Neil Kroncke GMOs: Economics & Acceptability Genetically modified organisms (GMOs) are developed in a process that splices the genes of one organism and then inserts them into another organism. It is believed that genetic modification can to lead to more nutritious, durable, tasty and cheaper food (van den Bergh). GMOs are often created to resist disease, eliminate the need for pesticides, and achieve other desirable characteristics. For example, genes from cold-water fish can be inserted into tomato plants to make them more tolerant to colder weather (Burkhardt). The potential benefits of GMOs are countless, and to a large extent many of the production possibilities have been unrealized due to many of the hindrances arising from ethical apprehension. Over the past decade or so, genetically modified organisms have become the subject of considerable public debate. Consumers around the world have exhibited a high level of concern regarding the safety of the food supply, and this has led many of them to purchase only organically produced foods. This rapid expansion in the demand for organic foods, which saw sales shoot up 21 percent in 2006, can be attributed to the heightened concern surrounding the threats associated with the release of GMOs (Boston Globe). The purpose of this paper is to address the ethical perspectives of economists, and how they relate to behavior regarding the production, consumption, marketing, and trade of GMOs. The main focus of attention will be on the use of genetically modified organisms, in particular transgenic plants. I will take a critical look at a particular economic study put forth to assess the economic impacts of releasing geneticallymodified cotton. I will then look at it from the perspective of all the actors involved, including but not limited to, large corporations, activist groups, small farmers, governments, and consumers. I then attempt to exhibit the many forgone benefits of the technology, explaining why corporations and governments have been following a flawed strategy, leading to a lower degree of efficiency. Finally, I offer a few recommendations as to how governments, corporations, activist, environmentalist, and economists can all work together to devise a successful strategy. When evaluating the cost and benefits of GMOs it is important to focus on the foundations of consumer behavior since economic outcomes are influenced by individuals’ behaviors, which are themselves influenced by evolving social values and ethics (Braun 180). Economic models such as the rational choice model allow economist to look beyond profit maximization and consider issues of ethical behavior. Nevertheless, much of economic theory has relied on the assumption that economic agents act in a rational manner and are guided by self-interest, with the objective to maximize their utility (Sen 1987). It is often the case that the influences of social institutions such as community, culture, and religion are not included as explanatory factors for human behavior (Gowdy and Walton 2003). Also, a great deal of the economic research concerning the release of GMOs has largely neglected the impact of factors such as consumer knowledge, beliefs, and attitudes (Burkhardt). In order to make a proper economic assessment of the impacts of GMOs, a truly multidisciplinary evaluation required. Back in 2004 a study was conducted observing the impacts of the world’s top four GMO growing countries (USA, Argentina, Canada, and Brazil), which account for 94%of the world’s transgenic crop area (James, 2004). The evaluation of economic benefits focused on the increase in quantity and quality, reduced costs of production, and ultimately lower prices of agricultural products. The study examined a genetically modified crop of cotton that produces its own toxin to ward off unwanted pests. The results of the study showed that the genetically modified crops of cotton had higher effective yields, were more profitable, and saved on pesticide expenditures (Traxler 50). For this study the economists estimated the cost saving benefits at the farm level and entered them into a supply and demand model of world cotton in order to calculate the benefits. The model suggests that the new technology would reduce the cost of production allowing farmers to expand supply. The reduced costs and expansion of supply would lead to lower prices which may in turn increase the consumer’s demand for cotton. All of these changes in cost, supply, price, and demand are calculated into the benefits. In this economic assessment, the assumption was made that consumers would be indifferent between bundles of conventionally produced cotton, versus bundles of genetically produced cotton. Although this allowed economists to isolate the price effects of improved production techniques, it was only done so at the expense of excluding the ethical considerations that consumers may have. Since it was assumed that consumers would be indifferent between the two bundles, producers concentrated solely on productivity and efficiency gains when calculating their profitability expectations. According to an USDA survey (1997), “the majority of farmers (50 to 75%) cited increase in yield as the first reason for adoption”. This led them to make improper evaluations since it is often the case that consumers are not indifferent between GM and non-GM produced goods. The approach taken by theeconomists in this study have been entirely supply-side oriented, neglecting ethical concerns that may have an adverse effect on demand. When assessing the profitability and economic impact of GMOs, the developments in supply and demand must considered together (EC). By not taking this aspect into account large corporations are making enormous un-hedged bets when they invest in the research and development of new technologies. Because consumer reluctance toward GMOs can have large effects on the economic valuation of such innovations, as well as on the distribution of the associated costs and benefits therefore, it is essential that consumer preferences towards GM products be considered in more depth. Author Jeremy Rifkin predicted that GMOs would turn out to be “the single greatest failure in the history of capitalism” (Hindo). The powerhouse of the GMO industry, Monsanto learned the hard way when in fiscal year 2002 the company had lost $1.7 billion. Monsanto altered its strategy to focus exclusively on seeds for