Look, everyone laughed when they watched the West Wing and Charlie Young was concerned Deborah Fiderer "swallowed a brochure" when she started raising alpacas. It was years before the bubble burst, and that episode aired even before the talk about it being a massive bubble where people must, eventually, lose their (proverbial) shirts.
If you're interested in why this happened, this explains the tax incentives, and this seems to be the canonical academic reference for it being a bubble, noticed while it was before its height, with the delightful title "Alpaca Lies?".
But here's the thing: alpacas still sell for closer to $800 than zero, and the economics haven't changed. Which makes me think the bubble never really burst – and academics appear to agree (they say "there is some evidence from the auction sales that a bit of air remains in the bubble" – which has probably ameliorated in the meantime, but that writing gets me – how do these people imagine physical bubbles?).
When I talk to people about tax simplification, I should probably mention I prefer people don't have neglected ruminants to trick the government into thinking they're a farm, because farms get such great tax deals. This is... very dumb. Let's just all agree on a system that's basically fair, and impose those rules on everyone equally, without regard for which industry they're in. If products need to be subsidized, we can give out vouchers on the demand side.
I'm not sure if these alpacas have moral weight to everyone. They seem cute, and I'm not sure they were harmed, per se, but the alpaca population went up 1000x because people wanted to trick bureaucrats. The answer isn't to make bureaucrats harder to trick, it's to make it so there isn't so much pressure to do so, because the details of our lives don't matter quite so much to them. The instinct to be wary of nosy government agents is because they can massive mess with, not only your own life, but the lives of an entire species, and nobody will seem to care.