Okay, re-reading ‘How it works’, seems like somewhere between A and C? I think I still don’t understand whether there are funky perverse incentive problems going on here, but hopefully someone with more direct market design knowledge can weigh in :)
With Paul’s, the egg certificate solves a problem of “I want humane eggs, but I can buy regular egg + humane cert = humane egg”. Maybe the same would apply for stunned shrimp, eg a supermarket might say “I want to brand my shrimp as stunned for marketing or for commitments; I can buy regular shrimp + stun cert = stunned shrimp”
I am not sure this helps you, but I think the idea is as follows. Some retailers would like to be resposible for electrically stunning more shrimp, but have suppliers which are not willing to do so. Those retailers could buy stunning credits as a way of certifying they have been responsible for electrically stunning more shrimp by paying other suppliers to do so. These suppliers may initially be uncertain about whether those retailers will buy their stunning credits, so SWP commiting to buying their credits would make them more willing to electrically stun more shrimp.
Apologies for all the confusion here—in terms of the idea I’m presenting in the post I think Vasco has done a really great job of summarising the idea above.
But I think the conversation above has helped me recognise a distinction that I don’t think I’d articulated particularly well in my post, which is that I see a difference between the application of credits for contexts like shrimp stunning, and the wider application of credits for animal welfare more broadly:
As a transition tool(as in shrimp stunning credits) - In the case of offsetting “bad” practices, credits aren’t intended to be very valuable, just a way to unblock logistical issues of transitioning a supply chain. Ultimately we want a situation where no-one is buying stunning credits because they’ve all directly transitioned their supply chains. (Again, I think Vasco actually does a great job of outlining my sense of how this would work without increasing shrimp production in his comment below).
As a tool to put a price on positive welfare (similar to Paul Christiano’s Demand Offsetting proposal—thanks @Austin! I hadn’t read this article before) - In cases of trying to optimise for “good” practices (where an improvement could lead to net positive lives for farmed animals), I wanted to paint a picture of a world where credits could be used to create lasting mechanisms that financially incentivise these welfare improvements.
Also, I’ve just realised that I’ve referenced @Vasco Grilo🔸’s comments a few times in this reply to help clarify my thinking—just wanted to say that I really appreciate your help in articulating the points I wanted to make!
Also, I’ve just realised that I’ve referenced @Vasco Grilo🔸’s comments a few times in this reply to help clarify my thinking—just wanted to say that I really appreciate your help in articulating the points I wanted to make!
I am optimistic about this sort of idea, but I agree that it’s important to pay close attention to perverse incentives. For what it’s worth, the paper referenced in the post says the following regarding increased quantity concerns in the imagined animal well-being units (AWBUs) market:
“As can be seen from Table 2, a producer has three options to increase the number of AWBUs produced—it can add more animals, increase well-being, or avoid discount factors. The incentive for all farms to improve animal well being is straightforward. The higher the price of AWBUs, the greater the incentive to improve animal care. It seems unlikely, however, that a farm would face much pressure to add more animals simply to increase the number of AWBUs produced unless there was a corresponding change in demand for meat, milk, or eggs. Moreover, a producer only faces positive incentives to add more animals if conditions on the farm are such that NAWBS were to able to established at a high level. And isn’t this exactly what animal advocates desire? Indeed, if it became more profitable to produce animals on farms by providing conditions that delivered high levels of animal well-being (which would increase production on such farms), there would likely be a corresponding decrease in the level of production on farms with low levels of animal well being. Thus, the anticipated effects of a market for AWBUs are:
The average level of animal well-being across all farms, as defined by the average NAWBS, will increase;
There will be a slight increase in the number of animals produced;
There will be a redistribution of where animas were produced; more animals will begin to be produced on farms with higher NAWBS; and
Each of the above affects will be accentuated as the price of AWBUs rises.”
There are a few typos in that section that I left in (“such that NAWBS were to able to established,” “animas,” and “affects,” presumably intended to be “such that NAWBS were able to be established,” “animals,” and “effects.” I’m not sure why there are so many small errors, in addition to at least one other earlier in the paper.
The claims seem plausible to me, but far from obviously true. A lot seems to be resting on “Indeed, if it became more profitable to produce animals on farms by providing conditions that delivered high levels of animal well-being (which would increase production on such farms), there would likely be a corresponding decrease in the level of production on farms with low levels of animal well being.” I think it’s possible that some producers of cheap products cannot easily upgrade facilities to get paid for the credits (which would likely increase high-welfare production less than or equal to the corresponding decrease in low-welfare production), and they may not decrease production 1:1 even if their low-welfare products lose value in the market (I think empirical studies on elasticity in these markets generally indicate this). They may continue to produce, for example, if marginal revenue covers variable costs and some, but not all, fixed costs.
How positive the credits system ends up being depends on the actual changes in the number of animals being produced at different welfare levels. If even low-cost producers respond by implementing relatively cheap but highly welfare-improving measures, things will go swimmingly. If there ends up being more separation between producers, things could get messy. I think a lot may depend on the specific market—how similar production is across borders, supply elasticities, and what the lowest-cost changes available are.
Okay, re-reading ‘How it works’, seems like somewhere between A and C? I think I still don’t understand whether there are funky perverse incentive problems going on here, but hopefully someone with more direct market design knowledge can weigh in :)
I’m also not sure if this is what SWP is going for, but the entire proposal reminds me of Paul Christiano’s on humane egg offsets, which I’ve long been fond of: https://sideways-view.com/2021/03/21/robust-egg-offsetting/
With Paul’s, the egg certificate solves a problem of “I want humane eggs, but I can buy regular egg + humane cert = humane egg”. Maybe the same would apply for stunned shrimp, eg a supermarket might say “I want to brand my shrimp as stunned for marketing or for commitments; I can buy regular shrimp + stun cert = stunned shrimp”
Hi Angelina and Austin,
I am not sure this helps you, but I think the idea is as follows. Some retailers would like to be resposible for electrically stunning more shrimp, but have suppliers which are not willing to do so. Those retailers could buy stunning credits as a way of certifying they have been responsible for electrically stunning more shrimp by paying other suppliers to do so. These suppliers may initially be uncertain about whether those retailers will buy their stunning credits, so SWP commiting to buying their credits would make them more willing to electrically stun more shrimp.
Hi Angelina, Austin, and Vasco :)
Apologies for all the confusion here—in terms of the idea I’m presenting in the post I think Vasco has done a really great job of summarising the idea above.
But I think the conversation above has helped me recognise a distinction that I don’t think I’d articulated particularly well in my post, which is that I see a difference between the application of credits for contexts like shrimp stunning, and the wider application of credits for animal welfare more broadly:
As a transition tool (as in shrimp stunning credits) - In the case of offsetting “bad” practices, credits aren’t intended to be very valuable, just a way to unblock logistical issues of transitioning a supply chain. Ultimately we want a situation where no-one is buying stunning credits because they’ve all directly transitioned their supply chains. (Again, I think Vasco actually does a great job of outlining my sense of how this would work without increasing shrimp production in his comment below).
As a tool to put a price on positive welfare (similar to Paul Christiano’s Demand Offsetting proposal—thanks @Austin! I hadn’t read this article before) - In cases of trying to optimise for “good” practices (where an improvement could lead to net positive lives for farmed animals), I wanted to paint a picture of a world where credits could be used to create lasting mechanisms that financially incentivise these welfare improvements.
Also, I’ve just realised that I’ve referenced @Vasco Grilo🔸’s comments a few times in this reply to help clarify my thinking—just wanted to say that I really appreciate your help in articulating the points I wanted to make!
Thanks, Aaron!
I am optimistic about this sort of idea, but I agree that it’s important to pay close attention to perverse incentives. For what it’s worth, the paper referenced in the post says the following regarding increased quantity concerns in the imagined animal well-being units (AWBUs) market:
“As can be seen from Table 2, a producer has three options to increase the number of AWBUs produced—it can add more animals, increase well-being, or avoid discount factors. The incentive for all farms to improve animal well being is straightforward. The higher the price of AWBUs, the greater the incentive to improve animal care. It seems unlikely, however, that a farm would face much pressure to add more animals simply to increase the number of AWBUs produced unless there was a corresponding change in demand for meat, milk, or eggs. Moreover, a producer only faces positive incentives to add more animals if conditions on the farm are such that NAWBS were to able to established at a high level. And isn’t this exactly what animal advocates desire? Indeed, if it became more profitable to produce animals on farms by providing conditions that delivered high levels of animal well-being (which would increase production on such farms), there would likely be a corresponding decrease in the level of production on farms with low levels of animal well being. Thus, the anticipated effects of a market for AWBUs are:
The average level of animal well-being across all farms, as defined by the average NAWBS, will increase;
There will be a slight increase in the number of animals produced;
There will be a redistribution of where animas were produced; more animals will begin to be produced on farms with higher NAWBS; and
Each of the above affects will be accentuated as the price of AWBUs rises.”
There are a few typos in that section that I left in (“such that NAWBS were to able to established,” “animas,” and “affects,” presumably intended to be “such that NAWBS were able to be established,” “animals,” and “effects.” I’m not sure why there are so many small errors, in addition to at least one other earlier in the paper.
The claims seem plausible to me, but far from obviously true. A lot seems to be resting on “Indeed, if it became more profitable to produce animals on farms by providing conditions that delivered high levels of animal well-being (which would increase production on such farms), there would likely be a corresponding decrease in the level of production on farms with low levels of animal well being.” I think it’s possible that some producers of cheap products cannot easily upgrade facilities to get paid for the credits (which would likely increase high-welfare production less than or equal to the corresponding decrease in low-welfare production), and they may not decrease production 1:1 even if their low-welfare products lose value in the market (I think empirical studies on elasticity in these markets generally indicate this). They may continue to produce, for example, if marginal revenue covers variable costs and some, but not all, fixed costs.
How positive the credits system ends up being depends on the actual changes in the number of animals being produced at different welfare levels. If even low-cost producers respond by implementing relatively cheap but highly welfare-improving measures, things will go swimmingly. If there ends up being more separation between producers, things could get messy. I think a lot may depend on the specific market—how similar production is across borders, supply elasticities, and what the lowest-cost changes available are.