Decision Making as Output and Bounded Rationality

  The classical economics theories proceed on the assumption of rational agents. Rationality implies the economic agents undertake actions or exercise choices based on the cost-benefit analysis they undertake. The assumption further posits that there exists no information asymmetry and thus the agent is aware of all the costs and benefits associated with the choice he or she has exercised. The behavioral school contested the decision stating the decisions in practice are often irrational. Implied there is a continuous departure from rationality. Rationality in the views of the behavioral school is more an exception to the norm rather a rule. The past posts have discussed the limitations of this view by the behavioral school. Economics has often posited rationality in the context in which the choices are exercised rather than theoretical abstract view of rational action. Rational action in theory seems to be grounded in zero restraint situation yet in practice, there are numerous restra

Debating GM Food


Genetic engineering is the process of manipulation of genes in an organism or transplanting genes of one organism to another to create robust effects. Applications are multipurpose from medicine to food to agriculture to host of other unexplored domains. There is significant increase in genetically modified (GM) crops that are resistant to pests. It is feasibly a expedient technique than spraying pesticides and possibly long last effects. There are promises of increasing yield per acre, some evidence of which has been perceived in cotton etc. The agriculture industry across the world is ominously subject to rainfall and irrigation. Given the accumulative scarcity of usable water, it is germane to explore less water intensive methods of growing crops. GM embedded crops are understood as an essential tool towards developing drought resistant /snow resistant/ flood resistant crops etc. If GM agriculture is given a free license, endless possibilities ostensibly will open up. Yet, any discussion on GM often degenerates into rhetoric than substance. Prima facie it appears very little polite discussion can happen on the subject without touching a raw cord of the discussants.

At the core of these discussions lies three issues. There is obviously the exercise of consumer and producer choices. These choices can be opting for or out of GM crops and downstream applications like food. Secondly, there is serious discussion on the ecological impact of the GM crops. Oblique is the need to understand the externalities before working forward. The third discussion centres on the prospective economic rent seeking by multi nationals. The last one given the historical evidence seems to have certain weight. Each of these points merits serious analysis.

Every producer has an independence to decide his her choice of electing in or out of GM cultivation. Similarly, the consumer too must be presented with choice of consuming the products produced by GM crops. No doubt, consumers must have perfect information whether the product being purchased and consumer contains GM material or not. Proper labelling procedures would address the issue allowing those averse to consuming GM food opting out the same. However the current approach has descended into a battle of the lobbies with little regard to the consumer and producer preferences. There seems to be a pattern to pitch in for self-styled paternalistic interventions. Beyond doubt, on grounds of safety, paternalistic or dictatorial top down intervention is essential in many cases. For instance, given the reluctance of wearing helmets or using seat belts, it might be imperative to have law followed with strict implementation on grounds of passenger safety. Yet in the context of GM debate, there seems to be no significant overwhelming evidence at the moment against its safety. Further, paternalistic interventionists are advocating a precautionary principle as protection against any future evidence emerging on the negative dimensions of GM crops. In other words, these producer, consumer and activist battles revolve around the need or the lack of permissionless innovation in GM agriculture.  Yet given the stakes, the beginning is the respect for producers and consumers opting in or out of the industry and its offerings.

Anti-GM advocates argue environmental impact which might manifest through soil degradation, destruction of biodiversity, public health etc. Unarguably, these concerns need remedies.  Externalities are not yet well understood. A farmer is well within his or her rights of not planting GM crops. The neighbouring farmer is well within his or her rights to exercise the preference of sowing GM crops. Yet the possibility of cross pollination even accidentally or naturally is quite high. Incidentally, through the nature, it is the pollination that besides breeding diversity makes possible of the growth the Plant and Fungi kingdom. The birds and insects are important messengers in the mechanism. There is a high probability of contamination thus negating the preferences exercised by the farmers. Without a significant fool-proof solution, GM food might face hurdles especially in continental Europe where the passions run high. Soil degradation and destruction of biodiversity, fostering mono cultures etc. can best be resolved by field trials rather than ranting that often is at the centre of the debate.

Genuine fears do exist that GM crops fill coffers of Monsanto, Dow etc. at expense of farmers through an increase in the cost of agricultural inputs. The evidence is overwhelming in the conventional agriculture sector. Economic rent extraction leveraging skewed IPR regime to secure proprietary customer lock in are known to substantially increase switching costs. Moreover, in the guise of modern cultivation etc. many firms through their appropriation models disrupt traditional seed sharing mechanism and its core economics. For countries like India whose socio-economy is deeply intertwined with agriculture and allied occupations, these might have larger implications.   At the heart of MNC self-interest, there undoubtedly lies market avoidance and evasion. The obvious investment in GM crops ostensibly demand a larger payback period thus constrained to seek legal protection from the market forces for longer period of time. The legacy costs as against the free choice by farmers create contestations. The size and resources of MNCs often lead farmers to disadvantage. To MNCs, market competition in farmer and consumer segment would be self-defeating thus efforts to avoid the same.

Answers lie in further exploration of IP alternatives like open source GM food etc. there is increasing evidence of open source innovation in agriculture. Farming and cultivation also offers a fertile test bed for experimenting user driven innovation. There are new peer production models emergent on the horizon that skip the IP issues allowing greater market role for the producers and consumers alike. Therefore, while allowing the private funded research to be monetized through patent models, public funded research is essential to reduce agricultural costs. Moreover, it is highly unlikely that firms like Monsanto, Dow etc would involve in 'unrenumerative' research in crops like jowar, ragi, millets etc. It is unlikely there would be interest in GM plants/creepers to clean urban/ rural water supply or GM plants soil erosion etc. unless suitable monetization models are discovered. Yet research in open source biology is taking its baby steps towards this direction. Historically private research concentrates on few remunerative crops. Traditional agricultural models or their counterparts engaged in sharing economies or peer production are likely to drive the rest. Yet this is far from attaining critical mass.  

Indubitably, there exists a persuasive case for permissionless innovation culminating in greater market competition in GM good. The exigencies of food security mandates exploration into the unknown and thus GM food has its role there. Pro-advocates for GM food argue in absence of any evidence of negative repercussions on public health, it is perhaps a crime to hold large sections of poor hostage to fulminations of the anti-lobbyists. Agriculture in most parts is hostage to nature and GM corps might serve a way out. Yet evidence for economies of scale driven price reduction is meagre in the current scenario.  Concerns of mono-culture or externalities which merit examination is often brushed aside as rhetoric. Debate on GM food might be more civilized if solutions to private appropriation of public research or customer lock in are addressed. The whole debate seems to revolve around prospective encroachment into food economy by the MNCs like Monsanto etc in their ‘greed’ to ever expand their profits. Any solution therefore has to address this before meaningful progress can occur.       

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