Abstract
The evidence in support of the various claims of gains and losses following the commercialization of GM crops is examined in this chapter. The gains from adopting GM crops are well reported. The distribution of benefits and costs to non-adopters and others beyond the GM crop space are analyzed, providing an assessment to date of the net gains or losses accruing to all adopters and non-adopters, both in the immediate vicinity and more distanced from the disruptive innovation.
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Notes
- 1.
It is also possible that those putting forth such a policy perspective simply believe that all technologies yield only negative outcomes for all and, hence, wish policy-makers to eschew all new technologies. As it is relatively easy to show that there will be ‘winners’ from new technologies, the less obvious case of why a ‘winner only’ technology cannot arise will be explored here.
- 2.
This does not mean that SECs cannot be part of a larger full assessment that includes both the scientific assessment and the socio-economic assessment. It only means that in terms of undertaking the assessment they should be kept separate.
- 3.
The metric of social welfare is based on the concepts of consumer surplus and producer surplus. See Gaisford and Kerr (2001) for a discussion of consumer and producer surplus.
- 4.
Or other forms of intellectual property protection such as plant breeders’ rights.
- 5.
Note, the royalty payment could also be depicted as an increased cost added to the marginal cost of adopting firms thus shifting those costs upward leading, in aggregate, to an upward shift in the supply curve relative to S1. In a similar way, technological improvements developed by firms with a degree of market power would represent a shift upward in the marginal cost curves of firms thus transferring some of the benefits to the firms developing the technology. An example might be a firm that develops a more efficient tractor and is able to charge a higher than competitive price for that new tractor.
- 6.
Note, as drawn ac21 is less that p1 at q21. As there is no direct relationship between the decrease in average cost and the change in price, the new price level, p1, may be greater than, less than or equal to average cost at q21.
- 7.
Under the assumptions of the strict neoclassical model firms exit freely (i.e. without cost). Of course, in reality firms do not leave easily and resources are not redeployed without cost (Leger et al. 1999).
- 8.
For example, a technological change in the pork industry leads to a lower price for pork. This will induce consumers to substitute more pork for beef in their diets—a leftward shift of the demand curve for beef. Of course, the demand for complements will increase as, for example, pork consumption increases there will be an increased demand for apple sauce. Thus, if cross market SECs are going to be included in the assessment of a technology it is important that the ‘winners’ be included along with the ‘losers’.
- 9.
For example, a higher yielding variety of canola will need less fertilizer per unit of output—thus reducing the demand for fertilizer.
- 10.
At some point the convention is to depict the market for cars as a market for a separate product. Doing this, however, obscures the effect of the technological change.
- 11.
Of course, demand will also increase for those inputs associated with the production of automobiles—creating ‘winners’.
- 12.
And eventually the GM variety.
- 13.
It is clear that at least a segment of the organic industry anticipated this shifting of demand between markets when it made the decision to declare that organic production would not allow GM technology. This was a propitious marketing decision.
- 14.
And, of course, shifting the demand curve for conventional and/or GM varieties further inward. If labeling of GM crops is required then consumers will be able to identify conventional products and the demand would segment into three markets. As a result of the transparency of labeling consumers will be able to avoid GM products without switching to organic products and, thus, the market for organic products will not shift outward to the same degree. We abstract from this outcome by assuming that the adoption of GM technology is complete in the non-organic market.
- 15.
There is also a gain in consumers benefit arising from the shift from the GM market to the organic market by some consumers. This is because consumers must perceive a greater utility from shifting to the new market than the loss of utility from leaving their existing market—otherwise they would not switch from one market to the other. This means that the shift outward in demand in the organic market is larger than the inward shift of demand in the GM market.
- 16.
While this would not be the case in either Canada or the US where certification only deals with intentional use of GM seeds, in Australia an organic farmer lost his organic certification due to the unintended presence of GM canola in his organic fields.
- 17.
Of course, organic farms that retain their status—depicted by SO1—receive an increase in producer surplus because the price they receive will rise above PO1 (SO1 intersects DO1 above PO1).
- 18.
If the costs of coexistence shift the GM supply curve up to those of SC0 or beyond then producers have no incentive to produce GM varieties and should return to the production of conventional varieties. Society would lose all the benefits of the GM technology. Ironically, if production remains (or returns to) conventional seeds there is no reason for consumers to switch to organic products—because no GM product exists—and the organic industry does not reap the windfall increase in producers’ surplus that the existence of GM varieties creates.
- 19.
Or one that can be agreed upon.
- 20.
That have cleared the regulatory hurdles for food safety and environmental risk.
- 21.
While a number of firms were contacted and asked to fill out our brief survey, only Clarkson replied.
- 22.
A copy of the questions are available from the authors.
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Smyth, S.J., Kerr, W.A., Phillips, P.W.B. (2017). Winners and Losers from Innovation and Trade. In: Biotechnology Regulation and Trade. Natural Resource Management and Policy, vol 51. Springer, Cham. https://doi.org/10.1007/978-3-319-53295-0_2
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