Opportunity Cost Of Production Research Articles

A comparison of a novel time-based summary measure of dairy cow health against cumulative disease frequency

BackgroundThere is an increasing push for dairy production to be scientifically grounded and ethically responsible in the oversight of animal health and well-being. Addressing underlying challenges affecting the quality and length of productive life necessitates novel assessment and accountability metrics. Human medical epidemiologists developed the Disability-Adjusted Life Year metric as a summary measure of health addressing the complementary nature of disease and death. The goal of this project was to develop and implement a dairy Disease-Adjusted Lactation (DALact) summary measure of health, as a comparison against cumulative disease frequency.MethodsA total of 5694 cows were enrolled at freshening from January 1st, 2014 through May 26th, 2015 on 3 similarly managed U.S. Midwestern Plains’ region dairies. Eleven health categories of interest were tracked from enrollment until culling, death, or the study’s completion date. The DALact accounted for the days of life lost due to illness, forced removal, and death relative to the average lactation length across the participating farms.ResultsThe DALact consistently identified mastitis as the primary disease of concern on all 3 dairies (19,007–23,955 days lost). Secondary issues included musculoskeletal injuries (19,559 days), pneumonia (11,034 days), or lameness (8858 days). By comparison, cumulative frequency measures pointed to mastitis (31–50%) and lameness (25–54%) as the 2 most frequent diseases. Notably, the DALact provided a robust accounting of health events such as musculoskeletal injuries (5010–19,559 days) and calving trauma (2952–5868 days) otherwise overlooked by frequency measures (0–3%).ConclusionsThe DALact provides a time-based method for assessing the overall burden of disease on dairies. It is important to emphasize that a summary measure of dairy health goes beyond simply linking morbidity to culling and mortality in a standardized fashion. A summary measure speaks to the burden of disease on both the well-being and productivity of individuals and populations. When framed as lost days, years, or lactations the various health issues on a farm are more comprehensible than they may be by frequency measures alone. Such an alternative accounting of disease highlights the lost opportunity costs of production as well as the burden of disease on life as a whole.

The Dynamic Enterprise Network Composition Algorithm for Efficient Operation in Cloud Manufacturing

As a service oriented and networked model, cloud manufacturing (CM) has been proposed recently for solving a variety of manufacturing problems, including diverse requirements from customers. In CM, on-demand manufacturing services are provided by a temporary production network composed of several enterprises participating within an enterprise network. In other words, the production network is the main agent of production and a subset of an enterprise network. Therefore, it is essential to compose the enterprise network in a way that can respond to demands properly. A properly-composed enterprise network means the network can handle demands that arrive at the CM, with minimal costs, such as network composition and operation costs, such as participation contract costs, system maintenance costs, and so forth. Due to trade-offs among costs (e.g., contract cost and opportunity cost of production), it is a non-trivial problem to find the optimal network enterprise composition. In addition, this includes probabilistic constraints, such as forecasted demand. In this paper, we propose an algorithm, named the dynamic enterprise network composition algorithm (DENCA), based on a genetic algorithm to solve the enterprise network composition problem. A numerical simulation result is provided to demonstrate the performance of the proposed algorithm.

Opportunity Cost Classification of Goods and Markets

Sixty years ago, Samuelson’s “Pure Theory of Public Expenditure” expounded the classification of goods, and Bain’s “Economies of Scale, Concentration and the Condition of Entry in Twenty Manufacturing Industries” expounded the structure-conduct-performance paradigm. To the present day, rivalry in- and excludability from consumption classify goods, and subadditivity and irreversibility in production classify market structure. Opportunity costs of production in the form of prospective sunk costs incentivise investment and production, and the sunk costs themselves induce subadditivities, specialization and convexity of the marginal rate of technical substitution. Opportunity costs in consumption are determined by the marginal costs of replacement. In light of the recent Nobel price award to Jean Tirole, we revisit some of the forgotten discussions and clarify some of the terminology under a more economic framework of opportunity costs.

Biomass Yield Enhancement Required for a Replacement Switchgrass Variety

For perennial grasses such as switchgrass (Panicum virgatum L.) used to produce biomass for biorefineries, the replacement of an existing stand with a new variety may require the loss of a year of production. If the opportunity cost of production is considered, a new cultivar (challenger) expected to result in only a modest yield increase relative to the existing variety (defender) may fail to achieve the clearly superior criterion required by variety release committees. The objective of the study is to determine the minimum expected yield increase in a new switchgrass variety that is required to economically justify the replacement of the defender. An economic model based on capital budgeting analysis is developed. Sensitivity of the expected yield increment was examined with respect to the discount rate, biomass price, field costs, and planning horizon. Results were obtained for estimated defender yields of 16.25 and 24.0 Mg ha−1. The required yield increment is inversely related to the length (years) of the planning horizon and to the price of the biomass and is positively related to costs and the discount rate. For the base parameter levels, (a defender yield of 16.25 Mg ha−1, biomass price of US$53 Mg−1, discount rate of 5%, and planning horizon of 20 yr), a 15% yield increase of 2.4 Mg ha−1 would be required to justify replacement. Economic assessments are important to both producers and breeders when quantifying yield targets for enhanced cultivars.

The Convergence of Utility and Profit Maximization

The literature discussing conditions leading to convergence of utility and profit maximization for owner-controlled firms has a long history. Scitovsky initiated discussion and derived important result that, in short run, utility and profit maximization are necessarily equivalent only when the several indifference of owner are displacements of each [10, 59]. Hereafter, we refer to indifference curves that are vertical displacements of each other as Scitovsky condition.' Ladd [6] restates Scitovsky's model in mathematical form and reaches same conclusion. Piron [8] extends Scitovsky's analysis to long run and concludes that utility maximizers also maximize profit. Recent contributions to literature examine issue of convergence when entrepreneur receives nonpecuniary benefits from managing firm. Olsen [7] concludes that a utility maximizer who derives benefits from being self-employed does not necessarily maximize profit in either short or long run. Feinberg [2; 3; 4] and Schlesinger [9] conclude that utility and profit maximization necessarily diverge when nonpecuniary benefits cannot be obtained outside firm. In contrast, Hannan [5] argues that utility and profit maximization necessarily converge even when nonpecuniary benefits exist. A theoretically precise measure of opportunity cost of entrepreneurial activity is crucial to this discussion. Profit is total revenue less all opportunity costs of production, including entrepreneurial activity. A theoretically precise measure of opportunity cost of such activity is, therefore, a prerequisite for a precise measure of profit. Scitovsky uses indifference curve passing through point indicating choice of total leisure to gauge opportunity cost. Ladd and Piron follow Scitovsky's procedure. Olsen, Feinberg, and Schlesinger (hereafter OFS) use wage rate foregone as indicator of opportunity cost.

Economic evaluation of ethanol fuel production from agricultural crops and residues in California

The economic feasibility of producing ethanol fuel from a variety of starch and sugar rich crops and crop residues at an off-farm cooperative scale plant (3,408,000 L/y) is evaluated within an agriculturally diverse and productive region of the Sacramento Valley, California (U.S.A.). A linear programming model of a county (Yolo) representative of the region is used to compare conventional starch and sugar crop fermentation and distillation technology with innovative cellulosic hydrolysis. Parametric programming is used to estimate breakeven prices for ethanol fuel production for several different planning scenarios. Land use data in the model are based upon 1981 crop hectarage inventory maps, a soil quality map, and a map of different trip distances to a centrally located plant. Vegetable and field crop hectarages of barley, corn, grain sorghum, rice, sugar beet, tomato, and wheat are digitized and upper and lower hectarage flexibility restraints are estimated by regression based upon hectarage changes in the past. High and medium productivity soil groups, Storie Index Rating (SIR) I and II, and III and IV, respectively, are also digitized. SIR is used to classify soils on the basis of pedologic characteristics and their usefulness to agriculture. Trip distance costs for trucking are calculated for 13, 26, and 39 km routes. Candidate starch and sugar feedstocks include barley, corn, corn silage, grain sorghum, wheat, fodder beet, Jerusalem artichoke, sugar beet, and sweet sorghum. Lignocellulosic feedstocks include the residues of barley, corn, grain sorghum, rice, and wheat. Planning options comparing the effect of including or excluding currently available subsidies in the form of tax credits on ethanol fuel breakeven prices are modeled for a base year, 1981, and a forecast year, 1992, when these subsidies are scheduled to expire. Technological innovation is assumed to reduce capital costs by 20% by 1992. Prices of gasoline and diesel fuel are projected to rise from $0.34 and $0.30 per liter respectively, to $0.75 and $0.71 per liter (1981 $), respectively. It was found that in 1981 the least-cost feedstock using conventional fermentation technology was fodder beet. Estimated breakeven prices sufficient to equal fixed, variable, and opportunity costs of production were $0.29 and $0.46 per liter, with and without subsidy, respectively. In 1992, the least-cost feedstock will also be fodder beet. Its estimated breakeven price is $0.40 per liter. For lignocellulosic feedstocks, breakeven costs using acid hydrolysis technology ranged from $0.27 to $0.35 per liter depending upon conversion efficiency and subsidization. By 1992, the estimated breakeven cost could range from $0.42 to $0.47 per liter without subsidization. Fodder beet appears more favorable than other fuel crops because of its cheaper storage costs, a factor not shared by sweet sorghum or Jerusalem artichoke when the distillery is operated year round rather than seasonally.

Effort, efficiency, and incentives in economic organizations

This paper establishes the possibility of achieving both efficiency and incentive compatibility within a hierarchical organization, even when managers are effortaverse, as long as efficiency is defined as incorporating managers' effort disutilities as opportunity costs of production. It is further argued that this approach yields the same (i.e., Pareto) type of efficiency as achieved by the perfectly competitive price system when managerial disutility of effort is allowed. Thus, the negative results published by Miller and Murrell hold because of the non-Paretian objective functions assumed for central planners.