Can biotechnology be a bad thing?

Question

My textbook (Economic Issues and Policy by Jacqueline Murray Brux) says:

In addition to health and environmental concerns about biotechnology, the most likely economic effects will be large increases in world food production, causing lower prices of agricultural products and preventing poor farmers from succeeding in agriculture. And it is the latter outcome that may serve to increase, rather than decrease, world hunger.

This statement seems utterly nonsensical to me. Are we actually to believe that large increases in world food production may serve to increase world hunger? Poor farmers using outdated technology may be forced to upgrade or find other jobs, but the lower prices will surely help non-farmers. Thus they (non-farmers) will have more money and this will create new demand and thereby new jobs for farmers who have lost their jobs.

Am I right? This isn't the first error I've encountered in this textbook.

Answer 1

You are right to be sceptical of this statement. Let's take it step by step.

Will developments in biotechnology increase world food production? Almost certainly yes, provided other things are equal. But the reality is that other things are not equal. Climate change is likely, other things being equal to reduce agricultural productivity in some parts of the world. Whether the positive effect of biotechnology will more than offset the negative effect of climate change is unclear.

If world food production increases, will prices of agricultural products fall? Not necessarily. Demand for food is rising due to rising population and to rising incomes in much of the world. Again, the net effect (of rising supply and rising demand) is unclear.

If agricultural prices fall, could this increase hunger for some people? Yes, this is certainly possible. Those most at risk would be people in poor countries who have relied on farming for their income and, due to limited education and training and/or location, have limited opportunities for alternative employment or other income sources. The book is right to imply that hunger is as much due to low incomes as to food supply. But the argument that the overall effect of biotechnology will be to increase world hunger is unconvincing.

Answer 2

Making such sweeping statements about biotechnology in general is impossible if you ask me.

Even when limiting oneself to agrobiotechnology it is impossible to make such statements because there are so many different crops that have been developed.

It is true that first-generation biotech crops are mainly developed to increase productivity, for example to resist insects (Bt maize) or to be able to be used with herbicides (Roundup ready soybeans). And yes, that may push down prices but as you point out that may also free-up labor for e.g. other more valuable crops. And of course an important question is whether or not farmers will actually adopt or be able to adopt the crops. The final outcome is a general equilibrium question, that cannot be easily answered.

There is quite a bit of research on the impact of individual crops in individual countries. See e.g. Qaim's: The economics of genetically modified crops in the Annual Review of Resource Economics or the meta-analysis by Klümper and Qaim in Plos.

Moreover there are second generation crops that address other issues such as drought and vitamin deficiencies where studies argue that benefits far outweigh potential costs, e.g. Wesseler and Zilberman's The economic power of the Golden Rice opposition in environmental and development economics.

Now this is not to say there are no negative effects of GM crops, they do for example cross-over with local weeds, resulting in herbicide resistant weeds. Similarly the built-in pesticide in insect resistance of GM crops, may result in resistance of those insects to that pesticide, but then again resistance problems occur anyway, independent of we use "normal" pesticides, "natural" pesticides or GM crops. Reducing resistance probability requires careful planning, buffer zones and integrated pest management.

Also the increased productivity may mean that land that was previously marginal can now be used for crop production at the expense of e.g. tropical rainforest. Then again the increased productivity also means that we need less land for the same production. Again the net effect is an empirical question.

Answer 3

If a biotechnology advance lowers the production price of corn from 3.50 dollars a bushel to 3 dollars, then farmers who do not have access to this technology now must sell at 3 dollars without enjoying any of the productivity gain, a reduction in income of 50 cents a bushel.

In considering the potential truth in the statement in the textbook (with respect to the context of 2018), one must focus on the question of "who is hungry?" and not "how much food is there?" There would be more food, but the distributional effects would be negative on those most likely to be hungry.

Who is hungry? Many of the people who are most likely to be hungry are poor farmers, who would simply receive a lower price and thus have less economic resources to obtain goods and services on the market.