In Chapter 2, we first review the evolution of wolves into dogs and consider the economic concepts and models that help us understand how and why symbiosis between humans and dogs developed and the biological and socio-cultural forces that sustain symbiosis. These questions are the prelude to the economics of dogs in contemporary life. We use the Prisoner’s Dilemma game to illustrate how individuals seeking to maximize their own payoffs can lead to social inefficiency. In this game, the human “Clan” and the wolf “Pack” interact. However, interspecies interaction requires evolutionary game theory, where some wolves have a genetic trait that predisposes them to share with humans. The Hawk-Dove game features equilibria that can result in diverse genetic strategies. Experiments with captive foxes that have little associative behavior with humans show that greater cooperation with humans can be induced quickly through selective breeding. We then build on these concepts and games to introduce the economics of dog co-production with humans. We show how this generates incentives for humans to create distinct types of dogs, or breeds.

In Chapter 8, we reprise the economic concepts examined in the preceding chapters and introduce four emerging dogonomic topics. We showed how neoclassic economics is central to understanding both supply and demand for dogs, and behavioral economics also helps understand demand. We also posit four important emerging topics. First, we consider the evolution of the property rights of dogs and of property rights with respect to dogs. Second, we explain how we expect these property rights changes to affect policies relevant to the welfare of dogs. Third, we discuss the emergence of interest group politics around dogs. Fourth, we review the emergence of canine genetic sequencing and of phenotypic behavior to lead to further boutique selection, a step beyond artificial selection, and the likely impact of cloning.

In Chapter 3, we analyze the demand side of the market for dogs. We first consider some implications of the tension between treating dogs as property and their commonly perceived status as family members. We report on the increasing prevalence of dogs in U.S. households and review the survey evidence that shows that a large majority of households now consider dogs to be family members. We describe some of the factors and reasons that affect the demand for dogs in general, and the differences across socio-demographic groups. We consider whether pets are (economic) substitutes or complements for children. We address particularly economic explanations for potential inefficiencies (market failures) in the demand for dogs. We then consider demand for specific types or breeds of pet dogs, which can be explained partly by the theory of fads. Finally, we consider dog ownership in two circumstances: first, dog ownership by the homeless; second, the (perhaps temporary) increase in dog ownership during the COVID pandemic. We use microeconomic analysis of markets to help understand the surge in dog ownership induced by COVID and predict its long-term impacts.

In Chapter 7, we expand on the working roles of dogs and classify current canine occupations. We introduce the theory of comparative advantage and note its important role in evolutionary science. We classify canine occupations in terms of two dimensions: the type of dog advantage (comparative, absolute, or unique) and whether the occupation requires a higher or lower level of training. These occupations include service (guide, hearing, disabled, and psychiatric assistance), emotional support, therapy, hunting, herding, racing, search & rescue, substance detection, police work, diabetic alerting, cancer detection, and seizure alerting. We explain the trade-offs between selection and training across occupations, both in terms of breeds and juvenile dogs within breeds. We examine two studies that employ cost-benefit analysis. First, we present an analysis of the social benefits of guide dogs. Second, we discuss the controversy surrounding the treatment of emotional support animals in air travel and the cost-benefit analysis the Department of Transportation used to support its rule that allowed airlines to treat emotional support animals as pets rather than as service animals.

In Chapter 6, we confront the reality that many dog owners must eventually face decisions about their dogs’ end-of-life, potentially including hard decisions about euthanasia or costly medical interventions. We frame these decisions about ending life in terms of the owners’ fiduciary responsibilities and what they imply across different property rights regimes. We show how framing the relationship between dogs and humans in terms of principal-agent theory may offer some novel insights about responsibilities. We explore the appropriateness of euthanasia and how individual preferences and societal perspectives on its appropriateness have changed over time. We then examine the growth in pet health insurance and pre-paid veterinary plans and how this growth affects the economics of the choice between various treatments and euthanasia. We conclude by considering how individual and societal attitudes toward the use of dogs in medical research have changed over time. Nonetheless, although the number of dogs used in research has declined in recent years, many dogs still suffer and experience premature death.

In Chapter 5, we explain how a stated preference method, contingent valuation, is used to estimate the value of statistical dog life (VSDL). This shadow price is useful in cost-benefit analyses, included in regulatory impact analyses of rules that affect canine mortality risk. We explain how economists estimate the value of statistical life (VSL) and how to interpret it. We motivate the value of the VSDL with the melamine pet food disaster, which killed many dogs and cats and resulted in the Food and Drug Administration being given more authority to regulate pet food. The VSDL was estimated using a survey experiment presented to dog owners in a national survey. Respondents were asked about their willingness to pay for a reduction in the mortality risk that their dogs face from canine influenza. We describe the construction of the survey instrument and the experimental design, and then demonstrate how the statistical analyses of the resulting data can reduce behavioral biases that might reduce the validity of the results. We conclude by considering how the VSDL may be extended beyond regulatory analysis to tort and divorce law and public policy more generally.

In Chapter 4, we examine the supply of dogs to the U.S. market. We first explain two potential sources of social inefficiency in the market: information asymmetry and negative externality. We then explore the heterogeneous nature of the sources of supply. Based on organizational form, we distinguish between commercial and so-called backyard breeders. Based on the ethics of practice, we distinguish between ethical breeders who provide high-quality care and unethical breeders who do not. We relate our six resulting categories of supply, including puppy mills and shelters, to the information asymmetry, negative externality, and a third potential market failure, the public good nature of the problem of protecting dogs from cruelty. Finally, we argue that serious market failures provide justification for government intervention to increase efficiency. However, the current patchwork of regulations and lack of resources invested in enforcement allow puppy mills and black-market breeders to impose costs on others and harm dogs.

In Chapter 1, we set out the big question that this book seeks to answer: How does economics help us understand the various relationships between human beings and dogs? We label our effort to answer this big question and the many related economic questions and issues as “dogonomics.” To frame the question, we introduce two somewhat differing economic perspectives: neoclassical economics, which assumes individual rationality, and behavioral economics, which argues that people act irrationally in predictable ways. We make the case that, although many dogs are bought and sold in markets, they are unlike other commodities and most other animals. Dog exceptionalism is real. Indeed, they often have a dual nature as both commodity and family member.

Generally, estimation of changes in social surplus requires knowledge of entire demand and supply schedules. Chapter 4 discusses direct estimation of demand and supply curves, focusing on the demand curve for the purpose of measuring consumer surplus. It assumes that there is a market demand schedule for the good in question, such as garbage collection or gasoline, and we can observe at least one point on this demand curve. In many applications of CBA, however, the markets for certain “goods,” such as human life or pollution, do not exist or are imperfect for reasons discussed in Chapter 3.