Proposition 37 is a crystal clear example of rent seeking in
the food industry. Some natural and organic and other food special interests are
utilizing this legislation to obtain market share that they otherwise would
not be able to obtain through the marketplace. To see this, its important to understand the dynamics of the
market for sustainable ag products as it has evolved over the last 15 years.
In the last
10-15 years, modern agriculture utilizing advances in management, information
technology, genetics, biotech, and pharmaceutical technologies has closed
the sustainability gap between conventional and organic production. (see Modern Sustainable
Agriculture). In terms of
reduced chemical use, improved biodiversity, reduced pollution and carbon
footprint, and overall safety, the biotech industry and modern Ag could pose
steep competition for some natural and organic food producers.
While most members of the agriculture industry don’t think the industry should be defined by an ‘us vs. them’ paradigm, some are willing to exploit
consumer fears and asymmetric information by using the government’s regulatory
apparatus to get a competitive edge. Some see modern ag as a competitor as
opposed to a partner in an overall mission to provide the world with safe
sustainable food. Consumer apathy also works against some promoting niche
organic and natural markets. Uncaring customers represent lost revenue potential. A
scary Hollywood horror movie label like ‘genetically modified’ may be enough to drum up business. How?
The Role of
Information Asymmetry
Whenever one party has better information about their
product or service than the buying public, information asymmetries may
exist. Proponents of proposition
37 claim that their initiative is to reduce information asymmetry and improve
the functioning of markets, as stated in this recent Forbes article:
“Free markets only
work when there is transparency and people are able to make decisions based on
information, which does not exist in the case of GMOs. If Prop 37 is enacted,
and, armed with this information, a significant enough number of consumers
decide not to buy these products, the onus will be on the companies to conduct
more research and produce better data.”
Will including the words ‘Genetically Modified’ on food labels really serve to inform
the public or create more confusion? This form of labeling won’t do any thing to decrease
information asymmetry in and of itself. The actual language in the law may in fact make it worse.
This is made clear on page 10 of a report by Northbridge Environmental Management Consultants (The Genetically Engineered Foods
Mandatory Labeling Initiative Overview of Anticipated Impacts and Estimated
Costs to Consumers):
"The Genetically
Engineered Foods Mandatory Labeling Initiative (A.G. File No. 11-0099 –
hereinafter the Initiative) would have a substantial impact on California
consumers. The Initiative would change how many of the foods they eat are
produced and would make that food more expensive. At the same time, however,
the Initiative would provide relative little by way of consistent and useful
information to consumers because of the loopholes and exceptions in its
language and the uneven ways in which it would apply to the same food consumed
in different settings. "
If informing consumers were the primary goal, then there are
much more intelligent ways to do so, perhaps in the ingredients listing
following industry standards (instead of using ‘genetically modified' if a product contains GMO corn, list instead ‘rCORN’, an idea I reluctantly entertain here) If
it alarms otherwise apathetic consumers, are they really going to invest the
time researching the safety of biotech foods to close the information gap or are they going to turn to the unqualified opinions of
celebrities like Dr. Oz or Oprah? I would bet that the special interests are counting on
consumers weighing heavily the opinions of celebrities and conspiracy theorists,
and therefore letting the information asymmetries associated with biotech
direct them to their own products. In this
way, Prop 37 is specially designed by special interests to take advantage of information
asymmetries and exploit the fears of the public in an effort to drive market
share.
***UPDATE
Here is a link to a great interview from Berkeley professor of Molecular and Cell Biology Michael Eisen via the Foodstuff's FoodLink Food and Farm Podcast with Ray Bowman that highlights the information asymmetry, special interests, trivialization of science, and near conspiracy theory aspects of Proposition 37.
See also, Eisen's piece 'Prop 37 and the Right to Know Nothing.'
***UPDATE
Here is a link to a great interview from Berkeley professor of Molecular and Cell Biology Michael Eisen via the Foodstuff's FoodLink Food and Farm Podcast with Ray Bowman that highlights the information asymmetry, special interests, trivialization of science, and near conspiracy theory aspects of Proposition 37.
See also, Eisen's piece 'Prop 37 and the Right to Know Nothing.'