Do Consumers Really Want GMO Labeling?

Mark Bittman on his NYT blog claims:​

IT’S not an exaggeration to say that almost everyone wants to see the labeling of genetically engineered materials contained in their food products.

and​

Nationally, on the broader issue of labeling, in answer to the question of whether the Food and Drug Administration should require that “foods which have been genetically engineered or containing genetically engineered ingredients be labeled to indicate that,” a whopping 91 percent of voters say yes and 5 percent say no.  

I agree that's what people will tell you in surveys.​  But, as Bryan Caplan has recently put it:

When lies sound better than truth, people tend to lie.

I don't think most people purposefully lie on surveys.  Rather, they often don't think about the consequences of the things they're saying.  In these cases, the "socially acceptable" answer is the easy one to give.  I've literally written dozens of journal articles showing that people will say one thing in a survey and do something entirely different when shopping.

When we look at what people actually buy in the grocery store, the data reveals that they don't buy a lot of organic or non-GMO products.  Why?  Because they're a lot more expensive.  ​

So, the question isn't whether surveyed people tell you that they are in favor of labeling GMOs.  They real question is what they are willing to pay to get it when they have to put their money where their mouth is.

Addendum: Tyler Cowen's response to Bittman's post is right on the money.​

Some Good Sense on GMO Labeling

This from Balylen Linnekin at Reason.com:

So I’d like to see Prop 37 fail. But I’d also like to see Prop 37 opponents support serious reform at the federal level by urging the FDA to reconsider its opposition to voluntary labeling that would permit non-GMO producers and sellers to openly tout their products as such. From a First Amendment perspective, the right to speak is, after all, on par with the right not to speak—which is largely what Monsanto and other Prop 37 opponents are fighting for here.

I’d also like to see more non-GMO food producers opt out of the USDA’s largely meaningless "organic" labeling certification regime and instead consider private certification, an increasingly attractive alternative to FDA labeling policy in general and (potentially) California law.

By respecting the rights of those with whom they disagree, both opponents and supporters of GMOs can find common ground and protect their own rights to eat what and how they please.​

How Will Food Companies Respond to Prop 37?

Three recent economic analyses have been released on the potential effects of Prop 37 in California, which would require mandatory labeling of genetically modified foods if passed in November.

Two analyses are by different groups of economists at UC Davis (Alston and Sumner and Carter et al.) and another by a consulting firm.  Each suggest potentially high costs and less consumer choice - exactly the opposite of that predicted by proponents of Prop 37.

The prediction (that Prop 37 will lead to high prices and less choice,) is based on a key assumption made by the analysts.  The assumption is that processors and retailers in California will not actually label foods and will instead substitute toward non-genetically modified ingredients.  The assumption is stated explicitly in the report by the consulting firm:

Based on experience in other parts of the world, review of the literature, and discussions with academic and business experts, we believe the most likely means of compliance for food companies is to substitute other ingredients for GE ingredients in their products. This means that companies would change the way in which they source ingredients or manufacture their products in order to avoid labeling their products with a vague and potentially frightening warning that conveys little meaningful information. 

Thus, most of the cost increase predicted in the studies is projected to come about from retailers and manufacturers choosing to use more expensive ingredients to avoid the label.

Is this what retailers will actually do?  Here are the reasons I’m not so sure:

• Many of the biggest donors supporting Prop 37 are organic and natural food companies.  To fork over millions of dollars in donations supporting the proposition must mean they believe it will help their bottom line, which will only happen if food firms actually label their products as containing genetically modified ingredients.

• Prop 37 would imposes zero-tolerance for accidental presence of biotech in food.  No country in the world (even Europe) imposes a zero-tolerance limit for their mandatory labels of genetically modified food.  Achieving zero-tolerance is practically impossible and extraordinarily costly. Food firms facing the chance of costly lawsuits may very well simply decide to label.

• Part of the reason there are virtually no GMO-labeled products in Europe (even though they are allowed) is because of competition between food companies.  It is a type of prisoner’s dilemma problem.  Even though all firms could make more money using GM ingredients, they choose to avoid GM because they know they’ll lose relative market share to competitors who don’t label.  Thus, they all avoid GM and no one labels.  The situation in California is different because, as mentioned above, the costs of falsely labeling will be much higher due to the zero-tolerance rule.  Moreover, consumer demand for the absence of GMOs in food is lower in California than in Europe, as my research shows.  This means the incentives for the sort of prisoner’s dilemma outcome are lower.  None of this is to mention the differences in markets structure of US and European in food retailing (the use of private labels in Europe is much higher and the retailers there exert much more influence on the entire marketing chain).

I do not think the arguments in favor Prop 37 are particularly strong, but I’m not entirely sure that the assumptions used  to project the costs of Prop 37 will ultimately match what happens if it passes.

Add​endum:  In the post above, I mention a study by Carter et al. in a way that inadvertently implied they argued that passage of Prop 37 would lead to firms avoiding the label by switching to non-GM or organic.  Here's what they actually say in their report:

Prop 37 would result in many products on the food shelf carrying a GM label. It might get to the point where there are so many products with GM labels that most consumers would just ignore the labels because they would be everywhere.

They seem to agree with my point that it will be hard for firms to avoid GE labels given the zero tolerance limit.   

Science vs. Consumer Sovereignty in Food

This from a forthcoming book chapter by Wally Huffman and Jill​ McCluskey:

The scientific consensus is that first-generation GM foods are equivalent to their conventional counterparts. However, on average, consumers want a discount in order to choose first-generation GM products over conventional products. Thus, the public’s perception of risks, rather than scientifically proven risks, that directly affect markets. This brings up the issue of scientific versus consumer sovereignty (Roberts, 1999). Although the scientific consensus is that GM foods are completely safe for consumption aside from potential allergens, it may still be the case that a majority of the population in a given country prefers to avoid GM foods. We find that information provision affect valuation and the source of information matters.

When people are informed about the science of biotechnology, they can become more accepting of GMOs in food.  Yet, this is hardly the only (or even the most persuasive) information confronting the food consumer.

Source: Huffman, W.E. and J.J. McCluskey. “Labeling of Genetically Modified Foods.” In P.W.B. Philips, S. Smyth and D. Castle, eds., Handbook on Agriculture, Biotechnology and Development. Northampton, MA: Edward Elgar Publishing, forthcoming. 

The Cost of Mandatory GMO Labeling

Not five minutes after posting on the potential effects of mandatory labeling genetically modified foods in California, I came across this release summarizing the recent work of Dan Sumner and Julian Alston, both agricultural economists at UC Davis. 

The bottom line: they estimate that Prop 37, if passed, would cost Californian farmers and food processors $1.2 billion. 

Although I understand the appeal of the “right to know” argument to the average consumer, what is less clear to me is why labeling of genetically modified food should, on economic grounds, be mandatory.  If the information is valuable to consumers, firms and farmers can profit by providing it.  And they have! 

There are already many voluntary labeling programs consumers can use if they wish to avoid biotechnology including organic and certified non-GMO labels.  Of course, these products are more expensive than conventional products – but that’s because they are more costly to produce.  But, it simply isn’t true that Californians do not have a choice to buy GMO or non-GMO foods.