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EpiCentre, Institute of Veterinary, Animal and Biomedical Sciences, Massey University, Palmerston North,
N e w Zealand
Summary
E c o n o m i c analysis is a valuable t e c h n i q u e in the planning and m a n a g e m e n t of
animal health p r o g r a m m e s at the national policy level and at the level of individual
livestock enterprises. Considerable e x p e r i e n c e has n o w been a c c u m u l a t e d in the
adaptation of methods of e c o n o m i c s to address decisions on disease control
issues. Different methods are appropriate for endemic diseases, for diseases
w h i c h o c c u r intermittently as local outbreaks, and for diseases w h i c h have the
potential to c a u s e an epidemic. A guide to the selection of the most suitable
method is provided. T h e information required for analysis at individual herd level
is m u c h simpler t h a n that required f o r national policy decisions and funding
decisions by international a g e n c i e s ; an outline of the requirements for e a c h level
of analysis is provided. Issues surrounding the d e g r e e of risk of different c h o i c e s
are e x a m i n e d , and the application of decision analysis to higher-risk c h o i c e s is
introduced. W a y s in w h i c h difficulties and hazards can be o v e r c o m e are
s u g g e s t e d for t h o s e unfamiliar w i t h the t e c h n i q u e s . Finally, p r o c e d u r e s to provide
confidence in the results of evaluations t h r o u g h sensitivity analysis are explained.
Keywords
Animal health - Cost-benefit analysis - Economic benefits - Economics - Risk analysis.
The contribution of economics to However, methods can be found to consider most of the
major benefits from disease control within an economic
in many analyses, this does not necessarily reduce the value of Diseases have also been shown to lower the accuracy with
the results. In economics, the risks of an investment are also which animals of superior genetic merit can be identified in a
investigated, and risk evaluation is an important component herd, thereby reducing the potential rate of genetic gain.
of animal health economics. Finally, diseases can reduce productive life both through
mortality and premature culling. All three of these effects
combine to increase involuntary herd turnover, leaving less
Effects of disease on animal scope for planned genetic improvement and adversely
affecting the age structure and hence productivity of the herd.
productivity and performance Each individual disease causes some (and in some cases all) of
the effects described, and almost all have severe effects on
Diseases have a cascade of effects on the productivity of overall productive efficiency of animals, causing a far less
affected animals. Morris has described the nature of these efficient conversion of available feed into marketable
effects as far as is currently known (9); these are summarised products.
in Figure 1. The principal direct effect of most diseases is on
protein metabolism, with ancillary effects on mineral, vitamin Evidence from a wide variety of studies over the last thirty
and energy metabolism. As a consequence, animals convert years has shown that because of the substantial effects of
feed less efficiently into useful products. In addition, feed diseases on productivity and the relatively low cost of control
intake tends to be reduced in many disease states, further measures, the net economic benefit obtained from controlling
exacerbating the impact of the disease. The underlying animal diseases is very high, commonly in the range 2 0 0 % to
explanation for the impact of disease on productive efficiency 1 , 5 0 0 % return on invested funds (9). Investments in other
is that nutrients are used up by the defensive response of the activities are considered unusually profitable if a yield on
body to disease agents, and especially by the regeneration invested funds of over 2 0 % is obtained. Clearly, disease
process which is required after an animal has been affected by control can be exceptionally profitable, and hence a very
a disease. These two body responses divert protein and other beneficial method of improving the productivity of animals,
nutrients into the response to disease, rather than marketable and the economic well-being of the owners. In addition,
products, and this 'nutrient leakage' is never recovered, even disease control provides substantial benefits to animal welfare
after the animal returns to normal health. Moreover, for many (2, 15), and represents an important element of a valid
diseases, animals may continue to suffer productivity programme of animal welfare measures.
depression for a long period after the disease has been
successfully treated.
Fig. 1
307
analysis, following earlier published examples by experienced and effort concentrated on the probability issues (although
analysts will avoid most of these. A number of the hazards are the World Trade Organization Sanitary and Phytosanitary
discussed below, and advice is given on how to avoid these Agreement expects the consequences to be evaluated).
hazards. Decision analysis can be used on partial budget data at herd
level, or on CBA at industry or national level.
Another common misconception is that the data available will e) System modelling: this method is used in cases where the
be inadequate to construct an analysis on the particular issue issue is sufficiently complex and the economic implications of
of interest. However, a literature search covering the full an erroneous decision are substantial. An epidemiological/
spectrum of published work on the disease will almost always economic model of the issue can be developed, and used to
reveal a surprising quantity and depth of relevant information conduct a more comprehensive evaluation that considers
- often in papers which are concerned with quite different more closely the nature of the problem, and interactions
issues, but incidentally contain material useful to the among various effects.
economic analyst. Where no data can be found concerning a
critical point, the next option is to make reasonable
assumptions about the likely value of the variable, and then to
test within the analysis to determine whether the validity of Categories of disease for
conclusions reached in the study are likely to be susceptible to
variation in the value, within the expected range - a process analysis
called sensitivity analysis. For many such variables which
have never been measured, the outcome of the analysis is Three major categories of disease can be identified which
found to be quite insensitive to the value in question, and a require different types of analysis. Diseases which occur in
sensible 'guesstimate' is adequate for inclusion in the final most or all livestock herds in a country or zone and cause
analysis. In cases where a more precisely measured estimate is some economic impact each year (e.g. parasitism, Johne's
required, a specific study can be designed to provide the disease, mastitis) are the simplest to deal with, requiring a
answer, and in many such cases, critical epidemiological data partial budgeting approach at herd level and a simple CBA at
are also lacking. Thus, these values can be jointly measured in national level. Diseases which affect only some herds in any
an appropriate investigation. However data are gathered, it is given year and which have an uncertain pattern of occurrence
essential to document the source of the data in a report of an (clostridial diseases, haemorrhagic septicaemia, bloat,
economic impact study, thereby providing a pedigree for even Newcastle disease) require that both the impact and the
informal 'guesstimates'. probability of an outbreak be considered, which can be
achieved using decision analysis or a more complex form of
CBA. Where a disease is not present in an area or is present
Choice of analytical method only at a very low level due to control (e.g. rinderpest, foot
and mouth disease, rabies), the analysis must give greater
Five common methods of economic analysis are applied in weight to the risk of introduction or recrudescence, and
the evaluation of animal health issues. These are outlined analysis will use decision analysis, but may use a more
below, and are dealt with in greater detail in other papers in cautious decision criterion than the usual one of maximising
this volume (3, 7, 13, 14). The methods are as follows: expected economic benefit, to protect against high impact in
the event of an outbreak. When required due to the biological
a) Partial budget: this is used for within-herd analyses, where
complexity of the issues in any of these three types of diseases,
costs and benefits both accrue within a single year, and only
a comprehensive epidemiological evaluation method, such as
the items changed by the proposed action need to be
modelling, may be used in conjunction with the economic
considered in the analysis.
analysis to improve the precision of the conclusions reached.
b) Enterprise analysis: evaluation of the effects of disease Broadly, the three categories outlined equate to endemic,
control on the entire livestock enterprise, not only on the sporadic and epidemic diseases.
items which change; this creates more analytical difficulties
than partial budgeting.
Table I outlines the suitability of each of the five analytical
c) Cost-benefit analysis (CBA): this is used for analysis of approaches, from different perspectives.
communal activity, where the actions of one livestock owner
have ramifications for the welfare of others; this is typically
used to examine industry or national programmes.
Table I
Suitability of various methods of economic analysis for animal health issues
(Scale: 1 = poor; 5 = ideal)
Useability:
- ease of use 5 2 3 3 2
- ease of explanation 5 1 5 3 3
- adjust to new data 5 2 4 4 5
- extrapolate to new environment 4 1 4 4 4
Where an analysis is being conducted to guide the decisions may also be substantially affected by a disease control
of individual livestock owners, the focus will be the actual or programme, and these effects should be considered in the
potential economic impact of the disease on the productivity analysis.
and economic return from the herd, and protection of the
herd against the entry of additional diseases. The analysis will
usually focus principally on productivity gains and the costs Where a disease is of national importance, or is the subject of
of possible interventions. Prices of additional quantities of a nationally managed disease control programme, then the
output from the herd can reasonably be assumed to remain analysis must consider alternative investment of scarce
unaffected by the actions of the individual. Risk of adverse national resources, and begin to compare animal health with
effects of action (or inaction) are important issues, which will alternative national development priorities, considering also
affect the choices of many owners - especially those for whom the risk to human health if this is a relevant factor. Issues such
an erroneous decision could have serious implications for as the impact of a particular potential animal health
family or economic viability. programme on export opportunities (or conversely, the
flexibility to import rather than expand local production,
If the analysis covers all herds in an area of the country or the without compromising animal health status) need to be
entire industry of the country, then CBA provides a structured considered. Differential effects of disease control programmes
answer, and can incorporate probabilities of various outcomes on different groups within the society, including the
and risk of adverse effects in the analysis. If the output levels opportunity to use a disease control programme to enhance
of many producers will be affected by the programme, then the opportunities of disadvantaged groups within the society,
consideration must be given to the depressing effect of this will require consideration. Impacts of proposals on the
increased output on product prices, and adjustments made environment and wildlife may also be important. Some of
for this effect. Under these conditions, a substantial these issues are not easily quantifiable, but methods can be
proportion of the economic benefits of the control found to incorporate these variables in the analysis.
programme may accrue to consumers (through lower prices),
and producers will retain only part of the gains in which they
have invested. This partitioning of benefits can be At the national level, external effects (or externalities) can
accommodated within the analysis, and it is economically become very important. External effects occur where the
appropriate that costs be allocated according to this transfer of actions of one individual affect, in some substantial way, the
benefits, an aspect which is often not acknowledged by policy economic well-being of others, with the latter unable to easily
makers. influence the result. For example, a farmer who fails to
vaccinate his or her cattle may place an entire district at risk;
Related industries which supply goods and services to such externalities are very common complications of disease
livestock producers, or which process products from them, control decisions.
310 Rev. sci. tech. Off. int. Epiz., 18 (2)
from the analysis, greatly simplifying the data requirements in item to estimate is the value of time spent by the farmer on
most short-term decisions, although this is not the case for disease control activities, given that alternative farm activities
long-term strategies. could be undertaken in this time. A common solution is to
value the time of the farmer at the cost of hiring temporary
Table II lists the items which may be appropriate to consider labour, although in some cases this may underestimate the
for inclusion at each of the levels of analysis. true value of the effort devoted to an activity by the farmer.
alternatives, and especially ranking of the options. Economics Thus, decisions should be based around the 'marginal' or
does not require accurate accounting; the important aspect is additional effect of further investment in a resource such as
accurate decision-making. In almost every case, the four or control of a specific disease. The overall guiding principle of
five most important items account for over 9 0 % of the costs or economics (the principle of equimarginal returns) is to
benefits in the analysis, and estimation of an item which allocate funds progressively, moving resources to wherever
contributes only 2 % to the outcome is not worthwhile. The the return on the next invested dollar is highest, and away
decision not to quantify some items saves enormous effort, from the current activity which yields the lowest return on
but usually has no impact on the conclusions. The robustness investment. Disease control yields very high returns and
of the analysis can be assessed through sensitivity analysis - deserves additional investment in most livestock enterprises.
varying each or some of the assumptions to monitor the extent Within disease control programmes, efforts should be
to which a realistic degree of change in the value alters the balanced across those diseases of highest economic priority, in
conclusions. Break-even analysis is a particularly useful form order to maximise the benefit of the portfolio of investments;
of sensitivity analysis - determining the potential change in
efforts should not be focused on a single control approach, or
the estimated effects or prices necessary before the economic
a single disease.
difference between control options disappears. This indicates
the degree to which the conclusions are robust and can be
relied upon. Sensitivity analysis is an essential tool to evaluate
the confidence with which results of a study can be
interpreted; using programs such as @RISK ( 1 1 ) , the
procedure is relatively easy to perform.
Résumé
L'analyse é c o n o m i q u e est un outil important pour la planification et la gestion des
p r o g r a m m e s zoosanitaires, tant au niveau national qu'au niveau de l'élevage. On
dispose désormais d'une longue expérience en matière d'adaptation des
méthodes é c o n o m i q u e s aux décisions intéressant la prophylaxie. Différentes
méthodes existent pour lutter contre les enzooties, les maladies à f o y e r s
sporadiques et c y c l i q u e s ou les maladies qui peuvent devenir épizootiques.
L'auteur propose un guide pratique pour le choix de la méthode la plus
appropriée. L'information requise pour une analyse au n i v e a u du t r o u p e a u est
beaucoup plus simple que celle n é c e s s a i r e aux décisions de politique nationale
ou aux décisions qui e n g a g e n t un f i n a n c e m e n t international. L'auteur p r é c i s e les
besoins c o r r e s p o n d a n t à c h a q u e niveau d'analyse. Il aborde, par ailleurs, les
questions relatives au degré de risque inhérent à c h a q u e choix et donne un
a p e r ç u de l'application de l'analyse décisionnelle a u x choix à haut risque. Il fait
également quelques s u g g e s t i o n s pour aider les p e r s o n n e s peu familières de c e s
t e c h n i q u e s à surmonter certaines difficultés et à maîtriser certains risques, ainsi
Rev. sci. tech. Off. int. Epiz., 18 (2) 313
que pour renforcer le fiabilité des évaluations par l'analyse de la sensibilité des
résultats.
Mots-clés
A n a l y s e coût-bénéfice - A n a l y s e des risques - Bénéfices économiques - Économie -
Santé animale.
Resumen
El análisis económico es una técnica valiosa para elaborar y gestionar programas
de sanidad animal, aplicable tanto al ámbito nacional como al de una sola
empresa ganadera. Se ha ido acumulando una notable experiencia sobre cómo
adaptar los métodos de la economía a la adopción de decisiones en materia de
control sanitario. Las enfermedades endémicas, las de aparición intermitente en
forma de brotes locales y las que encierran el potencial de causar epidemias
exigen métodos distintos y adecuados a sus especificidades. El autor ofrece, en
este sentido, orientaciones para seleccionar el método más conveniente. La
información necesaria para el análisis en el caso de un rebaño es mucho más
sencilla que la requerida para adoptar decisiones de ámbito nacional u orientar la
asignación de fondos de organismos internacionales. El autor expone a grandes
rasgos la información necesaria para cada nivel de análisis. También examina el
nivel de riesgo asociado a distintas alternativas, y explica cómo aplicar el análisis
de decisiones a las alternativas de alto riesgo. Por último formula una serie de
recomendaciones para salvar las dificultades y riesgos que presentan esas
técnicas para el profano, y e v o c a la posibilidad de recurrir al análisis de
sensibilidad para ponderar la confianza que ofrecen los resultados de las
evaluaciones.
Palabras clave
Análisis de la relación coste-beneficio - Análisis de riesgos - Beneficios económicos -
Economía - Sanidad animal.
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