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Ed Lotterman: Why should government intervene in the bird flu epidemic?

Flu outbreaks continue apace on U.S. poultry farms. The news this week is of 5.2 million chickens infected in Iowa. In my home state of Minnesota, the infected turkey count has hit 1.5 million, with new reports coming in virtually every day. There are similar outbreaks in at least 10 other U.S. states and in three Canadian provinces. Idaho isn’t a significant poultry-producing state, but some backyard chickens and privately owned falcons were diagnosed with avian flu in January in Canyon County. The flu epidemic is major.

State agencies in the affected poultry-producing areas plus the federal government have people working 24/7 to contain the outbreak. My own state made an emergency $500,000 appropriation to cover overtime and temporary workers and will spend at least $1.5 million overall to fight the epidemic. Similar costs are hitting other state governments. Much of the total outlays will be picked up by the feds.

From the point of view of the total budgets of state and federal government, this may amount to chicken feed. But why isn’t anyone, even among the most vocal “small-government” advocates, asking why government needs to be involved at all?

Since I started to draft this column, I’ve heard at least three GOP presidential candidates call for downsizing government. Not one uttered a peep about cutting back on animal-epidemic response. Why not?

Inertia and tradition are powerful forces in public policy.

The Constitution says nothing about using the federal government to control bird flu, or hoof-and-mouth disease for that matter. But for more than a century, the U.S. Department of Agriculture has had statutory powers and some funding to control animal epidemics. And for many decades, there was substantial federal funding of veterinary research and massive efforts to eradicate endemic diseases such as brucellosis. One of my earliest memories as a child in the 1950s is of the “cattle inspector” coming to the farm to test some wild Angus beef cows.

That particular effort was related to human health because the disease could be passed to people by direct contact with animals or through unpasteurized milk and cheese. The resulting “undulant fever” was a serious disease, though in itself seldom fatal. It now is virtually unknown here, but it did cause 6,500 cases in Mexico as recently as 1998. So this particular animal disease could be viewed as a human disease problem, the economics of which are a little different. And it did cause very large economic losses of cattle because, among other things, it caused cows to spontaneously abort.

The particular strain of avian flu causing problems now is not transmissible to humans. Nor is the baby pig virus that decimated some hog herds over the past two years. So why do millions of tax dollars get doled out to solve a problem confined to private profit-making businesses?

The answers are found in economics.

As long as agriculture approached “perfect competition” with millions of small producers vying for market share, farm animal disease control was a “public good.” Because the benefit to any single producer was small and the costs of trying to organize a group to attack the problem was high, unified action on a private voluntary basis was rare. And because it is difficult to keep the benefits of controlling an epidemic from “spilling over” to benefit those who would not pay or participate in the cure, a group of volunteers bears all the costs but can reap only a part of the benefits.

The outcome – not enough disease control and potential market devastation – is economically inefficient. Government action to contain and cure the disease can restore this lost efficiency and benefit society as a whole in the form of cheaper and, in the case of bovine diseases, healthier food.

But the features of agricultural structure that made private efforts inefficient – the enormous number of small producers and the high cost of coordinating a private-sector response – no longer are as true as they once were. There are fewer than 100 turkey growers in Minnesota, and some are part of very large publicly traded corporations. Coordinating action in this small a group is not impossible.

Yes, the temptation for any individual producer to refuse to pay and “free-ride” on the efforts and money of others exists. Instead of using this as justification for government taking over the task, one could instead enact a law that gives a private-sector group, whose voluntary members are a majority of producers, the power to charge nonmembers part of the cost whenever there are spillover benefits to all. Such legislation, albeit hated by some, already exists in “check-off” rules for advertising specific farm products.

Libertarian leaners tend to hate any sort of coercion, but the alternative is a less efficient economy with households paying more for food. If you are sure all government efforts are poorly managed and wasteful, isn’t a private group with some statutory power to coerce free-riders a less-bad alternative?

Yes, I may be setting up a straw man here. I’m not convinced personally that animal disease control should not be a function of government. But if you think the size of government should be shrunk, as many people do today, this may be one place to start.

Just as for a few farmers who get rain in a drought year, the poultry raisers whose flocks do not fall ill benefit from an epidemic. They get the benefit of higher prices due to reduced supply and don’t lose any output. It is a natural biological equivalent of the famous mandatory killing of baby pigs implemented by Franklin Roosevelt’s administration in 1934 in an effort to boost hog prices. It is bad to lose the animals, but the total income to producers as a whole can go up, as the effects of the price increase can overcome the lost income due to dead animals.

That’s enough. Time for a nice cheddar and turkey sandwich.

Economist and writer Edward Lotterman writes in St. Paul, Minn. Write him at boise@edlotterman.com.

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