The allocation of resources for animal health.

Abstract

Economics is too important to be left to the experts. This paper is therefore mainly for animal health policy-makers who are not economists but want a better appreciation of how economics can contribute to resource allocation decisions. First, the methodology of economic analysis is outlined with the objective of dispelling criticisms of its simplifying assumption of rationality. Then, unusual in economics but more familiar to biological and veterinary scientists, the technical aspects of transforming resources into products are discussed. Economics' unique contribution is to establish criteria enabling society to obtain maximum value from the production and distribution of goods and services (products) from scarce resources. Animal disease reduces the efficiency of this process. Value is intangible, but people reveal how much they value (i.e. feel a want or need for) products by what they actually consume, in quality and quantity. Animal products, and so implicitly animals themselves, are an example. The strength of people's preferences is reflected both in the prices they pay for market goods and services, and by their political votes where markets do not exist. Importantly, there is a difference between financial value (what the consumer pays for a good or service) and economic value (the maximum amount of money they would be prepared to pay for it). Allocating resources for animal health creates both costs and benefits, financial and economic. Moreover, costs and benefits are both private and social because of externalities, a major consideration in infectious diseases. Where production decisions with animal health implications are made exclusively for private benefit, government has a role in providing incentives for animal sectors to act in ways that result in socially efficient outcomes.