Economic analysis of animal welfare reveals that welfare improvements often generate benefits that exceed costs, yet market failures prevent these improvements from occurring without policy intervention.
The economic case for animal welfare improvement is stronger than market prices alone suggest. When the full social costs of poor animal welfare are included — antibiotic resistance, public health risks, environmental costs, and the moral cost of preventable suffering — higher-welfare production systems become much more competitive. Market failures mean that these social costs are not reflected in consumer prices, and that farmers who invest in welfare improvement cannot capture full returns in competitive commodity markets. Policy intervention through subsidy reform, welfare labelling, and minimum standards is economically justified to correct these market failures.