss for organi- the negative (positive) externality should invest their scarce re- zations, which could otherwise they create. The aim of this tax sources in projects that reduce invest the funds. (subsidy) is to compensate society misery most cost-effectively. A project’s marginal benefit can (the producer or consumer) for the Because farm animals represent 99 be measured in dollars saved or full value of the externality. In par- percent of all animals raised and gained (for instance, from increased allel to the “polluter pays” princi- killed in the United States each donations); and in noneconomic ple used in environmental policy, year, and because there is broad measures, such as the number of producers who abuse animals could public ignorance about standard animal lives or life-years saved or be expected to compensate society farming practices, efforts to some quality-adjusted measure of in some way—for instance, through improve farm animal welfare may animal welfare.2 Like costs, future taxes on less humane producers. In be especially cost-effective. benefits are often multiplied by a parallel, humane producers could Economists and policy makers discount rate, as benefits realized in receive a subsidy for the benefit generally prefer pull strategies the present can be reinvested. they provide society. over push strategies because they Net marginal cost is the differ- Last, governments can impose are less market-distorting. A pull ence between discounted eco- regulations that set minimum stan- strategy educates, informs, and nomic costs and discounted eco- dards of care and/or limit the pro- promotes changes in consumer or nomic benefits. A cost-benefit ratio duction or sale of certain products. producer behavior. A push strategy is calculated as the net marginal Throughout the world, this has regulates, forces, and demands cost divided by the noneconomic been the favored strategy for pro- such changes. A note of caution: marginal benefit. Projects with a tecting the welfare of pets. In campaigns against individual pro- lower cost-benefit ratio are more Europe this has also been the ducers, or groups of producers in efficient than are projects with a favored strategy for protecting the individual regions, can be ineffec- higher cost-benefit ratio and, all welfare of farm animals (supple- tive. If one producer is forced out other things being equal, ought to mented by subsidies). To a limited of business, another may simply be prioritized. extent, this is also true in the take its place, as long as the United States, where there are

The Role of Economics in Achieving Welfare Gains for Animals 167 demand for goods remains trade and trade agreements will unchanged. Research Needs affect animal welfare. The problem Targeted public education cam- Costs and Benefits of substitution needs to be studied paigns revealing standard animal of Animal Welfare to assess the effectiveness of state abuse could make substantial and national legislation. To argue that animal welfare im- progress toward improving animal provements are not economically welfare. Most Americans care Evaluation Research disastrous to producers, retailers, or deeply about animal welfare but Few animal welfare NGOs have consumers, better data are needed know little about animal abuse. sought to evaluate the effective- regarding the net economic effects Most would be appalled to see how ness of their projects. Cost-benefit of such improvements at each level animals are treated in agriculture, studies can help NGOs focus their of the market. Scant data exist on research, entertainment, and scarce resources on those projects the production costs of welfare im- other industries. NGOs can ask that are most cost-effective in pre- provements in the United States. consumers to consume fewer of venting misery. Better data are also needed on the those products and services that producer share of retail prices for cause animals the most misery. Social Marketing animal products to estimate the This advice is consistent with the NGOs are likely to increase the effect of production costs on these “Three Rs” approach used in other cost-effectiveness of their programs prices. There have been few studies animal welfare campaigns: refine, by using tools already employed in evaluating consumers’ WTP for ani- reduce, and replace (Russell and market research. Increasing con- mal welfare improvements, and even Burch 1959). sumers’ demand for animal welfare fewer studies have measured the The low market share of welfare- can be seen as a marketing problem actual behavior of such consumers friendly products probably has similar to that faced by any com- in price experiments. There are no more to do with consumers’ un- pany that wants to increase demand publicly available price elasticity awareness of these products and for its products. NGOs need to data on welfare-friendly products, so less to do with their limited avail- acquire better data about the low- it is difficult to estimate the prof- ability at retail outlets. If retailers est-hanging fruit in society—those itability of welfare improvements for thought there was sufficient consumers who can be persuaded producers and retailers and the demand for welfare-friendly prod- with the least amount of effort to additional costs faced by consumers. ucts, they would sell them out of adopt more humane purchases, and Unfortunately, few economists are self-interest. However, retailers can better data on how best to educate studying these problems. be encouraged to market actively these consumers about animal wel- welfare-friendly products to con- Subsidies fare. One approach would be to sumers, even in advance of signifi- measure how WTP varies with the To our knowledge there has been cant consumer demand. They may amount of information consumers no research on the extent to which be encouraged to do so to develop are given about animal products. public subsidies for CAFOs and a brand image as a responsible other animal industries distort the retailer or to protect themselves market for animal products and against future animal welfare cam- decrease animal welfare. Resources paigns. Retailers—especially large The reports and research tools ones—have considerable influence Externalities related to the economics of animal over production methods, are most welfare listed below are available Animal industries involve hidden vulnerable to consumer pressure, online, although they often require costs to society. There has been no and are immune to trade agree- users to be university affiliates or full accounting of these costs. ments.3 As more retailers require purchase subscriptions and/or pay audits of their suppliers, the need Market Concentration per-article fees. The descriptions for independent third-party audit- below are taken from the produc- More research on the impact of ing and for harmonized standards ing organizations. market consolidation in the agri- with simple, transparent labeling cultural sector would aid federal will increase (Thiermann and Bab- EconLit: According to the American regulators considering antitrust cock 2005). Economic Association, EconLit and other merger concerns. indexes more than thirty years of Trade economics literature from around the world. Compiled and abstracted Only recently has there been some in a searchable format, EconLit, a discussion of how international comprehensive index of journal arti-

168 The State of the Animals IV: 2007 Common Economic Fallacies It’s in producers’ economic interests suffer because of the inability to common animal foods), producers, to protect animal welfare. move....Chickens are cheap, as a group, can maintain or increase As suggested by Figure 3, producers cages are expensive. (Rollin their revenue by raising prices. Pro- have an incentive to maintain welfare 1995, 119) ducers are hurt only when compet- only at point D, the point of maximum And Mench (1992) states: ing producers incur lower costs for production efficiency. In cases where It is now generally agreed that producing the same goods. improvements in animal welfare good productivity and health are decrease efficiency, efficiency usu- not necessarily indicators of Increasing production costs will ally wins. Animal morbidity and mor- good welfare....Productivity...is hurt consumers. tality are costly to producers but can often measured at the level of While consumers may have to pay be less costly than the improvements the unit (e.g., number of eggs or more for animal-friendly products and in breeding and management needed egg mass per hen-housed), and services, this does not “hurt” con- to reduce morbidity and mortality. As individual animals may be in a sumers any more than consumers two poultry scientists asked, comparatively poor state of wel- are “hurt” by paying more for safer Is it more profitable to grow the fare even though productivity automobiles. As McInerney (1991, biggest bird and have increased within the unit may be high. 18) says, mortality due to heart attacks, Moreover, when animals are no Good economic sense simply ascites [another illness caused longer productive—as is the case means ending up with the pat- by fast growth], and leg prob- with sick, injured, or “spent” animals tern of consumption goods and lems, or should birds be grown —there is no economic incentive for services that is preferred. It is slower so that birds are smaller, producers to care for them. It’s typi- very little to do with spending but have fewer heart, lung, and cally cheaper to let these animals die less money—if it were we skeletal problems? (Tabler and than it is to treat them. For instance, would all die cold, naked, and Mendenhall 2003) 99 percent of farm animals receive unhappy surrounded by our The researchers conclude that it no individual veterinary attention dur- cash! takes only “simple calculations” to ing their lives. In the whole United Consumers value animal welfare. find “it is better to get the weight and States, just 220 veterinarians are An efficient market is one in which ignore the mortality” (Tabler and responsible for the care of ten billion the aggregate WTP of consumers Mendenhall 2003). farm animals (National Institute for equals the aggregate value of the ani- Rollin notes that it is: Animal Agriculture 2005). mal welfare provided. WTP research more economically efficient to tells us that such a market is likely to put a greater number of birds Increasing production costs will be one where consumers pay more into each cage, accepting lower hurt producers. for goods and services than they productivity per bird but greater Producers can pass increased pro- presently do. productivity per cage....[I]ndivid- duction costs on to consumers in the ual animals may “produce,” for form of increased prices. As long as example gain weight, in part the price elasticity of demand for a because they are immobile, yet good is greater than –1 (as it is for all

Figure 4 Supply Chain Flowchart

Supply/Equipment Slaughterhouses/ Farmers Retailers Consumers Sellers Manufacturers

Percentage Percentage Increase Increase in Costs in Price

The Role of Economics in Achieving Welfare Gains for Animals 169 The Economics of Farm Animal Production Free-range meat and eggs are often prices, as farm costs typically repre- changes.4 Producers as a group can sold at two to three times the price sent less than half of the retail price pass increased costs on to con- of conventional cage eggs. This has of meat or eggs. Wholesalers and sumers without a loss in profits, as more to do with niche marketing and retailers add their own margins to the decrease in demand is more economies of scale in distribution each product (USDA Economic than compensated for by the than with production costs. In well- Research Service 2002). increase in unit price (Huang and Lin developed markets with significant For instance, given the 48 per- 2000). It is ultimately consumers competition, prices decrease signifi- cent farm value share of retail price who bear the costs of improved ani- cantly. For instance, in the United for poultry meat (USDA Economic mal welfare. Kingdom, where free-range eggs Research Service 2002), a 5 percent Assuming constant percentage enjoy a high market share, free- increase in production costs would marketing margins at the farm level range eggs often cost less than cage translate into a 2.4 percent increase and fixed marketing margins at the eggs (Farming UK 2006). Production in the retail price to the consumer--- retail level, by purchasing slow- costs associated with many farm a few pennies more per pound of growth chicken meat, barn eggs, animal welfare improvements are chicken to alleviate the “the single and pork from group-housed sows, modest and can be offset by margin- most severe, systematic example an American’s average annual food ally increased prices to consumers. of man’s inhumanity to another sen- spending would increase by only $5 As long as the playing field is leveled tient animal” (Webster 1994, 156). (HSUS 2006). Assuming free-range by regulation or adoption by pro- Assuming substitutable products meat, eggs, and milk would ducer or retailer associations, the were not available, increases in increase production costs on aver- effect on producers can be minimal. price would not be expected to age by 50 percent (an overesti- Several welfare improvements decrease producers’ profits. mate), purchasing only free-range increase production costs at the Demand for meat, eggs, and dairy animal products would increase farm level (Table l). But even signifi- products is said to be “price inelas- average per capita food spending by cant increases in production costs tic,” meaning consumers are rela- only $3 per week (Blisard 2001). may not significantly increase retail tively unresponsive to price

Table 1 Costs of Welfare Improvements

Housing System Cost Increase over Standard Practice (by percentage)

Group housing (sows) 0

Group housing (calves) 1–2

Slow-growth (broilers) 5

Free-range (turkeys) 30

Free-range (hogs) 8–47

Furnished cages (layers) 8–28

Barn (layers) 8–24

Free-range (layers) 26–59

Sources: Theuvsen, Essmann, and Brand-Sassen (2005); Eurogroup for Animal Welfare (2005); Andreasan, Spickler, and Jones (2005); The HSUS (2006).

170 The State of the Animals IV: 2007 cles, books, book reviews, collective resource economics, environmen- tories (private company and interna- volume articles, working papers, tal economics, policy issues, agri- tional company coverage), product/ and dissertations, is available at cultural trade, and economic devel- brand-name listings, competitors, libraries and on university websites opment. More information: http:// officers’ names and salaries, product throughout the world. It is licensed agecon.lib.umn.edu. segmentation data, subsidiaries, and from information service providers, CAB Abstracts: Available prima- financial data, including access to which provide search engines, links rily through university libraries, annual reports and Securities and to libraries’ full-text subscriptions, CAB Abstracts is described as the Exchange Commission (SEC) fil- and other enhancements to assist most comprehensive source of in- ings. Hoovers also profiles industries users in document retrieval. More ternational research information in and has an IPO watch calendar. information: www.econlit.org. agriculture and related applied life Financial data are available for pub- AgEcon Search: A website devel- science. Updated monthly, CAB lic companies only. More informa- oped and maintained at the Univer- Abstracts provides current, in- tion: www.hoovers.com. sity of Minnesota by Magrath depth coverage of global journal USDA Economic Research Service Library and the Department of articles, academic books, abstracts, (ERS): The ERS is a primary source Applied Economics, AgEcon Search published theses, conference pro- of economic information and collects, indexes, and electronically ceedings, bulletins, monographs, research in the U.S. Department distributes full-text copies of schol- and technical reports. More infor- of Agriculture. ERS conducts a arly research in the broadly defined mation: www.cabdirect.org. research program to inform public field of agricultural economics, Hoovers Online: Hoovers provides and private decision making on eco- including subdisciplines such as qualitative company profiles that nomic and policy issues involving agribusiness, food supply, natural contain company overviews and his- food, farming, natural resources, and rural development. ERS’s econo- mists and social scientists conduct research, analyze food and commod- Dollars and Nonsense ity markets, produce policy studies, “Officials say Denver could lose $8 million if Ringling Bros. isn't allowed to and develop economic and statistical visit the city.” indicators. The agency’s research —ABC 7 News, “Opponents to ‘Circus Ban’ Bill Rally in Denver program is directed at the informa- Initiative 100 up for Vote in August Primary,” July 14, 2004 tion needs of USDA, other public pol- icy officials, and the research com- “Voter Kim Douglas said the predicted economic impact affected her vote. munity. ERS information and ‘The state has lost so much business and revenue, and I was convinced analysis is also used by the media, that this would be yet another blow,’ she said.” trade associations, public interest —Bangor Daily News, “Bear-bait Measure groups, and the general public. Many Narrowly Rejected,” November 3, 2004 datasets, reports, and analyses are available online in real time and Fiscal effects include: “[P]otential sales tax revenue loss, to the extent this updates are available via email bill results in fewer dog shows in California. For example, if 10 percent through free subscriptions. More in- fewer dogs are shown in California, there is a potential for state and local formation: www.ers.usda.gov. sales tax revenue losses of more than $1 million annually.” U.S. Fish and Wildlife Service —California State Assembly, Committee on Appropriations, (USFWS): The USFWS has a Hunt- Analysis of AB 418 (Koretz), April 13, 2005 ing Statistics and Economics sec- tion, which sponsors a National “This year’s dove season will bring an additional $87 million to Michigan’s Survey of Fishing, Hunting, and economy.” Wildlife-Associated Recreation every —National Rifle Association news release, “Michigan Dove five years. The questions are devel- Hunting Legislation Headed to Governor,” June 8, 2004 oped in concert with technical com- mittee members from every state “Pigs are their bread and butter and they must be treated humanely to be and with representatives of non- profitable for the company.” governmental organizations. The —Snowflake, Arizona, Councilwoman Sharon Tate, quoted in latest survey was conducted in 2006. “Snowflake Council Opposes Initiative Concerning More information: www.fws.gov/ Treatment of Female Pigs,” AZJournal.com, July 19, 2006 hunting/huntstat.html. The Humane Society of the United States: The Economic

The Role of Economics in Achieving Welfare Gains for Animals 171 Research Department maintains a total revenue for the seller of that good will Blum, J. 2004. Statement to U.S. not decrease, as the decrease in demand is searchable database of more than a more than compensated by the increase in Senate Judiciary Committee con- thousand collected articles and unit price. cerning animal rights: Activism reports focused on animal welfare vs. criminality. May 18. http:// and economics issues. Since the www.animalrights.net/archives/ department’s inception in mid- Literature Cited year/2004/000197.html. 2006, two relevant reports have Agra CEAS Consulting Ltd. 2004. Caspers, J. 2000. Concerning the been issued (one dealing with the Study on the socio-economic impact of agribusiness concen- economic impact issues related to implications of the various sys- tration on producers and con- circuses in Massachusetts, the other tems to keep laying hens, for the sumers. Testimony on behalf of with mourning dove hunting in European Commission. http:// the National Pork Producers Michigan). The Farm Animal Welfare europa.eu.int/comm/food/ Council before the Committee Department research library con- animal/welfare/farm/socio_ on Agriculture, Nutrition, and tains a number of current analyses economic_study_en.pdf. Forestry, U.S. Senate. April 27. of economic alternatives to specific Andreasan, C., A. Spickler, and http://www.nppc.org/public_ factory farming practices. More B.E. Jones. 2005. Swedish ani- policy/testimony/testimony information: www.hsus.org. mal welfare regulations and 000510.html. their impact on food animal pro- Eurogroup for Animal Welfare. See also the resources described in duction. Journal of the American 2005. Into the fold: Creating Chapter 1 of this volume. Veterinary Medical Association incentives for improved animal 227: 37–40. welfare under the Rural Develop- Notes Associated Press. 2006. Smithfield ment Regulation. http://www. 1While “cruelty-free” labels clearly provide Foods to buy Premium Standard. eurogroupanimalwelfare.org/ consumers with more information on which pdf/intothefold.pdf. to base their purchasing decisions, many con- September 18. http://biz.yahoo. sumers do not fully appreciate the key distinc- com/ap/060918/smithfield_foods European Commission. 2000. Euro- tions among these labels and may inadver- _premium_standard.html?.v=4. pean Communities proposal: Ani- tently purchase less welfare-friendly cosmetics mal welfare and trade in agricul- products. The experience of the cosmetics- Bayvel, A.C.D. 2005. The use of ani- labeling efforts suggests standardization of mals in agriculture and science: ture. World Trade Organization, definitions and regulation of terms like “cru- Historical context, international Committee on Agriculture Spe- elty-free” would result in even more efficient cial Session. June 28. Geneva, outcomes. considerations, and future direc- 2Ethical questions about animal welfare tion. Scientific and Technical Switzerland. depend on both the quality and duration of Review of the International Office Farming UK. 2006. Free range animals’ lives. Borrowing a measure used in retail price hits all-time low. April the health sciences, duration can be expressed of Epizootics (24): 791–797. in terms of “life-years,” equal to the number of Bennett, R.M., and D. Larson. 1996. 20. http://www.farminguk.com/ animal lives affected times the average life Contingent valuation of the per- bsp/10130/ews.asp?DBID=103- span in years. A life-year can also be weighted 281-013-096&iPage=1&id=4159. by a perceived level of welfare. While highly ceived benefits of farm animal subjective, as some welfare problems are more welfare legislation: An explana- Huang, S.K., and B.H. Lin. 2000. serious than others, estimating “quality- tory survey. Journal of Agricul- Estimation of food demand and adjusted life-years” can help to prioritize proj- nutrient elasticities from house- ects that relieve the most animal suffering. tural Economics 47: 224–235. 3In economic terms large retailers exercise Blandford, B., J.C. Bureau, L. hold survey data, for USDA Eco- what is called monopsony power. Their large Fulponi, and S. Henson. 2000. nomic Research Service. Septem- purchasing share from the wholesale or man- ber. http://www.ers.usda.gov/ ufacturing sector makes their preferences or Potential implications of animal requirements worth responding to. McDon- welfare concerns and public Publications/tb1887/. ald’s Corporation, for example, used its policies in industrialized coun- Humane Society of the United monopsony power as the number one pur- States, The (HSUS). 2006. The chaser of beef in the United States to exact tries for international trade. In animal welfare improvements at cattle slaugh- Global trade and consumer economic consequences of terhouses owned or contracted by companies demand for quality, ed. B. adopting alternative production wanting to continue selling beef to the fast systems. http://www.hsus.org/ food giant (see, for example, McDonald’s Cor- Kristoff, M. Bohman, and J. poration 2003). Caswell, 77–100. New York: farm/resources/research/. 4The price elasticity of demand is defined Kluwer. McDonald’s Corporation. 2003. as the percentage change in the quantity of a McDonald’s reaches animal wel- good purchased by consumers, in response to Blisard, N. 2001. Food spending in a 1 percent change in that good’s price. When American households: 1997–98, fare milestone: 500 global on-site a good’s price elasticity is between 0 and –1, for USDA Economic Research audits. Press release, May 15. demand is said to be inelastic with respect to http://www.mcdonalds.com/ price. An increase in price of, for example, 10 Service. http://www.ers.usda. percent will decrease demand less than 10 gov/publications/sb972/. corp/news/corppr/2003/cpr05 percent. This means that, in principle, the 152003.html.

172 The State of the Animals IV: 2007 McInerney, J.P. 1991. Assessing the Studer, H. 2001. How Switzerland http://www.census.gov/prod/ benefits of farm animal welfare. got rid of battery cages. Zurich: 2002pubs/FHW01.pdf. In Farm animals: It pays to be Pro Tier International. Webster, J. 1994. Animal welfare: A humane, ed. S.P. Caruthers. CAS Swanson, J.C., and J.A. Mench. cool eye towards Eden. Malden, Paper 22, Reading, England: 2000. Animal welfare: Consumer Mass.: Blackwell Science Ltd. Centre for Agricultural Strategy. viewpoints. In U.C. poultry sym- Yahoo News. 2000. Close quarters ———. 2004. Animal welfare, eco- posium and egg processing for chickens is unacceptable. nomics, and policy. Report on a workshops. http://animalscience. September 25. http://dailynews. study undertaken for the Farm ucdavis.edu/avian/swanson.pdf. yahoo.com/h/nm/20000925/ and Animal Health Economics Tabler, G.T., and A.M. Mendenhall. zo/chicken_2.html. Division of DEFRA. February. 2003. Broiler nutrition, feed Zogby International. 2003. Nation- http://statistics.defra.gov.uk/esg/ intake, and grower economics. wide views on the treatment of reports/animalwelfare.pdf. Avian Advice 5: 9. farm animals. October 22. http:// Meat News. 2005. Quality mark Theuvsen, L., S. Essmann, and H. animalwelfareadvocacy.org/ support. January 19. http:// Brand-Sassen. 2005. Livestock externals/AWT%20final%20% www.meatnews.com/index.cfm? husbandry between ethics and 20poll%20report%2010-22.pdf. fuseaction=Article&arNum= economics: Finding a feasible ———. 2004. Poll shows that fast- 8882. way out by target costing? Goet- food consumers care about Mench, J. 1992. The welfare of tingen, Germany: Institute for chickens’ welfare. June 2. http:// poultry in modern production Agricultural Economics, Univer- www.zogby.com/search/ systems. Poultry Science Review sity of Goettingen. ReadClips.dbm?ID=8379. 4: 112. Thiermann, A.B., and S. Babcock. National Institute for Animal Agri- 2005. Animal welfare and inter- culture. 2005. Vet schools to re- national trade. Scientific and shape curricula to meet 21st cen- Technical Review of the Interna- tury challenges. April ll. http:// tional Office of Epizootics (24): animalagriculture.org/headline/ 747–755. 2005NR/NR_2005Osburn.htm. U.S. Congressional Research Service. Ollinger, M., S.V. Nguyen, D. 2006. Livestock Marketing and Blayney, B. Chambers, and K. Competition Issues. March 20. Nelson. 2005. USDA Economic http://www.nationalaglawcenter. Research Service: Structural org/assets/crs/RL33325.pdf. change in the meat, poultry, U.S. Department of Agriculture Eco- dairy, and grain processing nomic Research Service. 2002. industries. March. http://www. Food marketing and price spreads: ers.usda.gov/publications/err3/ Farm-to-retail price spreads for err3.pdf. individual food items. http://www. Pickett, H. 2006. The way forward ers.usda.gov/Briefing/FoodPrice for Europe’s egg industry: Keep- Spreads/spreads/table1.htm. ing the ban on battery cages U.S. Department of Agriculture, in 2012. Compassion in World National Agricultural Statistics Farming Trust. http://ciwf. Service (USDA/NASS). 2005. U.S. org.uk/publications/reports/ hog operations, number by size Battery_Cages2006.pdf. group, 2004–2005. http://www. Poultry World. 2006. Shoppers nass.usda.gov/Charts_and_Maps want better welfare. Poultry /Hogs_and_Pigs/hopsze_e.asp. World 3 (March), 3. ———. 2006. Packers and stock- Rollin, B.E. 1995. Farm animal yards statistical report, 2004 re- welfare. Ames, Iowa: Iowa State porting year. February. Table 31. University Press. http://archive.gipsa.usda.gov/ Russell, W.H.S., and R.L. Burch. pubs/stat2004.pdf. 1959. The principles of humane U.S. Fish and Wildlife Service. experimental technique. London: 2002. 2001 National survey of Methuen and Co., Ltd. fishing, hunting, and wildlife- associated recreation. October.

The Role of Economics in Achieving Welfare Gains for Animals 173