Unintended Consequences of Mandatory Labeling of Genetically Modified Food

This November when Californians go to the polls to vote for Romney or Obama, they will also vote on Prop 37.  If passed, the proposition will require mandatory labeling of genetically modified food.

Proponents of Prop 37 argue that Californians have a right to know what’s in their food, that it would be essentially costless for agribusinesses and food retailers to simply add a label, and that it would send a message to multinational agribusiness firms.  I’ll address the first two issues in future posts, but for now I’ll simply say that the presumption that labeling will somehow help small farmers and food processors is probably mistaken.  Increased regulation often increases the power of large incumbent firms (who can employ teams of lawyers and strategists) - much to the surprise and dismay of regulation supporters.

Here is what Dan Murphy at Drovers recently had to say about the issue:

If GMO labeling becomes a hot-button problem, the executives decided, it will hit heavier on smaller companies—just like nutritional labeling and HACCP and every other regulatory initiative put in place over the last several decades. All that does is thin out the competition for shelf space, since the added costs are more easily passed along to the end user by the category leaders, as opposed to manufacturers struggling to hold onto market share.