Some Economics of Neuticles

What's a neuticle you may well ask? You'll probably be shocked, but there is some microeconomics involving economic rents, asymmetric information, and monopoly profits behind their existence.

But first off, I'll tell you that this isn't a joke, and then send you off to their website for a look. Yes, that's right ... this post will be about the economics of testicular implants for dogs.

Anyway, I saw this on Marginal Revolution before lunch, and sent Tyler Cowen a quick e-mail confirming that this product had been around for years. It had been over ten years since I heard about neuticles, so I didn't realize until I was cutting the grass (it's a good day to take off at Noon for the last cut of the year here) that I knew a whole lot more about this product, and that there was an economic story worth posting about it. Here goes.

Without any inside knowledge, most of you can imagine that dog shows are a big business. And like horses, most of the money is in breeding after you've won a championship. Naturally, owners of show dogs act like monopolists - they jealously guard their "product" so that they can preserve the monopoly profits it may earn in the future. In this case, the "product" develops its value by placing well in shows which are run by exclusive organizations like the American Kennel Club. Groups like this are exclusive because it pays to be; economists call this rent seeking. There are a variety of ways to seek rents, one of which is to limit entry into your group so that you can practice price discrimination: charging different amounts to different customers based on their willingness to pay. Economists even can show that otherwise silly rules and restrictions are beneficial to members if they limit access to the group and dilution of potential profits. In short, play by the AKC rules, get their seal of approval, win a few shows, and market the breeding rights to your show dog to both high paying customers (other breeders in search of their own monopoly profits) and lower paying customers (suburbanites who are willing to part with their money for a dog with some bloodlines).

So, how do neuticles fit into all of this? One of those silly rules is that dogs typically can't compete in a dog show if they've been "fixed". In fact, you may have even noticed some judges in dog shows making inspections of dogs that might be considered just a bit personal. They're actually trying to confirm that the dog is presumably fertile before conferring potential monopoly profits on its owner.

That's how I know all this arcana - our Blueberry (pictured to the left) is a purebred blue merle shetland sheepdog with champion bloodlines. We never wanted to show her, but we did look at other dogs in her class at shows and it was pretty clear we could have won a bunch (here is an AKC video that shows some champions). She's perfect on the outside. But not on the inside - she has a congenital problem, and we had her spayed at an early age to prevent her puppies from getting it. Some (unethical) breeders were aghast at this; you just are not supposed to have a potential champion spayed for problems that your potential future customers may have after they've paid you and gone on their way.

Now back to the economics: silly rules bother economists. Economists think everyone is smart, and if people are following a silly rule economists see it as their job to figure out why that rule is actually worthwhile. Well ... it's pretty easy to see in this case. You don't have to know much about dog shows to realize that the lion's share of the economic rents go to the winner of the show; the drop off in rents from first to second place is gigantic. Now put yourself in the shoes of the owner of a second place dog. You may think you have the better dog, you may have harsh feelings, but you're not going to go out and deny the winner their right to earn economics rents from their dog. Unless, of course, their dog can't capitalize on its status to earn those rents ... because they won't just fall to you because the top dog can't earn them. In fact, those economic rents will never be earned at all if the top dog can't earn them. So, losing to a dog that can't breed is almost like the owner burning their winnings in front of the other contestants. It just won't do, and there is a not-so-silly rule in place to make sure that it doesn't.

Which brings us back to neuticles. Neuticles help you hide the fact that your dog either can't breed (because he has two) or may have some problems (because he has one). Economists call this asymmetric information. If you have information that might affect the price of a transaction it makes sense to hide it if it would work against you. But really now ... why would you bother? The reason is that stud fees (for dogs) are usually charged with a two part scale: a flat fee for just showing up, and sliding fee for producing different numbers of offspring. This two part pricing scheme makes sense because one of the wonderful things about life is that sexual reproduction sometimes takes ... um ... let's just call it  practice. Thus, an owner who has a show dog that, say, has testicular cancer, can freely have that treated, go on to win shows, and earn stud fees even if the dog is sterile!

All this can even explain Tyler Cowen's addendum noting that people can't (currently) get neuticles. I would venture to say that the reason is that there isn't enough lobbying, and there isn't enough lobbying because there isn't money on the line. It's fairly safe to say that a human male who wants a neuticle or two isn't counting on exploiting asymmetric information to earn monopoly profits with them. And if they are, I don't think I want to know about it.

Who knew? Economists, that's who!

Via Marginal Revolution via The Agitator via Jacob Grier. Just imagine, there are four degrees of separation between you and everything you ever wanted to know about the economics of faux canine testicles.

And thanks to Kim Craft, the (horse) breeding expert in my department for advice on this post.

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Comments

[TM Lutas]

Google to the rescue.

The first human neuticle implant was apparently done in late 2000/early 2001 according to this page (http://www.uexpress.com/newsoftheweird/?uc_full_date=20000109). The neuticle material apparently has always been FDA approved. It's just a matter of somebody wanting more than a windsock down there after surgery. Once you've done one, there's hardly any cause to note further ones.

[Dave Tufte]

News of the Weird is not clear if this procedure ever went through. I'm not sure that it matters much though, since similar products used to be widely available before the tort lawyers decided to attach silicone. I know I found out about fake canine testicles sometime between 1989 and 1993 - before the neuticles brand hit the market.

[Bill B]

Just a bief note on why people can't get 'em. Actually AFAIK we used to -- until the big silicone scare of the 80's. Human testicular implants are similar to breast implants, and the FDA approval went out with them as well. They are approved and available in Canada.

[Dave Tufte]

Through e-mail, TMLutas informed me that the person in question did ultimately get a product similar to a neuticle in an experimental procedure.

[Dave Tufte]

Through e-mail, TMLutas informed me that the person in question did ultimately get a product similar to a neuticle in an experimental procedure.