Want to Know What's In Your Food?

​The Huffington Post just published a piece by Brandon McFadden and me, discussing some of the results of our recent survey of Californians on how they intend to vote on Prop 37.

Our survey revealed most voters supported Prop 37 because they said they have the right to know what is in their food.  Yet:​

If consumers really want to know what's in their food, a bit of web searching would tell them. Yet, our survey revealed that Californians knew next to nothing about biotechnology in food. In fact, 43 percent didn't even know the subject-matter covered by Prop 37. Survey respondents thought about 47 percent of corn and soybean acres are planted with GE seed (as indicated, the reality is actually around 90 percent) and they thought 45 percent of wheat acres were planted with GE seed (the reality is close to zero percent). More than 69 percent didn't know whether any Coke products contained GE (they likely do), and more than 59 percent didn't know whether any Kellogg's products contain GE (they likely do). Maybe that's the point of mandatory GE labels -- to tell consumers things they don't already know. But, we're doing it now. Voluntarily. For free.

​After fully disclosing which crops in the US are genetically modified, we argue that:

It seems many people confuse the "right to know" with the "right to buy." Many people want to avoid foods made with GE, and fortunately there are ways for them currently to do so. Simply look at the back of the package to see if the word corn, soy, sugar beet, canola, or papaya is in the ingredient list. Even without Prop 37, consumers already have access to non-GE foods, which are currently labeled if they choose to buy organic. Sure, organic or non-GE food is more expensive, but the reality is that organic or non-GE food is more expensive to produce. Requiring labels through Prop 37 is not going to change that fact.

Don't Let the Perfect be the Enemy of the Good

That's how I'd sum up Matt Ridley's excellent piece in the Wall Street Journal​.  He starts by arguing that:

Generally, technologies are judged on their net benefits, not on the claim that they are harmless: The good effects of, say, the automobile and aspirin outweigh their dangers. Today, arguably, adopting certain new technologies is harder not just because of a policy of precaution but because of a bias in much of the media against reporting the benefits.

​He rightly argues that negative articles on topics like biotechnology and shale gas make catchier headlines and drown out all the positive information.  Case in point?

 A recent French study claimed that both pesticides and GM corn fed to cancer-susceptible strains of rats produced an increase in tumors. The study has come in for withering criticism from mainstream scientists for its opaque data, small samples, unsatisfactory experimental design and unconventional statistical analysis, yet it has still gained headlines world-wide. (In published responses, the authors have stood by their results.)

The French study contradicts a Japanese paper that used larger samples, longer trials and accepted experimental designs, yet received virtually no notice because it found no increase in cancer in rats fed on GM crops. This is a problem that’s bedeviled GM technology from the start: Studies that find harm are shouted from the media rooftops, those that do not are ignored.

​He goes on to document the potential environmental benefits from GMOs.   

While ​no one would argue we should ignore the potential dangers of new technologies (particularly biotechnologies), it would be equally crazy to ignore their potential benefits.

Myths about Monsanto Seed

Earlier today, I added ​a post about a lawsuit brought by Monsanto against a farmer who (presumably and unwittingly) planted seed with Monsanto's protected biotechnology.  As I indicated, the key issue is whether farmers can legally replant the progeny of seed originally bought from Monsanto without paying a technology fee.    

In reading various blogs and listening to the ​anti-Monsanto crowd, I hear a number of myths that I think are important to clear up:

• Since the early to mid 1900s, most corn farmers have annually repurchased hybrid seed from seed-sellers.  This is because hybrid seeds are much more productive than the progeny.  So corn farmers having to repurchase seed every year is nothing new and is not a consequence of biotechnology. 
• ​The soybeans situation is different in that soybeans are open pollinated.  Thus, before biotechnology soybean farmers could save back some of their crop and replant the progeny without suffering too much in yield loss (at least in the short run).  In the long-run, however, varieties become susceptible to local diseases and pests and seed companies continually develop new varieties that put the old (replanted) varieties at a competitive disadvantage.  So, soybean farmers faced incentives to eventually buy new seed from seed dealers (although it was probably not on an annual basis) even before biotechnology.  
• My understanding is that when a farmer currently buys soybean from Monsanto, they sign a contract saying they will not to replant the seed.  It is hard for me to see malfeasance when farmers willingly buy seed at prices they are willing to pay while also willingly foregoing the right to replant.  In short, it appears (since more than 90% of the soybean crop is GM) the vast majority of farmers see more benefit in buying Monsanto seed and not replanting than in buying non-biotech (or other non-property-right-protected) seed ​that allow the option of replanting.
• ​The anti-biotech crowd is often up-in-arms over the so-called "terminator gene", which would prohibit the growth of progeny and, as a consequence, force farmers to repurchase seed.  Although the "terminator gene" is theoretical possibility, no commercial seeds being sold contain the genes.  Moreover, back in 1999, Monsanto pledged not to commercialize seeds with the "terminator genes."

Monsanto, Lawsuits, and Economics

​It appears that a Monsanto lawsuit (Bowman v. Monsanto) will be making its way to the Supreme Court sometime this summer (HT: Tyler Cowen).  At issue is a case brought by Monsanto against a farmer who (presumably and unwittingly) planted seed with Monsanto's protected biotechnology.  The key issue appears to hinge on whether Monsanto owns the progeny (i.e., the "kids")  of the original seed it sells, and whether farmers can replant the progeny of seed originally bought from Monsanto without paying a technology fee.    

Much has been said about the potential impacts of the lawsuit.  I don't know whether the suit has any merit.  I'm not a lawyer.  But I am an economist, and much of what has been said about the impacts if Monsanto loses are just plain wrong.    ​

The Business Week story on the issue quotes a professor at Washington State University’s Center for Sustaining Agriculture and Natural Resources who says.

If it’s overturned, it will have cataclysmic repercussions for the business model in the seed biotech industry,” Benbrook said by telephone. “It would basically end the agricultural biotech industry as we know it, certainly for soybeans.

Hardly.  ​As my colleague Bailey Norwood rightly pointed out to me after reading the story: What do you think will happen to the price of the first generation seed if farmers are able to freely replant the progeny?  

As Steven Landsburg points out in his wonderful (and recently re-released) book The Arm Chair Economist the indifference principle must always be at work.  The principle suggests that at current prices, (the marginal) farmers must be indifferent to buying Monsanto seed given that he cannot replant the progeny and must buy seed again next year.  However, if the Supreme Court rules that Monsanto does NOT own the progeny, then the value of the seed to farmers rises since they can re-use the seed.  The marginal farmer is no longer indifferent.   For the indifference principle to hold (i.e., for equilibrium to be restored), the price must rise.  Monsanto will charge more for it's initial offerings if farmers can freely replant.      

As an analogy, consider the market for textbooks.  Bailey and I wrote an undergrad textbook on Agricultural Marketing and Price Analysis a few years ago (in which we somewhat ironically discuss the indifference principle).  Buying a new copy of the book is pricey (Amazon.com has the current price of a new copy at $97.41).  What do you think would happen to the price of the initial offering of the textbook (i.e., the price of a new copy) if Bailey and I (and the publishers who actually sets the price) could receive royalties when the used textbook is resold in bookstores after the semester?  The initial price for a new book would almost certainly fall.  

The Monsanto case is simply this example working in reverse.  

Agricultural Marketing and Price Analysis

$97.41

By Bailey Norwood, Jayson Lusk

Buy on Amazon

What are Voters Willing to Pay for Food Labels?

Several months ago, I published a study in the journal Food Policy entitled The Political Ideology of Food.  The results, which suggested most people want more food regulation, were picked up in a variety of outlets such as the Food Navigator and Reason.com.

In responding to media inquiries about the study, I consistently told reporters something along the lines of the following: I’ve done lots of surveys like this over the years and one of the things I routinely find is that people appear much more favorable of regulation and labels in hypothetical surveys as compared to when real money is in the line.  In fact, I indicated at the end of the paper:

One important factor that our survey did not address is whether public support for
food and agricultural policies will remain high when people are made more aware of the specific costs of government action in this area. Many economists, including myself, have been critical of many of the policies this sample of consumers found so favorable, in part because it does not appear the benefits outweigh the costs. Only time will tell whether economic analysis on these matters will have any influence on the public’s ideologies with respect to food.

This insight is particularly relevant to the study we released earlier this week on Californian’s desire for mandatory labeling of genetically engineered foods.   In that study, we found a whopping 76.8% of likely voters said they intended to vote in favor of Prop 37 and the mandatory labeling policy.  Yet, when we followed up and asked people if they would still be in favor if food prices increased as a result of the policy, a different story emerged. 

Below is a graph of the percentage of the percentage of Californians projected to vote yes as the costs of the policy increase.  Citizen’s support for regulation is indeed price sensitive.  As the graph shows, at a food price increase of more than 11.9%, in fact, Prop 37 looses majority support.

Our research has been covered in a varied of blogs and media outlets (e.g.,here, here, and here).  And a few stories, such as the one over at Take Part, argue that the actual cost of Prop 37 will be far less than the 11.9% “break even” point.  As a result the author posits that:

But perhaps the most important detail—one that the survey didn't discuss and likely many voters don't know—is that the cost of food prices will be much smaller than 25 percent, much closer to a number which is almost negligible. 

Could be.  But it is it is important not to confuse cost with demand.  We were not measuring the costs of Prop 37.  We were measuring the price point at which people would be indifferent.  Those are two different things.  Though, the author is correct to say that if you analyze the demand for Prop 37 at the low price they assume (about 0.1%), then yes you’d still project strong support.  The costs have be highly debated and it isn’t particularly constructive to rehash those arguments here.

One thing I will point out in relation to the survey results is that economic research on how people respond to surveys suggests that the tend to over-estimate how much they are willing to pay for policies.  One widely cited review study, for example, showed that the amount people said they were willing to pay in hypothetical surveys was about three times what they were actually willing to pay when money was on the line.  Applying that insight to our analysis reveals that the “true” break-even price is probably something closer to 11.9%/3 = 3.97%. 

That said, we also have to remember that people don’t actually have to pay the price of the policies they support at the poll like they do when they’re shopping.  The result is that the costs of policies often get overlooked when people vote.