Does Prop 37 Impose Zero Tolerance?

​A bit of a debate has heated up in reference to one of the provisions of California's Prop 37, which would require mandatory labeling of GE foods.

Parke Wilde at Tufts put up a post a few days ago​ in which he says:

The editorial, which was widely published in other newspapers, claims that the proposal has a zero-tolerance for accidental GMO content in foods that aren't labeled as containing GMOs. Such a policy would force producers of essentially non-GMO products to use the label "may contain GMOs," simply out of fear of litigation.  But the editorial is mistaken. The initiative rightly allows foods that do not intentionally contain GMOs to carry a "non-GMO" label. 

​The story was picked up by Michele Simon at the Huffington post, who took the opportunity to disparage several top-notch economists at UC Davis.  (in full disclosure, in a previous post, I too made the claim about zero-tolerance in reference to Prop 37).  

There seems to be very little room for reasonable debate here.  Proponents of Prop 37 say there will be trivial costs and no lawsuits.  Opponents of Prop 37 say the opposite.  Proponents point to the literal text of the law.  Opponents tend to point to the dynamic interactions between firms an consumers that may occur as (perhaps unintended) consequences of Prop 37.  Thus, both can claim to be "right" and the public is totally confused.  

I personally​ don't know what will be the ultimate consequences of Prop 37.  But, I think any reasonable person must go beyond a literalist interpretation of the proposition language if they want to understand the potential consequences.  In one of his most well-known books, Thomas Sowell argues that to really understand the economic effects of a policy, you have to move beyond stage-one thinking and ask "and then what happens?"

It is true Prop 37 doesn't literally force processors and retailers to adopt more expensive non-GE products but that may be the ultimate consequence (or it may not - but we have to keep open the possibility).  It is also true that Prop 37 doesn't literally impose zero tolerance but that may well be the ultimate consequence.  

Truth is we don't really know.  But, consider a possible chain of events at some point in the future.  Despite the wording of the law, some individual in CA tests and finds that a non-labeled product contains GE (ANY trace of GE no matter how small).  The manufacturer of the product is then sued.  Then, it would be up to the manufacturer to provide all the sworn statements of unintentional use of GE.  But, then how do you prove “unintentional” or "accidental"? This is especially when every farmer (who provides the sworn statement) knows there is some chance the seed they plant contains at least some small traces of GE.  Even if the manufacturer withstands the legal challenge, non-trivial legal costs must be incurred to prove innocence.  Moreover, if one reads the full text of the law, they can see  that after July 1, 2019, the exception for "unintentional" use disappears - making the tolerance effectively zero at that time, 

It is that sort of reading and reasoning that I think folks are referring to (or at least that I am referring to) when saying that Prop 37 imposes zero-tolerance.   

How Do Research Findings Make You Feel?

​Over at EconLog, Bryan Caplan has an interesting post about how research findings make us feel.  He argues what we're wired to like some outcomes better than others based on our predispositions.  As he points out, sometimes these feelings can fly in the face of logic.

Just something to keep in mind as we read stories telling us organics aren't any more nutritious or than non-organics or that eating GMOs gives rats tumors.   ​We should strive to ask not "how do I feel about these results?" but rather "are they true?"

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When are Voluntary Labels Preferred to Mandatory Labels?

In a previous post, I argued that one of the key factors determining the ultimate effects of Prop 37 in California will be how retailers respond.  Will they choose to label all products "may contain GE ingredients" or will they switch to non-GE and not label?

Pro-Prop 37 folks argue that companies will simply add a label and the thus the costs of Prop 37 will be trivial (the costs mainly being the addition of a few words on a package)​.  Some economists argue the opposite, and suggest that the ultimate costs of Prop 37 will be very large because food prices will drastically increase due to retailers and processors switching to non-GE ingredients.  

I recently exchanged emails with the author of the above mentioned report​ arguing labeling costs will be trivial.  I asked why they thought firms will simply add "may contain GE" labels.  The answer, in short, was that we shouldn't expect the costlier European outcome (i.e., all products are non-GE and there are no labels) because Americans are less concerned about biotechnology than Europeans.  

I happen to agree with this assessment.  But, I thought it was a curious response coming from a proponent of mandatory labeling.  The economic research suggests that when demand for for non-GE products (as expressed by market behavior)  is relatively low (as it seems is the case in the US given the size of the organic and non-GE market) voluntary labels are preferred to the mandatory labels that would be required by Prop 37.  

Here is a summary of the economic research on the topic in a book chapter​ by Marks, Kalaitzandonakes, and Vickner (2004; pg., 36):

Protecting consumer’s ‘right to know’ and the ‘right to choose’ is advanced as the main reason for the current European policy stance.  In principle, there can be little objection to the argument that consumers should be able to exercise such rights.  Market transparency is the linchpin of well-functioning markets.  However, mandatory labeling is not the only option that would allow consumers a choice.  Indeed, given that mandatory labeling systems are costly to implement (Kalaitzandonakes et al., 2001) costs and benefits with such labeling regimes must be carefully weighted in order to decide their optimality (Giannakas and Fulton, 2002).  In this context, the proportion of consumers that would effectively discriminate between GM and conventional foods in the market place is a key parameter (Giannakas and Fulton, 2002).  Indeed, Caswell (1988, 2000) and Giannakas and Fulton (2002) have argued that a volunatary labeling programme may better serve a country where only a minority of the population is interested in separating GM from non-GM foods.

Whose Afraid of GMOs?

We humans are notoriously bad at judging relative risks.  We worry about some things that are very unlikely to happen (e.g., getting bit by a shark while visiting the beach), while ignoring other activities that are much riskier (e.g., driving to the beach).     ​

​This economic meme by Art Carden humorously points out such an inconsistency in the way we think about many food risks