Just a hunch here, but I think economists are starting to figure out the secrets of this whole internet headline writing thing. As evidence, take the ridiculously click-baity title of this post (yep, I admit it), which I've cribbed from a new working paper by researchers at Yale and the University of Pennsylvania. Sadly, like oh so many question headlines, this one oversells a bit. The paper does not really appear to call into question the foundations of modern capitalism based on the ongoing survival of longhorns, dairy cows, black angus beef cows or any other bovine breed. But it does offer up a pretty interesting economic puzzle involving cattle and India.
As you might have heard at some point, cows are pretty big in India, and along with buffalo, are considered prize possessions for many of the country's rural families. But, after breaking down a batch of economic survey data, the researchers come to a surprising conclusion: the cattle, on average, are money losers.
Our main finding is that, on average, households earn negative returns on their investments in cows and buffaloes if labor is valued at market wages: we estimate average returns of negative 64% and negative 39% for cows and buffaloes respectively. If we value the household’s own labor at zero, estimated average returns increase, to negative 6% for cows and positive 13% for buffaloes.
So why do households keep investing in livestock? The paper offers a few theories. Some Hindu families might see religious or social benefits in cow ownership (though that doesn't explain why they keep their non-sacramental buffalo around). Others might be betting on hitting the four-legged lottery; though the average cow is a cost sink, the researchers find that top 20 percent can deliver returns of more than 300 percent. Meanwhile, since much of the milk that's sold commercially in India is contaminated with delightful things like bleach and fertilizer, rural families might consider fresh, homemade milk particularly valuable. If the local labor market doesn't offer a great number of job opportunities, especially to women, the opportunity cost of staying home and tending to some farm animals might also be lower than the paper estimates. And finally, some might treat their cattle as a (somewhat ineffective) form of savings — which would suggest India needs to help rural families find more effective ways of stowing their money away.
Oh wait, there's one more. As the authors point out, their survey data might just be off.
Anyway, it's something to ruminate over. But seriously, great title.
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