Jocelyn and Robert Silver of Falls City, Ore. have been charged with multiple felony counts of animal neglect after sheriff’s deputies allegedly found dozens and dozens of emaciated alpacas when they seized the couple’s ranch in December. Sixteen alpacas were found dead and another 20 died afterward despite veterinarians’ best efforts, authorities claim. Around 175 more are being cared for at Oregon State University, as The Seattle Times reports.
These alpacas may or may not be the victims of criminal neglect — that’s a question for the courts — but it does appear their suffering has an economic explanation, too. Tina Saitone and Richard Sexton, agronomists at the University of California, Davis, found a decade ago that the market has severely overpriced alpacas. In their most recent work, they found that even under the most favorable assumptions, the fleece alpacas produce is worth less than half the cost of maintaining them. “As an asset, they were worthless,” Sexton told The Times. Meanwhile, even though male alpacas had lost around 80 percent of their value over a six-year period, the creatures were still selling for tens of thousands of dollars at auction.
Robert Silver told the newspaper that he and his wife put their life savings — some $750,000 — into their herd. Their goal was to breed alpacas for sale to other entrepreneurs, but they were never able to sell the calves at cost. Given the conditions in the market, it wouldn’t be unsurprising if they lacked the money to care for the animals properly.
How did prices get so high? The U.S. alpaca market is a classic example of a commodity bubble, like the Dutch tulip bubble of the seventeenth century. As with any bubble, explaining the irrational behavior of the investors in the market is not entirely possible. Part of the explanation is television advertisements like this one, which exploit the elderly and uninformed. Saitone and Sexton write that most of the speculators were smallholders and amateurs without access to objective agronomic analysis, and that other species of livestock that inexperienced farmers can raise in a backyard have also generated bubbles, such as emus, ostriches, chinchillas, Merino sheep, Shetland ponies and Berkshire hogs. They also note that there is no way to short an alpaca as you would a stock, which removes one check on the exuberance of the market.
Yet even experienced, professional investors can fail to price assets accurately. When retired people in rural Oregon counties spend thousands on worthless assets like alpacas, starving alpacas are the result. When bankers on Wall Street spend millions on worthless credit default swaps, the credit default swaps don’t go hungry. Instead, people do. Again, a judge or a jury will have to decide if the Silvers have committed criminal neglect — the pair have pleaded not guilty. Yet many wealthier and more sophisticated people made very similar mistakes, with far more serious consequences. They will not face a judge or a jury, nor will they have to worry about sheriff’s deputies taking control of their property.
Image via Wikipedia. Click below for the paper by Saitone and Sexton.