Are Organic and Non-GMO Labels Substitutes or Complements?

For the first time today, I saw the following label on a packaged food.

In a way, the label seems a little odd.  An organic seal on a product should already convey to consumers that the ingredients came from a process that excluded GMOs.  However, the very presence of the label suggests many consumers may not be aware of this fact.  

I have a paper with Brandon McFadden forthcoming in journal Applied Economic Perspectives and Policy (sorry, I don't yet have a link to the paper on the AEPP's website; I'll pass it along when I get the link and discuss the whole paper in more detail).  In the paper we delve into this issue and others.  Here's part of the motivation.  

“It appears that organic organizations are concerned that consumers perceive non-GM and organic labels to be substitutes. Although many organic food companies supported the general idea of mandatory labeling, now that the policy has passed, organic producers have expressed concern that non-GM verification may be perceived as a substitute for the more expensive and encompassing organic certification. For examples, California Certified Organic Farmers (CCOF) initiated a campaign “Organic is Non-GMO and More” to highlight the differences in the two claims, and the Organic Trade Association (OTA) emphasizes, “Organic = Non-GMO…and so much more!!” Despite these concerns, little is known about the extent to which the two most common non-GM labels, USDA Organic and Non-GMO Project, are demand substitutes or complements. Whether the labels are demand substitutes or complements can be determined, in our context, by investigating whether WTP [willingness-to-pay] is supra- or sub-additive when the labels are combined. If the premium for displaying both labels is less than the sum of individual premiums for each label, then the two labels must be providing some of the same underlying characteristics of value to the consumer and implies the two labels are substitutes. By contrast, if the premium for displaying both labels is greater than the sum of individual premiums, then the two labels are complements and provide more value when provided together. ”

We ultimately find that products with the organic seal and products with the non-GMO verified seal are indeed demand substitutes.  Here's one paragraph related to those results:

“For apples, the results revealed large and statistically significant substitution effects for Non-GMO and USDA Organic labels. In fact, results indicated that the two are almost perfect substitutes as WTP [willingness-to-pay] premiums for apples with both Non-GMO and USDA Organic labels roughly the same as WTP premiums for apples that display only one label. This result is made obvious by the third column of results. The WTP premium for apples with the Non-GMO label only (vs text label) is $0.446, the WTP premium for apples with the organic label only (vs text label) was $0.474, and the WTP premium for apples with both Non-GMO and USDA Organic labels was $0.446+$0.447-$0.461=$0.432, which is actually lower than when either label is present in isolation. ”

Because it is more costly to be organic than non-GMO (since the latter is a subset of the former), it is easy to see why many food companies would want to add the additional label that "Organic is non-GMO and more".

Labeling Food Processes: The Good, the Bad and the Ugly

That's the title of an interesting new article in the journal Applied Economic Perspectives and Policy by Kent Messer, Marco Costanigro, and Harry Kaiser.  Here's the abstract:

“Consumers are increasingly exposed to labels communicating specific processing aspects of food production, and recent state and federal legislation in the United States has called for making some of these labels mandatory. This article reviews the literature in this area and identifies the positive and negative aspects of labeling food processes. The good parts are that, under appropriate third-party or governmental oversight, process labels can effectively bridge the informational gap between producers and consumers, satisfy consumer demand for broader and more stringent quality assurance criteria, and ultimately create value for both consumers and producers. Despite the appeal of the “Consumer Right to Know” slogan, process labeling also can have serious unintentional consequences. The bad parts are that consumers can misinterpret these labels and thus misalign their personal preferences and their actual food purchases. The ugly parts are that these labels can stigmatize food produced with conventional processes even when there is no scientific evidence that they cause harm, or even that it is compositionally any different. Based on this review of the literature, we provide three policy recommendations: (i) mandatory labeling of food processes should occur only in situations in which the product has been scientifically demonstrated to harm human health; (ii) governments should not impose bans on process labels because this approach goes against the general desire of consumers to know about and have control over the food they are eating, and it can undermine consumer trust of the agricultural sector; and (iii) a prudent policy approach is to encourage voluntary process labeling, perhaps using smart phone technology similar to that proposed in 2016 federal legislation related to foods containing ingredients that were genetically engineered.”

How Votes on GMO Labeling Change Concern for GMOs

At the annual meetings of the Agricultural and Applied Economics Association last week in Chicago, I saw an interesting presentation by Jane Kolodinsky from the University of Vermont.  She utilized some survey data collected in Vermont before and after mandatory labels on GMOs appeared on products in that state to determine whether consumers seeing GMO labels on the shelf led to greater or lower support for GMOs as measured by her surveys.  

I'm not sure if she's ready to make those results public yet, so I won't discuss her findings here (I will note I'm now working with her now to combine some of my survey data with hers to see whether the findings hold up in a larger sample).

Nonetheless, her presentation led me think about some of the survey data I collected over the years as a part of the Food Demand Survey (FooDS) project.  While I don't have enough data from consumers in Vermont to ask the same question Jane did, I do have quite a bit of data from the larger states of Oregon and Colorado, which held public votes on mandatory labeling for GMOs back in December 2014.  

In particular, I can ask the question: did the publicity surrounding the vote initiative on mandatory GMO labeling cause people to become more or less concerned about GMOs in general?

We have some strong anecdotal evidence to suggest that support for GMO labeling fell pretty dramatically in the months leading up to the vote.  For example, here are the results from several polls in California (including one data point my research with Brandon McFadden generated) on support/opposition to mandatory GMO labeling.  The figure below shows support for the policy was high but fell precipitously as the election campaigning began, and as we all know by now, the policy ultimately failed to garner majority support in California.

There is a similar pattern of support for mandatory GMO labeling in other states where the voter initiatives were held.  However, just because public support for a mandatory labeling policy fell as a result of campaign ads, this doesn't necessarily mean people thought GMOs were safer or more acceptable per se.  Indeed, many of the negative campaign ads focused on possible "paydays for lawyers" or inconsistencies in the ways the laws would be implemented, rather than focusing on the underlying technology itself.  

The Food Demand Survey has been conducted nationwide and monthly since May of 2013.  In November of 2014, two states - Colorado and Oregon - held widely publicized votes on mandatory GMO labeling.  These data can be used to calculate a difference-in-difference estimate of the effect of mandatory GMO labeling vote on awareness of GMOs in the news and concern about GMOs as a food safety risk.

The survey asks all respondents, every month, two questions of relevance here.  First, “Overall, how much have you heard or read about each of the following topics in the past two weeks” with response categories: 1=nothing; 2=a little; 3=a moderate amount; 4=quite a bit; 5=a great deal.  Second, we also ask, “How concerned are you that the following pose a health hazard in the food that you eat in the next two weeks” with response categories: 1=very unconcerned; 2= somewhat unconcerned; 3=neither concerned nor unconcerned; 4=somewhat concerned; 5=very concerned.  One of the 16 issues we ask about is "genetically modified food."

These data allow us to calculate a so-called difference-in-difference estimate.  That is - were people in CA and OR more concerned about GMOs than people in the rest of the country (this is the first difference) and how did this gap change during and after all the publicity surrounding the vote (this is the second and third difference)?  The "treated" group are the people in CA and OR while the "control" group consists of people in all other US states.

To analyze these question, I split the data into three time periods - "before" the vote (the months prior to September 2014), during the vote (Sep, Oct, Nov, Dec of 2014 and Jan of 2015) and after the vote (all the months after January 2015).  There were 485 "treated" people in CO and OR before the vote, 172 in these locations during, and 908 in these locations after (out of a total sample size of almost 49,000). 

In terms of awareness, here's what I found. 

Compared to people other parts of the U.S., people in CO and OR indeed reported hearing more about GMOs in the news during the ballot initiative vote than they did before and after (the increase in news awareness during the months surround the vote was statistically significant at the 0.01 level).

But, here's the key question.  Did the vote increase or decrease concern about GMOs as a food safety risk?  Apparently there was no effect.  The graph below shows, as compared to people in other states where there were no votes, there was actually a small increase in concern for GMOs in CO and OR in the months during the vote (however, the increase was not statistically significant, p=0.36), which then fell back down to pre-vote levels after the vote.  

So, despite evidence that the vote initiative on mandatory labeling led to an increase in awareness of GMOs in the news, it did not substantively affect concern about GMOs one way or the other.

ABC, BPI, and LFTB

A couple weeks ago, the lawsuit between BPI, the maker of lean finely textured beef (LFTB), aka "pink slime", and ABC news finally came to an end after the two parties agreed to an settlement for an undisclosed amount of money (here's one summary from CNN).

Here's another story from Inside Sources that touches on the economic impacts of the original ABC news coverage.  They reached out to me for comment and you can read a tad bit of what I had to say at the link above.  

Better yet, check out the chapter in my book 2016 Unnaturally Delicious entitled "Waste Not Want Not."  In that chapter, I talked about the history of BPI and it's founder Eldon Roth, the technology used in creating LFTB, some intriguing background on how BPI wound up in the documentary Food, Inc., and more.  Here are the law few paragraphs from that chapter.    

“It’s a bit hard to know what to make of all that transpired. To be sure, much of what was said about BPI was sensationalized. BPI didn’t use organ meats or bones or hoofs or hides or
“dog food.” The company used slightly fattier versions of same beef cuts that usually become roasts or ground beef. In fact, the day I visited BPI’s South Dakota plant, which is adjacent to a
Tyson packing facility, I was amazed at the beef entering BPI’s facility. The meat traveled on a conveyer belt in a tunnel that connects BPI and Tyson. A steer or heifer enters one end of the
Tyson facility, and a few hours later beef trimmings emerge at BPI without ever seeing the light of day. The trimmings consist of some small cuts of beef but there are also huge hunks of meat that looked almost identical to the briskets that I love to barbeque for get-togethers with friends and family. Lean finely textured beef is beef. That’s all. I suppose that’s why the company created a website called beefisbeef.com. No bone goes into the process. Big beef hunks go in one end and out the other end come three products: tallow, cartilage (which is the only waste), and lean finely textured beef.

I’ve visited a lot of food plants, and BPI’s was one of the most technologically advanced, safety-conscious plants I’ve seen. That a company that proactively invested millions in food safety measures found itself embroiled in controversy involving perceived (but unfounded) safety concerns is deeply ironic. What tarnished BPI’s reputation was no actual sickness or recall or outbreak; it was a series of TV shows and news stories.

But, given the information that consumers received, it is hard to fault them for their reaction. After all, best-selling authors and journalists have primed the public’s distrust of Big Food. In
an era when processed food has come to be seen as almost evil, “pink slime” struck a chord with consumers. Perhaps BPI should have required labeling of the beef that contained its products. Surely some of the public outcry arose from a feeling of having been deceived and of having no control over what is in our food. But from BPI’s perspective, what’s to label? “This product of ground-up beef parts contains more ground-up beef parts”? More fundamentally, BPI didn’t sell directly to consumers. Rather, the company sold to other processors, who sold to restaurants and grocery store chains. BPI was hardly in a position to force others to label products that contained lean finely textured beef.

So where does that leave us? Many shoppers, although I am not among them, no doubt want to avoid lean finely textured beef and are willing to pay a premium to purchase lean ground beef that does not contain it. There’s no harm in that.

But if we are really concerned about food waste, we probably need to change some of our narratives. We shouldn’t say we want companies to recycle and reuse and then turn around and vilify them for doing so.

The comedian Jon Stewart, who was more than willing to jump on the Big-Food-is-bad bandwagon, remarked that pink slime should instead be called “ammonia-soaked centrifuge-separated by-product paste.” He was working off a popular narrative. He could have instead featured the harm to a family owned business that was innovating to make food safer and more affordable by preventing food waste. But that’s not very funny.”

When Consumers Don't Want to Know

Since I first started working on the topic of animal welfare, I've had the sense that some (perhaps many?) consumers don't want to know how farm animals are raised.  While that observation probably rings intuitively true for many readers, for an economist it sounds strange.  Whether we're talking about GMO labeling, nutritional labels, country of origin labels on meat, or labels on cage free eggs, economists typically assume more information can't make a person worse off.  Either the consumer uses the information to make a better choice or they ignore it all together.    

There is a stream of literature in economics and psychology that is beginning challenge the idea that "more information is better."  One simple explanation for the phenomenon could be that consumers, if they know for sure they will continue to consume the same amount of a good, could be better off ignoring information because the information could only lower their satisfaction (perhaps because they'll feel guilty) for doing something they've already committed to doing.  In this paper by Linda Thunstrom and co-authors, 58% of consumers making a meal choice chose to ignore free information on caloric content, a finding that Thunstrom calls "strategic self ignorance" arising from guilt avoidance. 

Another possible explanation that I've previously published on is that, when people have limited attention, more information on topic A might distract people from a topic B, even though topic B ultimately has a larger impact on the consumers well-being.  

It may also be the case that people want to believe certain things.  They derive satisfaction from holding onto certain beliefs and will avoid information that challenges them.  These ideas and more are discussed by Russell Golman, David Hagmann and George Loewenstein in a nice review paper on what they call "information avoidance" for the Journal of Economic Literature.

A graduate student in our department, Eryn Bell, has been working with Bailey Norwood to apply some of these concepts to the topic of animal welfare.  They conducted a survey of 1,000 Oklahomans and asked them one of the two simple questions shown below.  Depending on how the question was asked, from 24% to 44% of respondents self declared that they would rather NOT know how hogs are raised.  The primary reasons given for this response were that farmers were trusted (a belief consumers may prefer to hold), that there are more important issues to worry about (limited attention), and guilt aversion. 

In the same survey, Bell and Norwood also included a set of questions based on some ideas I suggested.  The question gave respondents the option to see a picture of how sows are raised or to simply see a blank screen for a certain period of time.  People were divided into three groups that varied how long they had to see the blank screen.  The idea was that we could use the waiting time as a "cost", which would allow us to ask: how long are people willing to wait to NOT receive free information?  As it turns out, people weren't very sensitive to the waiting time.  Nonetheless, regardless of the waiting time, about a third of respondents preferred to see an uninformative blank screen as opposed to a more informative screenshot of sow housing.  These findings suggest at least some people, at least some of the time, would prefer not to know.