Saturday, January 23, 2016

GMO Labeling and Market Failure

Three Oklahoma State University ag economists, Eric DeVuyst, Jayson Lusk, and Cheryl DeVuyst, recently published a short fact sheet on GMOs. The whole thing is interesting, but I especially liked #9.
9. Should food companies be required to label foods with GMOs?
     There are several existing voluntarily labeling programs, such as the USDA organic certification, which provides consumers choices on this matter in the marketplace. Thus, the question isn't whether GMOs should be labeled, but rather whether labels should be mandatory.
Though they aren't the same thing, any product that is USDA certified organic is also GMO free. The only reason I can imagine this wouldn't be a satisfactory solution to the problem of GMO labeling would be that a significant number of people want GMO-free products but don't care if they're certified organic.

Whether or not that group exists in large enough numbers determines the need for a mandatory label. If most people who want GMO-free products are content buying certified organic products, there's not much of a profit incentive to create another label or certification scheme specifically for GMOs. In that case, the mandatory label isn't necessary either.

If there are a substantial number of people who want a specific label for GMOs and that label doesn't exist, I would conclude that either 1) there's some "hidden" cost out there preventing the creation of that label (see this podcast or read about the "people could be different" fallacy) or 2) this is a textbook case of market failure.

I'm no expert on labeling (I dabble) but it seems to me that most people who don't want to consume GMOs also prefer organic. What do you think? Is this a textbook market failure? Are there costs we aren't counting? Have I missed something?


  1. I think labeling is an exercise in education. If consumers want it and you want them to buy your product, label it. Why do we fight over labels as if we have something to hide?

    1. Joe,

      I think the "something to hide" is a real problem, especially in the case of ag-gag laws. Here, though, we're talking about something that is costly, namely educating the public on the *meaning behind* the label. I'd imagine that is immensely costly, especially with all the anti-industry and anti-GMO stuff out there.