Feedlot antibiotic use: Smart for one, dumb for all
It seems the FDA is finally going to crack down on feedlot antibiotic use.
Rampant antibiotic use, both for humans and especially for animals in confined feedlot operations, always struck me as a classic prionser's dilemma.
For those who don't know, the prisoner's dilemma is the canonical example of a kind of market failure where individual incentives lead to a socially bad outcome. Hence, "smart for one and dumb for all," a line taken from Frank and Bernanke's principles of economics book. My favorite example from their book is helmet use in hockey. Most individual players will choose not to where a helmet if given the choice. But most are willing to vote for rule requiring mandatory helmet use by all players. Why? Because, no matter what other players are doing, not wearing a helmet may give a marginal advantage to the player not wearing the helmet, by making himself appear tougher or improving comfort, visibility or freedom of movement. Thus, without a rule, no one wears a helmet, which obviates any advantage but makes the game very dangerous. With a helmet rule, everyone is better off, because no competitive advantage is conferred but everyone is safer.
So, in today's headline case it's always best for a feedlot owner to give his livestock lots of antibiotics, whether or not other livestock producers do the same. But if all producers use antibiotics, we breed resistant superbacteria that can make a lot of livestock super sick (people, too).
I'd be surprised if the livestock industry has much to lose from new regulations and they potentially have a lot to gain, since it reduces the chance a superbug will kill off a lot of animals. One way or another I expect they'll figure out a substitute. And since all producers will face higher costs, they will be compensated for their costs in the form of retail prices. So, producers will benefit from making the industry as a whole less susceptible to superbugs, and besides it's meat and dairy consumers that will ultimately foot the bill for the new regulations.
Since the basic economic analysis suggests producers have little to lose from the new regulations and perhaps a lot to gain, why do they resist these kinds of regulations so vigorously?
I don't know. But I've got two guesses. First, maybe individual producers imagine they will individually be effected by the regulations while their competitors are not effected. That is, they are so used to taking prices as given that they just don't see that the regulation doesn't confer a competitive disadvantage to them (except, perhaps, relative to foreign producers--but that's a small deal in this case). Second, it could be the livestock industry isn't really competitive, at least on the processing end. I'm pretty sure that means livestock producers still have little to lose, but the big meat companies that process livestock products and distribute them may actually swallow a lot of the higher costs. Moreover, the processors never bore much of the risk from a big feedlot disease outbreak. So, my guess is that it's the processors that don't like the regulations, not the livestock producers, because the regulations will erode their market power.
Rampant antibiotic use, both for humans and especially for animals in confined feedlot operations, always struck me as a classic prionser's dilemma.
For those who don't know, the prisoner's dilemma is the canonical example of a kind of market failure where individual incentives lead to a socially bad outcome. Hence, "smart for one and dumb for all," a line taken from Frank and Bernanke's principles of economics book. My favorite example from their book is helmet use in hockey. Most individual players will choose not to where a helmet if given the choice. But most are willing to vote for rule requiring mandatory helmet use by all players. Why? Because, no matter what other players are doing, not wearing a helmet may give a marginal advantage to the player not wearing the helmet, by making himself appear tougher or improving comfort, visibility or freedom of movement. Thus, without a rule, no one wears a helmet, which obviates any advantage but makes the game very dangerous. With a helmet rule, everyone is better off, because no competitive advantage is conferred but everyone is safer.
So, in today's headline case it's always best for a feedlot owner to give his livestock lots of antibiotics, whether or not other livestock producers do the same. But if all producers use antibiotics, we breed resistant superbacteria that can make a lot of livestock super sick (people, too).
I'd be surprised if the livestock industry has much to lose from new regulations and they potentially have a lot to gain, since it reduces the chance a superbug will kill off a lot of animals. One way or another I expect they'll figure out a substitute. And since all producers will face higher costs, they will be compensated for their costs in the form of retail prices. So, producers will benefit from making the industry as a whole less susceptible to superbugs, and besides it's meat and dairy consumers that will ultimately foot the bill for the new regulations.
Since the basic economic analysis suggests producers have little to lose from the new regulations and perhaps a lot to gain, why do they resist these kinds of regulations so vigorously?
I don't know. But I've got two guesses. First, maybe individual producers imagine they will individually be effected by the regulations while their competitors are not effected. That is, they are so used to taking prices as given that they just don't see that the regulation doesn't confer a competitive disadvantage to them (except, perhaps, relative to foreign producers--but that's a small deal in this case). Second, it could be the livestock industry isn't really competitive, at least on the processing end. I'm pretty sure that means livestock producers still have little to lose, but the big meat companies that process livestock products and distribute them may actually swallow a lot of the higher costs. Moreover, the processors never bore much of the risk from a big feedlot disease outbreak. So, my guess is that it's the processors that don't like the regulations, not the livestock producers, because the regulations will erode their market power.
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