I recently ran across a claim I've heard many times in the past about animal protein production and animal welfare. It goes something like the following: happier animals put on weight more efficiently because they aren't stressed by disease and discomfort. So, a producer can't make money unless they takes care of their animals, meaning the profit motive and improving animal welfare are aligned.
There is an element of truth to this line of reasoning. But, it's not the whole story. I discussed this issue in a paper entitled Animal Welfare Economics published back in 2011 with Bailey Norwood.
Here is a key paragraph describing the problem:
We then walk through a numerical example showing that even when animal welfare and animal output are very highly correlated, a producer will tend to stock hens more hens than would be given by the stocking density that would maximize animal welfare. The main insight is that the producer aims to maximize the profit from the BARN not the ANIMAL.
The figure below shows the particular example we walk through. The rest of the details are in the paper.