The economics of livestock disease: Farmer choices

1. The economics of livestock disease: Farmer choices Governance of Livestock Disease SVEPM 01 April 2009

2. Why do farmers manage disease the way they do? • 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

3. Why, contd. • 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;

4. Why, contd. • A network view: • Individual farmersare linked with each other in a network of relationships; • A farmer’s decision to link with others or not to made on cost-benefit considerations; • a three-way network interaction assumed among • Structure- e.g., of contact • Behaviour – e.g., mode of disease management • Epidemiology – e.g., prevalence,

5. 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 econo-psychological/network problem (why and how questions); • How much drug to buy can be viewed as an optimization problem;

6. 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 self-motivated behaviour; inefficiency of outcome • Network structures • Key questions: efficiency vs. stability, multiplicity, dynamics

7. Conceptual frameworks at GoLD • 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;

8. 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

9. 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

10. Research plans • Panel estimates of three-way interaction; • Policy impact assessment; • Agent-based simulation; • Model-supported scenario development and gaming

11. 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?