Rent-Seeking in the animal healthcare market

18 Mar

Economists are allergic to wasteful activities, activities that inefficiently allocate goods and resources.  When “total consumer welfare” drops as a result of wasteful misdirected talent, investments, and energy, they cringe.  One such activity is “rent-seeking” or the activity of firms (or labor associations and other economic interest groups) directed not at product improvement, enhanced competition, but aimed instead at lobbying for public policies that provide them with a competitive advantage.  That’s right, many regulations are sought out by firms, industries, labor associations, even very costly ones, if those regulations drive out price-undercutting competitors.  The social waste comes in when the value of the time, talent, labor, that could have been spent improving competition (making a better cheaper product) is spent instead lobbying lawmakers for favorable policy at the cost to the consumer of higher prices.  I could give numerous examples of this (e.g., stiffening professional licensure requirements/costs for operating hair salons, nurse practitioner medical practices, laws privileging architects vs engineers, etc.), but here’s a recent one from South Carolina (animal shelters vs veterinary clinics), but here’s a recent one from the animal healthcare market in South Carolina.

From Fox News:

South Carolina veterinarians say their business is being neutered by shelters
Mar 18, 2013

Veterinarians in South Carolina want state lawmakers to rescue them from animal shelters they say are taking away their business.

The shelters, which not only spay or neuter feral animals, but also provide heartworm tests and dental care, have animal doctors up in arms. They claim the issue is the standard of care, as well as the fact that the shelters are paid with taxpayer funds and donations.

“Donor-subsidized care should not mean substandard care for people who go to a humane society or shelter to adopt a pet,” said Patricia Hill, president of the South Carolina Veterinarians Association.

A bill making its way through the state Legislature would limit care animal shelters can offer to homeless animals or pets. Animal welfare advocates say the veterinarians are putting their business ahead of the pets they mend.

“When we take an animal into our facility, we try to meet any needs that they have while we have them under anesthesia,” Denise Wilkinson , CEO of Pawmetto Lifeline, told “If they have a tumor, if they have an issue with their eyes, we try to take care of those issues.

“If they come to us because we have a more affordable rate, then so be it,” added Wilkinson.

With between 5 million and 7 million homeless animals nationwide, more than 5,000 shelters help provide them care and, in many cases, homes. But nearly 4 million shelter animals are euthanized each year because they are not adopted. The shelters argue that treating the health of these pets is the best way to find them a home.

The bill would require animal shelters to stop performing procedures on the animals that the vets say should be done only by vets in private practice. Hill said the bill stems from more and more complaints from vets who are seeing complications in animals due to procedures not done properly in the municipal shelters.

Wilkinson said her agency has two full-time, licensed veterinarians who perform surgeries on animals. She said getting the animals healthy increases their chances of being adopted.

“If you walk through our facility and you see an animal with a health issue that we are aware of and have chosen not to address, you might be reluctant to adopting that animal because then you would have to take it to a private clinic and pay for that medical bill,” said Wilkinson.


One Response to “Rent-Seeking in the animal healthcare market”

  1. darrelltoddmaurina March 18, 2013 at 9:33 pm #

    I agree with the principle here of overregulation being inappropriate and harmful to the public, but what about the issue of government competing with private business?

    It’s one thing for a private company to undercut another private company’s price with a product that may or may not be equal — consumers can and will decide whether there is a qualify difference, and if so, whether the quality difference is worth paying a higher price for higher quality. That’s what the free market is all about.

    The problem is that some animal shelters are able to offer lower-cost services because they are private nonprofit organizations which pay no taxes, because they are funded by government, or in some cases, because they are actually a government agency.

    Unlike much of what modern government does which doesn’t have a clear biblical basis, it’s actually possible to argue that stopping the spread of feral half-wild dogs is a legitimate purpose of the civil magistrate protecting people from a clear and present risk of life or limb.

    So how, as a matter of public policy, do we balance the government’s legitimate interest in stopping the spread of dangerous dogs, which could be done directly via a city-run dog pound or indirectly through a non-profit tax exempt organization, with the principle that government should not be disrupting the free market by providing subsidized services that compete with private business?

    The answer is not immediately obvious, and as is often the case, the devil is in the details.


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