Economics and the "Marginal Efficiency of Cows"

In college I had an older German professor of Economics. He gave but demanded respect. The first final I ever took in his Macro-Economics class had me studying frantically every spare moment before the test. As it turned out I received a 100. Kind of funny though, I got one thing wrong, but had done such a good job in other areas the extra credit still gave me 100% on the test. I have no clue what I got right on that test. What I failed to add to my answers was “The Marginal Efficiency of Capital.

How does that work? If you spend an extra dollar do you get $5 back or $1.50 or $.99 for your investment. I was recently made aware of an article that first appeared in Drovers magazine. It really hit home with me because people within industry are beginning to say “the Emperor Has no Clothes.”

An excerpt from the artilcle is very telling on the Marginal Efficiency of Cows…

“By 2012, David Lalman, Oklahoma State University (OSU) had rounded up data from Montana, Arkansas and Oklahoma showing that 100 pounds of additional weight in each cow adds 6 pounds, at most, in her calf. The variation was from 4 to 6 pounds. Based on that, he worked with OSU economist Damona Doye to show that added calf weight, at the time, was worth $5 to $7. It is worth perhaps a little more now but will not be forever. They calculated the cost for carrying that outsized cow at $42. It was a net loss of about $35 per cow unit.”

Today I am thanking my Economics professor of 40 years ago for not letting me fall into that trap. For every dollar invested here you loose six!

Let’s get back to some of the “old-fashioned” methods of choosing cows. Those cows that are efficient on our grass and return a profit to us every year is what it should be all about to the cow-calf man.

Posted on December 24, 2015 .