Where there’s muck there’s brass

I am cross-posting this from the Business Studies blog, so apologies to those who read both - but I think it is a good story for both subjects. I have changed a few of the terms and themes to cover the different emphasis for an economics student.

On the face of it, this is a good end-of-term case study which is bound to raise a smirk or a grimace from most students, but actually there is a wealth of good solid theory in it. In answer to the question “What to do with 12,000 tonnes of pig poo?” a farm in Gloucestershire has taken advantage of government grants to set up their own biogas generator, which enables them not only to provide their own power for the farm and farmhouse, but also to sell about 2.2 million kilowatts of electricity each year to the National Grid, and even better, to save money on fertiliser as the by-product has been broken down into a form that can be used on the fields. Even better, the process prevents huge amounts of methane from being released into the atmosphere - apparently each year it saves the equivalent of almost 9,000 return flights from London to New York. So lots of good positive externalities there.

But it wasn’t the environmental benefits that drove James Hart and Jeremy Iles, the farmers, to do this, but the need to find another source of income to keep the farm going. The price they receive for their pigs from the supermarkets is the same now as it was 15 years ago, and was significantly lower for much of the past decade (...shame they didn’t have the chance to talk to Sir Terry Leahy at the Business Teachers’ National Conference last week!). Costs, of course, had been rising so making a normal profit was becoming a problem. This scheme appears to be going well - there are references to merit and demerit goods as well as associated externalities, efficiencies, use of scarce resources, short term vs long term decision, and perhaps property rights here, and also issues around reliance on government grants,risks of unintended consequences, innovation, comparisons with other EU countries…. there is a long list of issues you could use. Perhaps students could read the story and see which group can generate the longest list of Economics topics they can find in it?