The Loss From Underutilizing GM Technologies
David Zilberman & Scott Kaplan
While the discovery of DNA and the resulting biotechnology led to a wide array of applications in medicine, the utilization of genetic engineering (GE) in agriculture has been quite limited despite the many benefits it has yielded (Barrows, Sexton, & Zilberman, 2014a). Heavy regulation of GE technology—in particular practical bans and costly approval processes—limited the application of the technology to only a few crops and a few countries. In the process, an inventory of GE innovations in various stages of development, including some that are ready for commercialization, have been accumulated. In this article, we present a methodology to quantify the cost underutilization of the potential of GE in agriculture and provide several case studies to illustrate this method.
Economists have advocated the use of benefit-cost analysis that considers environmental impacts to assess the use of new projects and technologies (Palmer, Oates, & Portney, 1995). Traditional benefit-cost analysis would suggest executing a project if expected discounted benefits exceed expected discounted costs, but when it comes to projects with irreversible, uncertain outcomes, Arrow and Fisher (1974) suggested considering the option of delaying the decision to gain new information. Indeed, many environmental agencies have used the delay option in regulation of new technologies like GE varieties, which have been taken to an extreme with the use of the “precautionary principle” (Cross, 1996)1 for environmental and health regulation. However, the framework presented in Arrow and Fisher (1974) suggests that excessive delay can be very costly, and we develop a simple framework to illustrate this with application to regulation of GM technologies.
This article introduces a simple framework to assess the economics of delaying the introduction of GM technologies due to concerns about their unintended effects (externalities). We found that the delay is not justified if the expected discount benefits of adoption of the technologies are at least greater than the expected damages. We applied our framework to analyze the consequences of delaying the introduction of Golden Rice, GM corn in much of the world, and GM wheat and rice globally. In the case of Golden Rice, we found that delay of more than 10 years of introduction of the technology may result in several millions of eyesights lost. The damage of the technology must be greater than between $2.7 and $29 billion of discounted net benefits expected to be gained from the technology under various assumptions.
We are a broad-based coalition representing the entire American agriculture food supply chain – from farm to fork. We are committed to increasing the public’s understanding about the science and safety of genetically modified organisms (GMOs) and advocating for science-based policies that keep food affordable for every American.