The International Consortium on Agricultural Biotechnology Research (ICABR)

 

 

Public Acceptance of and Benefits from Agricultural Biotechnology: A Key Role for Verifiable Information

 

Wallace E. Huffman, Iowa State University
Abe Tegene, USDA-ERS, Washington DC

 

 

Abstract

 

The objective of this paper is to examine the welfare effects of information from communication (by interested parties) on the decisions of producers of agricultural products and potential users of biotechnical inputs and on consumers of agro-biotechnical products.

Interested parties are considered to be private biotechnical companies whose profits depend positively on sales of GMOs as inputs to agricultural producers and Aenvironmental groups@ whose utility depends positively on a naturally pure environment. Final consumers of agricultural products and agricultural producers which might use GMO inputs are assumed to be approximately Aneutral parties@ in this communication process, but they face important decisions relating to their own welfare.

The two interested parties provide information in the form of communications attempting to affect agricultural producers= and consumers= decisions. The communications are signals which reflect the self interest and private information of each group. Communication is cheap because it requires little action, and new information technologies, e.g., e-mail, websites, etc, have reduced its cost. There remains some modest fixed cost of preparing a communication, but the marginal cost of distribution has become approximately zero. Because signaling with communications is so cheap, one possible outcome is that they degrade the quality of information to the point that communications from the interested parties are ignored. However, if the information in communications is verifiable, the prospects may not be so bleak.

When information in communications is verifiable, neutral decision makers may under some conditions make fully informed decisions. One possibility is that the decision maker is sophisticated and knows the preferences (biases) of the interested parties. Exactly how this could come about needs more work, but s(he) should be Arationally skeptical@ and discount heavily the content of the communications. However, some useful information can be transmitted because the claims are verifiable. Even if the decision maker is unsophisticated and does not know the preferences of the interested parties, s(he) may be able to make good decisions if there is an opportunity for the different interests to come out. Each group has an incentive to reveal things that are to the disadvantage but true of the other interested party=s position, since claims are verifiable. If this outcome occurs, then it may become relatively easy for neutral decision makers to make informed decisions.

Without verifiable information, the presence of communications by interested parties has the prospect of degrading the information content to the extent that it is ignored by sophisticated decision makers. This will, however, be welfare reducing relative to fully informed decision making. For example, social-cost reducing inputs to agricultural production might not be used by agricultural producers, or socially beneficial GMO laden foods might not be consumed. More generally long term delays in adopting GMOs because of the time required to verify or refute claims by the environmental groups about agro-biotechnical products will reduce the expected payoff to private R&D in this area. A likely outcome is that the private sector will shift its R&D efforts away from agro-biotechnology and toward other pursuits.

If a verifiable information system could be established, this has the potential to be social welfare improving. It must be a disinterested (neutral) institution and would consume socially valuable resources in verifying claims. It, however, has the potential social benefit of getting the interested parties to voluntarily reveal more private information that is relevant to good decision making on GMOs. Exactly how this institution might be structured needs more work.

 

Selected References

 

Falck-Zepeda, J.B., G. Traxler, and R.G. Nelson. ASurplus from the Introduction of a Biotechnology Innovation.@ Am. J. Agr. Econ., forthcoming.

Falck-Zepeda, J.B., G. Traxler, R.G. Nelson, W.D. McBride, and N. Brooks. ARent Creation and Distribution from Biotechnology Innovations: The Case of Bt Cotton and Herbicide Tolerant Soybeans. Auburn University, Dept. Agr. Econ., June 1999.

Frey, Kenneth. Future Priorities for Plant Breeding, National Plant Breeding Society, Special Report, forthcoming.

Gaskill, G., M.W. Bauer, J. Durant, and N. Allum. AWorlds Apart? The Reception of Genetically Modified Foods in Europe and the U.S.@ Science 285(1999):384-387.

Hamstra, Ir A. Public Opinion About Biotechnology: A Survey of Surveys. The Hague, Netherlands: European Federation of Biotechnology, 1998.

Jones, Charles I. Introduction to Economic Growth. New York, NY: Norton & Do., Inc., 1998.

Milgrom, Paul and J. Roberts. ARelying on the Information of Interested Parties.@ RAND J. Econ. 17(Spring 1986):18-32.

Molho, Ian. The Economics of Information. Malden, MA: Blackwell Publ. Inc., 1997.

Nordic Working Group on Food Toxicology and Risk Evaluation. AFood and New Biotechnology-Novelty, Safety, and Control Aspects of Food Made by New Biotechnology.@ Nordic Council, Copenhagen, Denmark: Nord 1991:18.

 


 

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