Coase Lecture: Culling Chickens

The annual Ronald H. Coase Lecture in Law and Economics is geared towards our first year law students. This year's lecture, on January 23, 2007, was delivered by Professor Anup Malani and titled "Culling Chickens." Professor Malani spoke about prevention of the spread of avian flu in chickens, particularly, although not exclusively, in third world countries. Much of the discussion centered around the economic principles that go into determining the appropriate rate to pay for potentially-diseased chickens in order to ensure that farmers will indeed turn them over for slaughter.  A lively Q&A followed, and you can listen to the whole thing here.

Comments

[Joan A. Conway]

I remember an American incident regarding our production of pigs, when the bottom fell out of the pig market, producers slaughtered healthy pigs in order to take a tax loss.

Does anyone remember this American economic lesson that I read in a popular economic paperback book 3 or 4 years ago?

Does anyone have an American Finance comment about the "put" and "call" option strategy regarding this issue in order to hedge your investment?

I believe the investment can be straddled for the upside and the downside so that the chicken(s) or the pig(s) do go to market one way or another!

Tells us how to do it you financial genius out there?

[alvin]

I might have to listen to the podcast, but could you explain what you mean by "determining the appropriate rate to pay for potentially-diseased chickens in order to ensure that farmers will indeed turn them over for slaughter"? Do you mean the amount farmers have to pay these slaughter houses or waste disposal companies to take away the potentially-diseased chickens, or are the payments going the opposite directions?

[Joan A. Conway]

I am not answering my question above, but in response to the disposal costs, there are the fixed and variable costs of producing pigs for the market, like the chickens, such as the farm rental, feed, vet, acquisition of chickens, farm equipment, transportation, human resources, research and development, good will, and insurance and taxes, just to name a few of the associated expenses and depreciation and liabilities associated in the farming of livestock.

[Joan A. Conway]

Six Million pigs slaughtered during the great depression in FDR's hog reduction plan is the answer to my question, while millions of people go hungry in the nation with food lines everywhere.

[Joan A. Conway]

I don't really know if it is just a breakeven number that does the service, but I bet farmers are protected from being "MARKET GIVERS" and are the "MARKET TAKERS." This involves public policy and is a health and safety issue.

[Joan A. Conway]

Somedays it is difficult to post my comments without the prompter moving from sentence to sentence and beyond the site.

Housecleaning: I found the lecturer interesting, but difficult to follow as he paced from the podium to the blackboard.

The buy or ban scenario creates another problem as to how our government bureaucracy can comply with a Congressional Act, and how we can be successful in the elimination of a black market for chickens with frog meat or shrimp.

I believe then slaughtering the chickens to be the best alternative if not in the depression era, but in the recession era of the 21st Century.