EX ANTE VS' EX POST BIOTERRORISM MITIGATION: Better safe than sorry

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EX ANTE VS. EX POST BIOTERRORISM
MITIGATIONBetter safe than sorry?

• Levan Elbakidze
• Texas AM University
• Department of Agricultural Economics
• National Center for Foreign Animal and Zoonotic
  Disease Defense

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Agricultural Terrorism

• food terrorism - an act or threat of deliberate
  contamination of food for human consumption with
  chemical, biological or radionuclear agents for
  the purpose of causing injury or death to
  civilian populations and/or disrupting social,
  economic or political stability(WHO, 2002)

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Outline

• The economic problem
• Some theoretical deductions - hypotheses
• Conceptual modeling
• A simplistic first cut
• Broader project efforts

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Justification Vulnerability

• Implementation difficulty and magnitude of
  damages.
• Food borne diseases cause approximately 76
  million illnesses, 325,000 hospitalizations, and
  5000 deaths annually in the United States (Mead
  et. al. 1999)
• Lost consumer/producer surplus
• Food and water contamination remains the easiest
  way to distribute harmful chemical and biological
  agents (Khan et. al 2001)
• Two General Categories of Agricultural Sabotage
• Direct Food contamination (Torok, et. al. 1997,
  Mermin et al. 1999)
• Introduction of non-indigenous species (Pinmentel
  et al. 2000, Shogren, 2000)

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The Food Process Farm-to-Table
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Economic Problem

• Goals
• Mitigation strategies
• Minimize costs
• Form best investment strategies considering cost,
  disease vulnerability, risk, and event
  characteristics?
• Manage market information to minimize impacts
• Major elements
• Irreversibility cannot instantly install
  investments when an event occurs
• Conditional response depending on investments
• Fixed cost versus infrequent occurring events
• Income depends on event and there is a large span
  of possible events
• Best strategy depends on investment cost,
  operating cost and probability

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H0 Tilting Factors
Ex-Post Fix
Ex-Ante Invest
Detection Response Recovery
Prevention Surveillance
Tilt toward ex-ante Event is more
likely Ex-ante Activity has multi
benefits Ex-ante Activity is more
effective Ex-ante Activity is cheaper Ex-post
treatment more costly Fast spreading disease More
valuable target Big demand shift -- health
Tilt toward ex-post Event is less
likely Ex-ante Activity is single purpose Ex-ante
Activity is less effective Ex-ante Activity is
expensive Ex-post treatment less costly Slow
spreading disease Less valuable target Little
demand shift -- health
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Simple Model -Two Stages
Pr
(1-Pr)
Ex ante
Ex post
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Analytic Conceptualization
Cost Encountered
Expenditure on Ex-Ante
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Analytic Conceptualization

• Two Stage
• Maximizing Expected Utility
• P probability of event, L monetary losses, V
  - Industry profits, r ex post actions, s ex
  ante actions, d event severity, w - prices

MAX
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Analytic Conceptualization

• Sensitivity analysis
• Expected outcome
• Risk neutrality and convexity of L
• Risk aversion and convexity of L
• Risk aversion and concavity of L

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Very Simplistic Case study

• Impact of prevention and treatment strategies in
  FMD setting
• Region Texas
• Unknown probability
• Investigate adoption of
• Ex-ante periodic animal examinations
• Ex-post ring slaughter of affected animals as a
  treatment strategy
• Look at expenditure balance as influenced by
• Probability level
• Spread rate
• Costs of implementation
• Effectiveness of response
• Recovery programs

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Foot and Mouth Disease (FMD)

• 2001 UK Outbreak 2026 cases, 7.6-8.5 billion,
• Effects, Tourism 4.5-5.3, farmers and related
  industries (Mangen, and Barrell 2003)
• Exports
• Decreased productivity

• Found in 34 Countries during 18 month prior to
  Apr 2001 (The Economist, 2001)

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Foot and Mouth Disease (FMD)

• Spread air, transportation, artificial
  insemination, milk related transmission, direct
  contact, and wildlife
• Dont show signs of disease for one or two weeks
  but are contagious. (Garner and Lack, 1995,
  Economist 2001)
• Virus can survive even in processed meet and
  dairy products (Economist 2001)

• Not harmful to humans

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FMD mitigation options

• Vaccination (Schoenbaum and Disney 2003,
  Carpenter and/or Bates, Ferguson 2001,Berentsen
  1992, etc.)
• Slaughter (Schoenbaum and Disney 2003, Carpenter
  and/or Bates, Ferguson 2001,Berentsen 1992, etc.)
  
• Movement Ban (Ferguson 2001)

• Surveillance and Detection (McCauley et al. 1979)
• Monitoring imports (McCauley et al. 1979)
• Monitoring travel
• Tracing
• Recovery/information (Ryan et al. 1987 for milk)

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Formation of Animal Disease Management System

• Prevention -- systems where there are actions
  undertaken to try to avoid disease introduction
• Detection -- systems designed to screen animals
  to detect disease early to allow more rapid
  treatment and much lower spread than would
  otherwise be the case
• Response systems which involve actions to stop
  the spread and ultimately eradicate the disease
  and to avoid further economic losses.
• Recovery -- systems put in place to restore lost
  assets or demand shifts due to introduction of
  animal disease

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P Probability of outbreak L(N,R) - losses
associated with prevention, response and
occurrence of potential FMD outbreak. N -
number of tests performed annually on cattle in
the region. R - response activities in the
state of nature where outbreak occurs. Y -
binary variable representing investment in
surveillance system. CR - costs of response
activities FTC - fixed testing costs VTC -
variable testing costs. H(R) response
effectiveness function. proportion of animals
lost in case of an outbreak under various levels
of response actions D(t) - is the disease
spread function expressed in terms of days that
the disease is allowed to spread before
detection. V Value of losses per infected
herd t Maximum number of days disease is
undetected, 365/(N1)
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Assumptions

• Cost minimization of ex-ante costs plus
  probabilistic weighted cost of response.
• Response effectiveness
• Slaughter (Schoenbaum and Disney, 2003)
• Convexity
• Disease spread
• Exponential (Anderson and May, 1991)and
  Reed-Frost (Carpenter et al. 2004)
• Fast (0.4) and slow (0.15) contact rates
  (Schoenbaum and Disney, 2003)
• Source Elbakidze, Levan, Agricultural
  Bio-Security as an Economic Problem An
  Investigation for the Case of Foot and Mouth
  Disease, In process PhD Thesis, Department of
  Agricultural Economics, Texas AM University,
  2004.

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Model Experimentation

• Event levels Probability 0.001 0.9
• Severity or spread rate slow vs. fast
• Response effectiveness 17 - 30
• Variable costs of detection 0.1TVC, 0.01VTC
• Average herd size 50 to 400.
• Ancillary benefits FTC-50 per herd
• Recovery actions decrease loss of GI per animal
  by 30

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ResultsSpread Rate
Slow RF
Fast RF
i Full variable Costs (VC), Response
Effectiveness (RE)0.17 ii VC, RE 0.3 iii
0.1VC, RE0.17 iv 0.1VC, RE0.3 v 0.01VC,
RE0.17 vi 0.01VC, RE0.3
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Event probability, Response effectiveness, VTC
costs
Results
RF
i Full variable Costs (VC), Response
Effectiveness (RE)0.17 ii VC, RE 0.3 iii
0.1VC, RE0.17 iv 0.1VC, RE0.3 v 0.01VC,
RE0.17 vi 0.01VC, RE0.3
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Results

• Herd Size
• Increasing herd size from 50 to 400
• increase of tests. Reached 39 for fast spread.
• Ancillary benefits
• Decrease FTC by 50 per herd
• No change in of tests
• Lower the probability of adoption in slow spreads
• Recovery actions
• Decrease in losses of GI per animal by 30
• Did not have a noticeable effect on surveillance
  intensity.

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Costs of an outbreak with and without ex ante
action
With detection
Without detection, Only response
i Full Variable Costs (VTC), Response
Effectiveness (RE) 0.17 ii VTC, RE0.3 iii
0.1VTC, RE0.17 iv 0.1VTC, RE0.3 v 0.01VTC,
RE0.17 vi 0.01VTC, RE0.3
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Conclusions

• Relationship between ex ante (detection) and ex
  post (slaughter) strategies.
• effort in a priori surveillance increases with
• threat level,
• cost reductions in surveillance,
• with disease spread rate,
• lower degree of effectiveness in response,
• and average herd size
• Lower bounds of benefits from ex ante detection
  systems. Trade, consumer scare, other industries
  not considered.

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Conclusions

• Caution functional forms, parameters, cost
  estimates.
• Future
• Explicitly include vaccination, recovery,
• Disaggregate to localized strategies
• Cooperation/non-cooperation
• Include Risk Aversion
• Link to epidemiology model

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Future Work Link to Epidemiology

• An economic model linked to epidemiologic model
• Disease spread
• Multiple types of outbreaks
• Event occurrence and severity
• Broader mix of strategies
• Multiple vs. single purpose strategies
• Risk aversion
• Effects on optimal mix of strategies
• Localized decision making
• Possibly three stage formulation

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Modeling Conceptualization

• Big elements
• Multi disciplinary study
• Domain experts, Veterinarians, Epidemiologists,
  Information technologists, Economists
• Ties together a number of models
• Designed for insights not numbers
• Will run backwards to see what characteristics of
  diseases and event probabilities merit what types
  of strategies

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Contemplated Studies

• Component strategy evaluations
• Anticipation, Prevention, Detection, Response,
  Recovery
• Investment / strategy mix study
• Strategy use
• Effects of disease characteristics
• Event probability that mandates actions
• Event specific vs multi outcome strategy value
• Risk / investment assessment
• Markets
• Information management and demand
• Dynamic response
• Demand suppression
• Other
• Recovery information management
• Carcass disposal
• Policy design and cooperative behavior

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Response Effectiveness

• Convex
• Normalized to R1, H(R)0.83 (Schoenbaum and
  Disney,2003)
• R slaughter of herds in direct contact with
  diagnosed herds
• Results in 17 decrease in number of lost
  animals
• H(R)1-0.34R0.17R2

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Value of losses per infected herd

• C is the costs of slaughter, disposal, cleaning
  and disinfection and was assumed to be 69 per
  head (Bates et al, 2003).
• NH is average number of cattle heads per herd in
  Texas, which was found to be around 50 (Ernie
  Davis, Personal Communication, August 2004).
• CV is an average market value per cattle head
  reported to be 610.00.
• GI is gross income for Texas cattle and calves
  operations reported to be 6,829,800,000 in 2001
  (Texas Agricultural Statistics, 2001).
• TN is number of cattle heads in Texas reported to
  be approximately 13,700,000 in 2001.

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• FTC - 42,915,000, which was calculated by
  multiplying per herd testing costs (150) for
  operations of less than 100 animal heads
  (Schoenbaum and Disney, 2003) and the number of
  cattle operations in TX (286,100).
• VTC - are assumed to be 50 per visit per herd
  (Schoenbaum and Disney, 2003), under the scenario
  where an outside expertise is required to conduct
  the screenings at each farm. for the whole Texas
  the costs per visit are 502861114,305,000.
• CR - include expenses for appraisal (300 per
  herd), euthanasia (5.5 per head), and carcass
  disposal (12 per head) (Schoenbaum and Disney,
  2003). 1175 per herd. costs or response
  strategy corresponding to R1 are assumed to be
  37117543475.

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Exponential Spread

• Simulate number of infected herds for slow and
  fast spreads
• Estimate ln(D)bt
• Slow Spread b0.026(310-15), R20.43
• Fast Spread b0.2(310-25), R20.9

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Reed-Frost Formulation

• Simulate number of infected herds for slow and
  fast spreads
• TN Total number of herds in the area
• q Probability of avoiding adequate contact
• 1-q - probability of making adequate contact
  k/(TN-1)
• K number of adequate contacts a herd makes per
  time period
• Slow 0.15, Fast 0.4

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Reed-Frost Formulation

• Use generated data to fit logistic function
• Fast Spread ß1512040, ß2-0.319, R20.99
• Slow Spread ß114554.2, ß2-0.012, R20.97

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Analytic Conceptualization Three Stages
STAGE 1 Pre Event
STAGE 2 Possible Event
STAGE 3 National and Local Management Decisions
1-p
Normal No Event
No Event Invest in Prevention Detection
Response capability
No Event Recover
Event Respond Prevent
Detect Recover
p
Event Respond Recover
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Data from Epidemiology

• N(r)(s,k,i,j,h)
• s State of nature
• k - region
• i - vaccinated, dead, infected, preventatively
  slaughtered, unaffected,
• j - stage along supply chain cow/calf,
  stocker, feed yard.
• h - mitigation strategy
• r random trial

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N is either a probability distribution across
randomized trials, or there needs to be a table
of the above form for each random trial.