Opinion, Berkeley Blogs

Mandatory versus voluntary labeling: The case of Prop 37

By David Zilberman

In debating Proposition 37, people ask me ‘What’s wrong with providing information to consumers?’ The answer is ‘information provisions are costly and therefore society must make a choice whether labeling should be mandatory or voluntary?’ Currently, food items and other consumer goods are covered with ‘labels’, from branding logos to certifications of kosher, halal, organic or fair trade, but most of it is voluntary. Whoever places a company logo, pays for it and backs it up. For example, fair trade coffee is backed up by an organization that certifies it the coffee growers receive fair compensation and fulfill other standards. It is costly, and it presumably adds to the price of the coffee but the consumer that is interested in this property is ready to pay. There are few mandatory informational labeling requirements. They include basic information about nutritional content and the most prominent example of mandatory labeling is the Surgeons General warning on cigarettes. Mandatory labeling is justified if the overall societal benefit from labeling exceeds the cost. In the case of cigarettes, the cost of the labeling is relatively small but the benefit may be very high because it is proven by the scientific community that cigarettes are detrimental to human health. In the case of nutritional content, the labeling entails some expense that may add to price of the food but for most of public, the value of the information is higher than the cost and at least in principle, the democratic process resulted in mandatory labeling.

Now let’s look at GMO. It is far from the case of cigarettes. Several reputable scientific societies and academies have suggested that GM is as safe as conventional food or organic food and furthermore is good for developing countries (Councils of The Royal Society of London, the U.S. National Academy of Sciences, the Brazilian Academy of Science, the Chinese Academy of Science, the Indian National Science Academy, the Mexican Academy of Science, and the Third World Academy of Science). The American Academy of Arts and Sciences have actually also recommended against voting for Prop 37 (http://www.aaas.org/news/releases/2012/1025gm_statement.shtml). So there is no obvious risk that justifies the mandatory labeling. But still, consumers may be need this information to make decisions. Therefore, there is a case to be made for it to be subject to the electoral process. Introducing the labeling is costly and it will increase the cost of food and has other implications. People that value this informational and are willing to pay can vote in favor of this proposition. In this case, people that are not willing to pay the implied premium will vote against the proposition. If the proposition fails, then people that really value the information and are ready to pay the premium will have to rely on voluntary labeling. Already there are private certifiers that label or assist in identification of ‘GMO-free’ food and then there is always to option to buy organic. Obviously, life is not always fair. If the proposition passes, people who do not value the information will have to pay extra for their food (and/or consume less), and if it fails, some people that would have benefited from mandatory labeling would not be willing the pay the extra cost of voluntary labeling.

Thus the real issue is, ‘what are the costs?’ We can distinguish between direct and indirect costs. The direct costs are estimated by respected economists to be approximately $350- $400/year for the average Californian family. Even if one assumes distrusts this estimate, and assumes that this study doubled the cost, then $200/year is not insubstantial especially for poorer families. Then there are the indirect effects. Labeling in California will lead to labeling elsewhere and will be an indicator of researchers and investors that investment in agricultural biotechnology is not as favorable as they thought, which will reduce the development of these technologies. Already even the limited use of GM in corn and soybean has reduced the price of food to consumers by about 3-4%. Future investment in these technologies allows for the increase supply of food, reduce the cost of adaptation to changing weather patterns due to climate change and the overall cost of food. Less investment in GM will reduce all of these potential benefits and the losers will be the poor people in the US and overseas. Thus to some extent, I see Proposition 37 is a mechanism to address the anxieties of the well to do on the back of the poor, who are sometimes unaware of these processes.

Then there are other issues that are attached to do with the Proposition that have nothing to do with it. Some people that advocate for diversified farming systems are against the proposition. I am also for diversified farming, but improved genetic technologies can contribute to DFS; GM allows for more flexibility to reduce chemicals in agriculture and actually enables the resurrection of old varieties that were not used before due to pest problems that can be addressed by GM. Others object to GM because of agribusiness. Agribusiness will thrive anyway, with or without GM; actually some big chemical companies, mostly European, will be the big beneficiaries of reducing GM products. Thus I will vote against Proposition 37, because I think defeating will actually benefit the poor and the environment.