Upload
jaguar
View
33
Download
0
Tags:
Embed Size (px)
DESCRIPTION
Why Compensation?. What’s the Goal of Veterinary Services?. Animal Health Safeguarding. Disease Prevention. Disease Control. Disease Prevention Disease Control. Which is most important in protecting / safeguarding animal agriculture? Disease Prevention - PowerPoint PPT Presentation
Citation preview
Why Compensation? Why Compensation?
What’s the Goal of What’s the Goal of Veterinary Services?Veterinary Services?
Animal Health SafeguardingAnimal Health Safeguarding
Disease PreventionDisease Prevention Disease ControlDisease Control
Disease PreventionDisease PreventionDisease Control Disease Control
Which is most important in protecting / Which is most important in protecting / safeguarding animal agriculture?safeguarding animal agriculture? Disease PreventionDisease Prevention
Reducing the environment for disease to enter or spreadReducing the environment for disease to enter or spread Disease ControlDisease Control
Elimination of disease once it is establishedElimination of disease once it is established
In terms of compensation there is tension In terms of compensation there is tension between the twobetween the two
Disease ControlDisease Control
Surveillance Surveillance
ReportingReporting
EradicationEradication
Clean UpClean Up
Disease ReportingDisease ReportingIndividual PerspectiveIndividual Perspective
Individual Perspective to Suspicion of a highly Individual Perspective to Suspicion of a highly contagious diseasecontagious disease Hoped for responseHoped for response
Call veterinarian or animal health officialCall veterinarian or animal health officialConsequences if disease positiveConsequences if disease positive
Herd / flock depopulatedHerd / flock depopulated Surrounding herds / flocks depopulatedSurrounding herds / flocks depopulated Economic lossesEconomic losses Genetic lossesGenetic losses Reduction in available meat proteinReduction in available meat protein Government & Media SpotlightGovernment & Media Spotlight
• Not well liked by family, friends, neighbors & colleaguesNot well liked by family, friends, neighbors & colleagues
Disease ReportingDisease ReportingIndividual PerspectiveIndividual Perspective
Individual Perspective to Suspicion of Individual Perspective to Suspicion of a highly contagious disease a highly contagious disease (continued)(continued) Because of previous listed consequences Because of previous listed consequences
possible likely responses arepossible likely responses areKeep quiet, hope animals get betterKeep quiet, hope animals get betterTry to market sick animals before they dieTry to market sick animals before they dieBoth lead to greater spread of the diseaseBoth lead to greater spread of the disease
Saying about individual disease responseSaying about individual disease responseShootShootShovelShovelShut-upShut-up
Disease ReportingDisease ReportingIndustry / Government PerspectiveIndustry / Government Perspective
Industry / Government Perspective: Industry / Government Perspective: Individuals should report diseaseIndividuals should report disease
Quick responseQuick responseLimit spreadLimit spread
However, reporting is not necessarily in However, reporting is not necessarily in the individual’s best private interestthe individual’s best private interest
ExternalityExternality Pay individuals to act in the public goodPay individuals to act in the public good Economic justification for government to Economic justification for government to
be involved in disease compensationbe involved in disease compensationThe greater the indemnity paid the greater The greater the indemnity paid the greater
the cooperation to report disease and the cooperation to report disease and agreement to animal depopulationagreement to animal depopulation
Compensation Through the Lens of Compensation Through the Lens of Disease Prevention Disease Prevention
Disease PreventionDisease Prevention
Border SecurityBorder Security On-farm BiosecurityOn-farm Biosecurity
Does On-Farm Biosecurity Does On-Farm Biosecurity Increase or Decrease Profits?Increase or Decrease Profits?
Function of costs and benefitsFunction of costs and benefitsOptimal biosecurity occurs Optimal biosecurity occurs where costs equals benefitswhere costs equals benefitsBenefits function ofBenefits function ofEffectiveness of biosecurity Effectiveness of biosecurity
measures to prevent diseasemeasures to prevent diseaseAmount of potential lossesAmount of potential losses
Value per headValue per headNumber of headNumber of head
Government Compensation Government Compensation & Farm Biosecurity Expenditures& Farm Biosecurity ExpendituresQ. What is the impact of government Q. What is the impact of government compensation on optimal on-farm compensation on optimal on-farm biosecurity expenditures?biosecurity expenditures?A. Compensation reduces losses A. Compensation reduces losses realized realized Which reduces benefit of biosecurityWhich reduces benefit of biosecurity
Which reduces optimal on-farm biosecurity Which reduces optimal on-farm biosecurity expenditures expenditures
Conclusion: government compensation Conclusion: government compensation reduces private incentive to practice reduces private incentive to practice good biosecuritygood biosecurity Which works against VS’ Goal of Which works against VS’ Goal of
Safeguarding Animal Health through Safeguarding Animal Health through Disease PreventionDisease Prevention
Thus the tension between disease control Thus the tension between disease control and disease prevention in terms of and disease prevention in terms of compensation policycompensation policy
Moral HazardMoral Hazard(Risks & Returns)(Risks & Returns)
RisksRisksReturnsReturnsDo the returns justify the Do the returns justify the risks?risks?Activities / Programs that Activities / Programs that reduce the consequences reduce the consequences of a risky choice gone of a risky choice gone “bad”, encourages people “bad”, encourages people to engage in such to engage in such behaviorbehavior
Moral HazardMoral Hazard““Moral hazard is the prospect that a Moral hazard is the prospect that a party insulated from risk may party insulated from risk may behave differently from the way it behave differently from the way it would behave if it were fully would behave if it were fully exposed to the risk.” (Wikipedia)exposed to the risk.” (Wikipedia)If others are willing to “pay” for our If others are willing to “pay” for our mistakes or “rescue” us, then we mistakes or “rescue” us, then we are more likely to engage in risky are more likely to engage in risky behaviorbehaviorExampleExample How much more money would you How much more money would you
spend at a casino if you were spend at a casino if you were guaranteed to leave with 90% of the guaranteed to leave with 90% of the money you walked in with?money you walked in with?
Moral HazardMoral HazardEconomic Law of Supply Economic Law of Supply The higher the price, the greater the The higher the price, the greater the
quantity suppliedquantity supplied
Moral Hazard & Economic Law of Moral Hazard & Economic Law of Supply CombinedSupply Combined More you pay for diseased animals, More you pay for diseased animals,
the more diseased animals will be the more diseased animals will be presented to government (Kuchler & presented to government (Kuchler & Hamm, 2000)Hamm, 2000)
Is this a good thing?Is this a good thing? Yes, if disease prevalence is Yes, if disease prevalence is
independent of indemnity paymentindependent of indemnity paymentObtaining more animals now reduces Obtaining more animals now reduces
future prevalencefuture prevalence No, if disease prevalence is positively No, if disease prevalence is positively
correlated with indemnity paymentcorrelated with indemnity paymentFuture prevalence is increasedFuture prevalence is increased
Compensation BalanceCompensation BalanceEncourage
Disease ReportingDisease Control
Encourage BiosecurityDisease Prevention
High CompensationHigh CompensationLow CompensationLow Compensation
Producer IncentivePit of Moral Hazard
Compensation BalanceCompensation Balance
Deliberate Disease Contact&
Disease Spread
Producer Incentive
What Compensation is NotWhat Compensation is Not
NotNot to provide income to provide income subsidies to producers.subsidies to producers.Not to put them back into Not to put them back into business, that’s the role of business, that’s the role of business interruption business interruption insurance.insurance. Often owners want to replace Often owners want to replace
with younger, more expensive with younger, more expensive animals which is why they animals which is why they may reject appraisal valuemay reject appraisal value
Compensation SummaryCompensation Summary
Compensation improves disease reporting Compensation improves disease reporting which is a good thing, but too much which is a good thing, but too much compensation can result in reduced compensation can result in reduced biosecurity and less than optimal disease biosecurity and less than optimal disease preventionprevention
Meaning for APHIS Employees Meaning for APHIS Employees who are asked to do Appraisals who are asked to do Appraisals
What is the right balance of compensation?What is the right balance of compensation? My Opinion: Fair market value isn’t too far off from My Opinion: Fair market value isn’t too far off from
optimal compensation if APHIS doesn’t compensate optimal compensation if APHIS doesn’t compensate for lost income and doesn’t pay for cleaning and for lost income and doesn’t pay for cleaning and disinfection costs disinfection costs
As APHIS appraisers our goal should be fair As APHIS appraisers our goal should be fair market valuemarket value Our long term creditability as appraisers is tied to Our long term creditability as appraisers is tied to
well done appraisals that do a good job of well done appraisals that do a good job of determining and explaining value determining and explaining value
Let program managers and regional administrators Let program managers and regional administrators determine indemnity paiddetermine indemnity paidDon’t let them influence your valuationDon’t let them influence your valuationRemember the ethic rulesRemember the ethic rules