The welfare of farm animals has always been important to livestock farmers, But in recent years, it has become a major concern as consumer interest regarding the issues seemingly increases, new polices are developed at the local and federal level and farmers wrestle with ways to effectively communicate their commitment to animal well-being.

Meanwhile, not much is known about the economic implications of adopting new welfare standards, since researchers and economists have only recently begun to study the impact of these actions. 

Jayson Lusk and Bailey Norwood, Oklahoma State University economists, recently took a look at what everyone can learn from the existing research. And what questions still need to be answered when it comes to the happiness of farm animals and its economic impact. Their findings have been published in the latest issue of Applied Economic Perspectives and Policy.

"As this debate gains some steam, it's crucial that we understand the different economic forces at play, and how they would be impacted by efforts to increase animal welfare," Lusk says.

For example, Lusk and Norwood note that increasing the happiness of animals means increased production. One would assume that based on this, the most profitable approach for a farmer would be to make the animals as happy as possible. Not always, the authors say, as sometimes it makes more economic sense to sacrifice the happiness of each animal, so that you can have more animals producing. "Producers are not paid based on the number of eggs produced per hen, but rather on the total number of eggs coming out of the barn," they explain.

In the context of these realities, it can be difficult to craft policies that adequately address the issue. Calling an all-out ban on particular practices a "blunt policy instrument," the authors examine the merits of other approaches, like adding food labels to products that meet a certain standard or creating explicit markets for the level of animal welfare produced on a farm.

"Letting consumers decide what products to buy may end up being as effective as a blanket policy, with fewer unintended consequences," Lusk says.

One of the thorniest issues arising in the study of consumer preferences for animal welfare is that people simply do not know much about how farm animals are raised, the paper notes.

"This knowledge problem presents significant challenges to carrying out cost-benefit analyses of animal welfare policies,” the authors say. “Attempting to resolve some of these philosophical and economic paradoxes present a significant challenge for future research.”

Download the paper at: http://aepp.oxfordjournals.org/content/early/2011/11/08/aepp.ppr036.full