On the derivation of economic weights in livestock improvement

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Abstract
The use of profit equations for deriving economic weights (the value per unit improvement in a trait) in the genetic improvement of livestock has led to anomalies both in theory and in practice. These anomalies can be removed by imposing two conditions. One is that any extra profit from genetic change that can be matched by rescaling the size of the production enterprise should not be counted since it can be achieved without any genetic change. Only savings in cost per unit of product value should be included. The second condition is that changes that correct previous inefficiency in the production enterprise should not be counted. Thus, it is assumed that resources are efficiently used, and changes in output will require proportional changes in input. This means that fixed costs, like variable costs, should be expressed per unit of output, rather than as a fixed total enterprise cost. Improvement effort spent on traits that redress current inefficiencies in a production enterprise is of local and temporary value and is at the opportunity cost of improvement of other traits that save costs per unit of product value and are of permanent and general value. Application of these two conditions is shown to give economic weights that are identical on different bases; scaled output value, input or profit; fixed output value, input or profit; and zero profit. They were also equivalent to economic weights derived as the cost per unit product value from an economic efficiency index. The dilemma of different economic weights for different perspectives in production (unit of product, animal, producer, investor, and consumer) is also resolved.