On April 29, Vermont became the first state to pass a bill that would make it mandatory for foods containing genetically modified organisms (GMOs) to be labeled as such. On May 9, that bill became law. As you might have expected, the law is being challenged by the food industry, but if that challenge is unsuccessful, the law is expected to take effect in 2016.
If you have been reading this blog for some time, you know that, as a development agricultural economist concerned with food security, I am in favor of GMOs as a means to ensure that people the world over have access to plentiful, nutritious, and safe food. I emphasized the word “safe” in the previous sentence given that the bulk of the opposition to GMOs stems from a mistaken understanding among some and misguided — if not misleading — efforts by others to convince those same people that GMOs are unsafe and have ill effects on human health. For a discussion of that debate that tried to lay out both sides of the debate, see this previous post of mine.
What I wanted to discuss today was the presumed effects of GMO labeling laws on farmers. Specifically, their effects on organic farmers. This post stems from a conversation I had with Per Pinstrup-Andersen when I was at Cornell to give a talk earlier this year. He was the one who convinced me that GMO labeling laws would likely end up hurting organic farmers. Thus, I cannot claim intellectual paternity of the argument I’m laying out below.
GMO Labeling Laws: Bad for Organic Farmers
Imagine you are convinced that GMOs are bad for you (if you read this blog regularly, it is probably difficult for you to imagine that, but I want you to try nonetheless). Now, suppose you live in a world where there is no GMO labeling. There are two kinds of food out there: organic, and non-organic food. It is quite possible that some non-organic food is GMO-free, but there is no way for you to know. What you do know, however, is that organic food is GMO-free with certainty. So you tend to buy lots and lots of expensive organic food.
Now, suppose the government of the country in which you live decides to pass a law that would force food producers to put a label that says “Contains GMOs” on any food that does contain GMOs. “Groovy!,” you think to yourself.
Why do you say that to yourself? Because now you are facing three types of food: (i) organic food, which is GMO-free and more expensive than non-organic food; (ii) non-organic food with GMOs, which you are not going to purchase; and (iii) non-organic, GMO-free food, which is cheaper than organic food.
If you are like most consumers, you act rationally, and you substitute away from expensive organic food toward cheaper non-organic GMO-free foods. Sure, some of your friends (and maybe even you) still choose organics, but at the market level, all things being equal, people tend to be individually rational, and to gravitate towards the cheaper of two goods. And that is exactly why it is likely that GMO labeling laws will end up putting more than a few organic producers out of business.