Monday, July 20, 2015

Confusion on GMOs from Financial Heavyweights

Mark Spitznagel and Nassim Taleb have an interesting article in the NYT attempting to draw an analogy between systemic financial vulnerability and alleged problems with GMOs. They start off by describing some ways in which the financial system was vulnerable leading up to the crash.

I find a lot I can agree with in that section, but my agreement stops in the second half where they attempt to convince the reader that alleged problems with GMOs fit the same patterns. I'll give my thoughts on each of these 5 issues.
First, there has been a tendency to label anyone who dislikes G.M.O.s as anti-science — and put them in the anti-antibiotics, antivaccine, even Luddite category. There is, of course, nothing scientific about the comparison. Nor is the scholastic invocation of a “consensus” a valid scientific argument. 
Interestingly, there are similarities between arguments that are pro-G.M.O. and snake oil, the latter having relied on a cosmetic definition of science. The charge of “therapeutic nihilism” was leveled at people who contested snake oil medicine at the turn of the 20th century. (At that time, anything with the appearance of sophistication was considered “progress.”)
None of this should be convincing to anyone, as it doesn't have a shred of logic to it. The first paragraph has nothing to do with the usefulness or safety of GMOs, but it does reveal the authors' experience with other people who disagree with them. In the same way, the second paragraph fails to make their point. Just because some of the name calling that exists now is similar to the name calling surrounding snake oil salesmen doesn't mean GMOs are like snake oil in any other way. I would have expected more from both of these men, as they're clearly very intelligent.

Second, we are told that a modified tomato is not different from a naturally occurring tomato. That is wrong: The statistical mechanism by which a tomato was built by nature is bottom-up, by tinkering in small steps (as with the restaurant business, distinct from contagion-prone banks). In nature, errors stay confined and, critically, isolated.
This is where the authors begin their false analogy. There's nothing "bottom up" or "top down" about genetic modification. Just because "nature" (whatever that is) has one method of genetically modifying organisms and people (who, I suppose, are not part of nature for some reason) have another doesn't imply anything about the safety or goodness of either one. This is called a fallacious appeal to nature. In fact, "nature" created GMO sweet potatoes thousands of years ago in a manner very similar to the way scientists do it in a lab today.
Third, the technological salvation argument we faced in finance is also present with G.M.O.s, which are intended to “save children by providing them with vitamin-enriched rice.” The argument’s flaw is obvious: In a complex system, we do not know the causal chain, and it is better to solve a problem by the simplest method, and one that is unlikely to cause a bigger problem.
The most obvious problem here is that GMO technology has improved countless lives. We use less land, water, and pesticides thanks to GMO technology. Certainly those should be counted as benefits. The great agriculturist Norman Borlaug (known as The Man Who Saved a Billion Lives) believed that GMOs were essential to continued progress in food production. He noted that humans have been modifying the genetic makeup of organisms for a very long time via variety selection and breeding.

Further, I find it surprising, given his writing, that Spitznagel would make this claim. I don't know as much about Taleb, but Spitznagel seems very well read in Hayek's theory of the business cycle and, I'd wager, knows something about the rest of Hayek's writing. In economics, in contrast to the physical sciences, we know quite a bit about the fundamental causes for the things we study. We are studying human behavior and introspection can help us understand basic, fundamental things that go on (e.g. the laws of supply and demand). We have more difficulty predicting the particular results of a complex economic system, to the extent that Hayek in his Nobel Prize lecture spoke of "mere pattern prediction."
Here's Hayek:
This brings me to the crucial issue. Unlike the position that exists in the physical sciences, in economics and other disciplines that deal with essentially complex phenomena, the aspects of the events to be accounted for about which we can get quantitative data are necessarily limited and may not include the important ones. While in the physical sciences it is generally assumed, probably with good reason, that any important factor which determines the observed events will itself be directly observable and measurable, in the study of such complex phenomena as the market, which depend on the actions of many individuals, all the circumstances which will determine the outcome of a process, for reasons which I shall explain later, will hardly ever be fully known or measurable. And while in the physical sciences the investigator will be able to measure what, on the basis of a prima facie theory, he thinks important, in the social sciences often that is treated as important which happens to be accessible to measurement.
In other words, there's a fundamental difference in the way we can treat the complexity of the market and the (relative) simplicity of such things as chemistry and physics. We can much more confident about the results we obtain from rigorous laboratory study in the physical sciences than in economics and finance.

Spitznagel and Taleb go on:
Fourth, by leading to monoculture — which is the same in finance, where all risks became systemic — G.M.O.s threaten more than they can potentially help. Ireland’s population was decimated by the effect of monoculture during the potato famine. Just consider that the same can happen at a planetary scale.
This statement seems to me to be utterly confused. The definition of monoculture is "the agricultural practice of producing or growing a single crop or plant species in a field at a time." This is in no way analogous to financial rules and regulations applying to all firms, promulgated by a few bureaucracies with near-zero culpability for the consequences of those regulations. It's the function of (relatively) free international and intranational trade that makes monoculture efficient.

Crop rotation is practiced all over the developed world (quite possibly in the developing world as well, but I don't know much about that) and hundreds of different varieties of the crops grown in these countries are used. On top of that, we have seed banks that help preserve biodiversity. The decision to plant this or that crop is up to individual farmers and is determined mostly by soil and climate, not gov't policy. How this is in any way analogous to the heavily interventionist financial system, with its implicit guarantee of bailouts for large firms and "free" insurance for bank deposits, I don't know.
Fifth, and what is most worrisome, is that the risk of G.M.O.s are more severe than those of finance. They can lead to complex chains of unpredictable changes in the ecosystem, while the methods of risk management with G.M.O.s — unlike finance, where some effort was made — are not even primitive.

This is not substantiated or argued at all. I don't know why anyone would take it seriously since the authors don't even feel the need to back it up.

Individual human behavior is the fundamental building block of economics and finance. Our knowledge of the general cause-effect relationships is pretty solid, but it's very difficult to make precise statements about specifics because much of the relevant information can't be included in statistical models.

The physical sciences are different. The specifics of the effect of a change in X on Y can be known with precision because we have laboratory experiments that do include all the relevant information. Even if the creation of GMO crops weren't grounded in "nature," there is plenty of diversity that ensures the safety of our food system.

I would guess that Spitznagel and Taleb would agree with me that fewer economic regulations, guarantees, and subsidies would create a more robust economy. The same problems are not evident in GMO crop science to nearly the same degree.


  1. Great post. You earned yourself a new follower.

    1. Thanks, Ryan! I try to post twice per week and I always announce our new stuff on Twitter.