Friday, March 11, 2016

Relatively Good Regulation - GMO Edition

In previous posts on food labeling I've discussed food labels and the information they provide as well as possible reasons why a private GMO label hasn't already appeared. In this post, I'll discuss the reasons commodity groups are in favor of federal GMO labeling legislation.

Senator Pat Roberts (R-Kansas) recently introduced legislation that would establish federal guidelines for GMO labeling. The law would preempt state mandates for GMO food labels and start an educational campaign for the public on the safety of GMO foods.

The question isn't whether farmers, food companies, and retailers believe the guidelines are good for them financially but whether these guidelines are better than the relevant alternative. I'd wager that food companies would, in an ideal world, prefer to label their food in a manner that maximizes their profit.

Since that world doesn't exist, and there's a credible threat that interest groups in some states will successfully pass legislation mandating GMO labels, federal preemption of such laws is preferable. For producer groups, federal preemption makes it less likely that potential discounts on conventionally-produced food will be passed on to them. Additionally, the cost of educating consumers will not be borne by food companies, retailers, and farmers but by taxpayers.

As I argued in a previous post, the tremendous cost of educating the public on the safety of GMO foods is one possible reason why we haven't seen widespread efforts by food companies or third parties to create a GMO labeling scheme.  Another possible reason is the presence of substitute labels. Many consumers who are concerned about the safety of GMO food might be content buying food labeled "organic."

The more I think about it, though, the more I'm convinced that the main reason we haven't seen a third-party, private effort to create a GMO label is that the public generally trusts only the federal government to ensure food safety. It's true we have all sorts of private labels informing consumers of the characteristics of the food they buy, but safety is a separate issue in most people's minds.

The new legislation introduced is likely to be a net benefit to farmers, food companies, and retailers. They'll be shielded from the risk of more onerous regulation at the state level and won't have to bear the cost of educating the public about GMO safety. This makes the bill, from their points of view, relatively good regulation.


  1. The EPA has had a voluntary GMO labeling regimen since 2001, but not one company chose to use it to label its products with GMOs ingredients until Campbell announced its decision to voluntarily label products with GMO ingredients in December 2015. If you think more companies would choose to voluntarily label products with GMO ingredients under Robert's bill, I'd like to know what you are smoking...


    1. I never predicted that food companies or retailers would start labeling. This post was merely intended to discuss the costs of doing so and how this bill affects those costs.

  2. If you are inclined to step into the eye of the storm, I could share this post with NN Taleb. He is passionate about GMO foods, and this is an unusually rational argument in favor of labelling.

    P.S. I am not worried about the health effects of GMO foods, and believe that Norman Borlaug was a great humanitarian. Here's a nice picture honoring his memory that you might like!

    1. Ellie,

      Thanks for your comment!

      You said: "this is an unusually rational argument in favor of labelling"

      I'm not sure what you're referring to. Something I said here? I'm not arguing in favor of labeling, all I'm saying is that a federal ban on state-mandated labeling with some kind of non-mandated guideline is better from the industry's POV than state-mandated labeling. Mandates don't necessarily fix the supposed negative externalities people are concerned about. I've argued in recent posts that there are probably very few people who would actually benefit from these labels. If that's true, then the label mandate itself becomes a negative externality (that is, it disperses costs while concentrating benefits on a very small minority).

      I've read some of Taleb's arguments about GMOs and I find them patently absurd. His work makes sense in social science and on the bleeding edge of natural science, but not in areas where we have multiple decades of sound analysis. That's my opinion anyway.

    2. You didn't actually argue in favor of labelling, but rather, a reason why non-GMO food producers and Republican senators would want regulation and education about GMO food dangers (benefits!) at the federal level rather than the state level. In fact, Democrat senators would probably want that too. I am taking a cynical view of big government in saying this.

      Federal regulation would cause the costs to be passed on to the taxpayer, as well as create a government apparatus to enforce that these requirements were satisfied on an ongoing basis.

      Your post was good, i.e. unusually rational, in that you pointed out why the anti-GMO groups who would be the most likely to call for federally-mandated guidelines on GMO food education would actually be causing more cost to taxpayers and consumers, and thus, more harm than good. That was my intent. It is the "unintended consequences" effect.

  3. Also, thanks for the picture! Great stuff!

    1. You are most welcome!

      I forgot to mention in my previous comment that Taleb is an anti-GMO extremist. He has a huge fan following, sort of like Neil de Grasse-Tyson. When all the diatribe, neologisms and name-calling is stripped away, Taleb is good with risk management and probability distributions. As you said, that is the area where his work is most relevant.

  4. It may be that a national law is a "lesser evil" than say Vermont's law which has led companies to decide to label their products nationally to comply with their law. However there is no need for labels. Those who wish to avoid GMO can already buy non-GMO labeled or organic food. It is like the situation with those who eat kosher. They are in the minority and they look for the label for the food they want, they aren't so incredibly selfish as to try to force all other food be labeled "non-kosher" for their convenience since they grasp it isn't needed.

    If there were some cult that decided all food picked by someone named Bob were unsafe, we wouldn't demand all food be labeled with the name of the person who picked it to appease an irrational tiny cult. If there were enough of them then some company might cater to their needs by producing "non-Bob" labeled food.

    The reason companies don't wish a GMO label is that some anti-GMO activists have admitted that they intend to then try to dupe uninformed consumers into thinking the GMO label is a safety warning label. If the government requires it they'll pretend its because the government thinks there is a safety concern with GMO, even though they don't.

    There have been instances of produce with bacterial contamination due to the use of manure as fertilizer. Yet these activists wouldn't want food labeled with the type of fertilizer used (not that its needed since the risk is low) because that would hurt the organic industry,which is what this is about. The organic industry has a few times the revenue of the GMO seed business (even if you include Roundup whose sales are bolstered by a GMO trait). The non-GMO labeled business is even larger now, with $550 billion in sales, about 37 times the revenue of the GMO seed business, and exists only due to misplaced fears about GMOs.

    Many organic and conventional foods are the result of intentional mutation via radiation or chemicals that induces random changes, rather than the targeted changes of genetic engineering, yet those foods aren't tested to the degree GMO foods are. Yet there is no cry for labels since that would hurt the organic industry. There is no cry for labels regarding the toxicity of pesticides used, since organic pesticides are sometimes more toxic than modern synthetic pesticides. There is no cry for labeling foods with the amount of safety testing done, since that would benefit GMO compared to organic.

    1. Anonymous,

      I agree with much of what you say here. As I've said in past posts, the fact that there isn't currently an effort to generate a non-GMO label by a private, 3rd party is evidence that there isn't much demand for such a label. This implies that a policy forcing GMO labeling is likely a transfer of income from those who don't care to the activists since all will bear the cost of the policy.