Sheep as capital stock: an empirical analysis of investment in sheep

Abstract

Many of New Zealand's economists are interested in the impact or wool price fluctuations on both the New Zealand Economy and, perhaps to a lesser extent, the Pastoral Industry itself. (Pastoral Industry is used hereinafter as a synonym for the Sheep Farming Industry.) This study aims to provide some quantitative information which would be relevant to a study of the latter. It seems to us that before the effects of wool prices on the Pastoral Industry can be analysed we need rather more quantitative information on the structure of this industry than is available. Equally, before the likely effects of any policy measures on this industry can be evaluated we need more quantitative information on the industry's structure. It is not our intention to study the whole of the Pastoral Industry, but only a part of the industry, viz. the aggregate sheep stock. One reason for concentrating our study on the aggregate sheep stock is because we believe this is the core of the Pastoral Industry - it is from this stock that the pastoral products are derived. The other reason for selecting the aggregate sheep stock as our field of study, is because much of the discussion on sheep is couched in a conceptual framework which (we shall argue in chapter 1) is suspect and misleading. The commonly used concept of sheep is that they are inventories. We take issue with this concept on the ground that it lacks empirical validity and, consequently, tends to distort rather than clarify one's insight into the structure of the aggregate sheep stock.