Transcript EC 314: Topics in Economic Theory

The economics of livestock disease: Farmer
choices
Governance of Livestock Disease
SVEPM
01 April 2009
Why do farmers manage disease the way they do?
1. The conventional view (rational choice):

Resource endowment and optimum choice;
 Farmers as autonomous decision makers who take the world
around them as given;
 Implication: Behaviour and choice viewed as equivalent
Why, contd.
2
Behavioural view:
 Farmers’ decision making subject to influences from outside
(e.g., peers, Vets, legislation...)
 The psychology of economic decision making;
•
farmer’s own belief, compliance with social convention and
degree of control over resources and circumstances.
 Implication: divergence between choice and behaviour;
Why, contd.
3
A network view:
 Individual farmers are linked with each other in a network of
relationships;
 A farmer’s decision to link with others or not to made on costbenefit considerations;
 a three-way network interaction assumed among
• Structure- e.g., of contact
• Behaviour – e.g., mode of disease management
• Epidemiology – e.g., prevalence,
Evaluation
 Each view has a contribution to make to the understanding of
farmers’ current disease management;
 Veterinary drugs and medicine e.g., Every disease management
associated with a certain cost of drugs (“what is” question);
 Issue of disease management adoption can be viewed an econopsychological/network problem (why and how questions);
 How much drug to buy can be viewed as an optimization problem;
5
Economic models of infectious animal disease: lit. audit
 Conventional modelling – costs and benefits of disease incidence
and management, growth models, partial/general equilibrium, etc
 Game-theoretic models, e.g., Incomplete information – uncertainty,
herding
• Public goods and other externalities - market response,
reputation effects, risk (re)allocation;
• Nash equilibrium – impossibility of eradication under selfmotivated behaviour; inefficiency of outcome
• Network structures
 Key questions: efficiency vs. stability, multiplicity, dynamics
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Conceptual frameworks at GoLD
1. Economic epidemiology’s thesis: the cyclicality of disease
prevalence, an example
 Environmental factors increase disease prevalence;
 Increased prevalence places a burden on farmers initially;
 Farmers influence the level of disease prevalence ultimately;
 Behavioural laxity leads to resurgence of disease, and the cycle
repeats;
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Conceptual frameworks at GoLD
2 Biosecurity and Network structure
 The natural view of this model is of animals becoming ill and
recovering;
 An alternative centres on farmers: as animals fall ill, farmers
• Notice illness and respond with treatment;
• e.g. susceptible farms drop links with infected farms (inward
biosecurity) and vice versa (outward biosecurity);
• This influences the distribution of disease prevalence (of
endemicity) within a country
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Current Empirical frameworks at GoLD
 Testing whether public incentive mechanisms are compatible with
farmers’ incentives for disease control;
 Testing for farmers’ behavioural response to changes in disease
prevalence;
 Testing for the existence of networks using bio-economic data
Research plans
 Panel estimates of three-way interaction;
 Policy impact assessment;
 Agent-based simulation;
 Model-supported scenario development and gaming
What and how much do we know about farmers?
 Are farmers autonomous in their decision-making?
 Do social networks influence farmer behaviour?
 Do farmers respond to changes in endemic disease prevalence
rates?
 Do compensation mechanisms influence the degree of farmers’
disease control?