I was pleased to find this in the mail yesterday!
It officially comes out March 22. According to Amazon, it is the #1 new release in the categories of biotechnology and agronomy. I have no idea what that means, but I'll take it.
John Copeland, Tyler Cowen, Rachel Laudan, and Dan Sumner were gracious enough to provide nice blurbs - thanks!
One of my duties as incoming president of the Agricultural and Applied Economics Association (AAEA) is to help pull together sessions of invited papers for the ASSA meetings held in Chicago in January 2017. As many readers may know, it can be comparatively difficult to get a paper on the ASSA program as it is THE big meeting of economist from around the world. The AAEA has some dedicated slots at the ASSA meetings, and I aim to use the best of them.
If you've got a good (or even half-baked) idea for a paper session at the ASSA meetings, I hope you will consider submitting a proposal. Details on proposal submission are here. Feel free to shoot me an email if you have specific questions that aren't covered in the call.
Yesterday, the New York Times ran an editorial on the political fight over GMO labeling. In the piece, the editorial board cited one of my studies (with Marco Costanigro) in the following passage:
“There is no harm in providing consumers more information about their food. A study published in the journal Food Policy in 2014 found that labels about genetic modification did not influence what people thought about those foods.”
I want to add a clarification and caveat to that statement. What we found (in the context of an internet survey), is that the addition of GMO labels didn't make people more concerned about GMOs than they already were. That is, the addition of a label didn't seem to send a signal that GMOs were more risky than consumers already thought they were.
However, we did find that consumers would attempt to avoid foods with a GMO label. Consumers' choices in our studied implied they were willing to pay as much $1.98/lb to avoid an apple that has a mandatory "genetically engineered" label relative to an unlabeled apple. As I discussed just yesterday, it is precisely this issue that is the big potential driver of the costs of mandatory labeling. That is, if some segment of consumers tries to avoid GMO labels, retailers and food manufacturers may respond by trying to source more costly non-GMO crops.
Finally, I'll note that despite the above quote, that different types of GE labels in fact had very big effects on what people "thought" or were willing to pay for GE foods. In particular, we compared how willingness-to-pay (WTP) for an unlabeled apple varied when there were apples with mandatory labels (i.e., "genetically engineered) vs. voluntary labels (i.e., "not genetically engineered").
We found that the WTP premium for the unlabeled apple relative to the apple labeled "genetically engineered" was the aforementioned $1.98/lb. However, the WTP premium for apples labeled "not genetically engineered" relative to the unlabeled apple was only $0.81/lb. Thus, the implied willingness-to-pay to avoid GE was [(1.98–0.81)/0.81] ∗ 100 = 144% higher in the mandatory labeling treatment as compared to the voluntary labeling treatment. In the paper, we write:
“The differences in responses to mandatory vs. voluntary labels may result from the asymmetric negativity effect, which may in turn result from differences in what these two labels signal about the relative desirability of the unlabeled product. The differences in the “contains” vs. “does not contain” may also send different signals and change beliefs about the likelihood that the unlabeled product is GE or non-GE.”
One more point that I just can't led slide. The editorial also mentions the following:
“Various polls have found that about 90 percent of Americans favor mandatory labels for genetically modified foods.”
Yes, but about the same percentage of consumers say they want mandatory labels on foods with DNA. And, when you directly ask people, the vast majority say they don't want the issue decided by state ballot initiatives but rather by the FDA. And, we've had real-life ballot initiatives in five states now, and all have failed to garner more than 50% support. Whatever positive reasons may exist for mandatory labeling, the cited "90% of people want it" reason is the most dubious and misleading.
Discussions on the environmental benefits (or costs) of genetically engineered crops tend to focus on relative volumes and toxicities of herbicides applied, effects of Bt, and possibilities of cross pollinating native plants. In so doing, what is often missed is an important environmental benefit of herbicide resistant crops. In particular, if a farmer can control weeds by spraying the entire field with a herbicide like glyphosate, that means they don't have to use other methods of weed control (like plowing) that may lead to soil runoff.
A new paper just released by the American Journal of Agricultural Economics by Edward Perry, GianCarlo Moschini, and David Hennessy tackles this issue. Here's a portion of the abstract:
“We find that glyphosate tolerant soybeans and conservation tillage are complementary practices. In addition, our estimation shows that farm operation scale promotes the adoption of both conservation tillage and glyphosate tolerant seed, and that all of higher fuel prices, more droughty conditions, and soil erodibility increase use of conservation tillage. We apply our results to simulate annual adoption rates for both conservation tillage and no-tillage in a scenario without glyphosate tolerant soybeans available as a choice. We find that the adoption of conservation tillage and no-tillage have been about 10% and 20% higher, respectively, due to the advent of glyphosate tolerant soybeans.”
It should be noted that herbicide tolerance isn't unique to biotechnology. There are several "non GM" crops on the market that are tolerant to certain herbicides but are not genetically engineered, at least as the term normally used.
Back in 2014, the Vermont legislature passed a law mandating labels on certain foods produced with genetically engineered ingredients. The law is set to go into effect this summer, and it has prompted a lawsuit and at least a couple federal attempts at a GMO labeling law to provide uniform standards across all states (the most recent is a bill by senator Pat Roberts from Kansas).
Against this backdrop comes a new study on the potential costs of Vermont's law. According to Agri-Pulse:
“A new study funded by the Corn Refiners Association concludes that if Vermont’s mandatory labeling law were allowed to go into effect and spread nationwide, the increased cost of producing food in the U.S. would reach about $82 billion per year, or about $1,050 per family.”
That's a sizable sum, and one that's somewhat larger than the often-cited $500/family from William Lesser of Cornell who estimated the costs of such a policy in New York. We can add this new study to other previous ones like that of Julian Alston and Dan Sumner of UC Davis who estimated a $1.2 billion cost on California food processors when that state had a ballot initiative back in 2008. Tom Marsh and other economists estimated the costs (just of monitoring and oversight) in Washington State of over $700,000/year when that state had a ballot initiative in 2012. Here's a nice discussion of labeling effects by some Colorado State University agricultural economists produced with that state held a ballot initiative.
Of course a lot of pro-labeling groups dispute these estimates, and have written their own reports to "debunk" them, (though I find it curious that none of the de-bunkers have much economics training, while each of the authors of the above reports are respected and well known agricultural economists). The organization Just Label It, for example says
“there’s no evidence that requiring food manufacturers to label products that contain genetically modified (GMO) ingredients will increase food prices at the supermarket.”
So, where's the truth? All the studies (by pro- and anti-labeling groups alike) rely on assumptions. One assumption often made by pro-labeling groups is that the government costs of monitoring and enforcement are essentially nonexistent. As the Washington study suggests, however, that's unlikely to be true and these extra costs will either manifest themselves in higher taxes or higher food prices, depending on how they're funded and people respond. Pro-labeling groups are right to suggest that the physical costs associated with changing the label are relatively small and close to the "cost of ink." The much bigger question, and where most the controversy arises, is how food companies will respond to the label. If they respond by seeking to source non-GM crops, the cost implications could be quite significant, and this is how we arrive at numbers like $1050/family (the new Vermont study also assumes manufactures will have to comply in all states not just Vermont because of possibility of liability if one of their unlabeled products sold elsewhere unwittingly finds itself on a store shelf in Vermont). If instead food companies shrug their shoulders and just slap the label on all their products, the costs are likely closer to just the physical re-labeling costs and the government oversight and regulatory costs.
So, how will retailers respond to the label? My guess is that the answer is somewhere between the extremes: some will dis-adopt GM and others won't. Thus, the expected cost should be calculated by multiplying the costs of disadoption by the anticipated likelihood of disadoption. I find it a bit hard to believe that all retailers will fully move away from GM content to avoid the label (i.e., that the probability of full disadoption is 1). Why? A lot of consumers are unconcerned about GMOs and many more have no opinion on the issue, and thus there will remain an incentive for food companies to remain cost competitive. Also, the US is going to produce a lot of GMO corn no matter the labeling policy because around 40% of the corn crop goes into our gas tanks as ethanol and most of the remaining corn crop is used for animal feed (and animal products are typically exempted from the label). These much larger demanders of corn, as opposed to comparatively small demands for high fructose corn syrup or corn starch, are likely to drive the market for corn.
So, all this would suggest that $1,050/household/year is an upper-bound estimate associated with the mandatory labeling law. And, I think that's true, except for one thing. The potentially much larger (and admittedly more speculative) costs could come about if we create a culture and market environment that is hostile to the introduction of biotech crops and crop technologies. What future innovations will we forego if retailers chose to disadopt? We may never know, but it would be a mistake not consider these opportunity costs.