Conservatives generally believe and our national government tells us that genetically modified food crops (genetically modified organisms, or GMOs) and, perhaps soon fish, are safe and therefore should not have to be labeled. Nevertheless, some people believe that GMO products may be harmful, so they don’t want to buy them. It doesn’t matter whether their belief is justified. They are being denied available information that affects their choice and, so, their satisfaction with the product. Contrary to their usual stand on GMOs, conservatives should actually agree with this.
Economics 101 and Murphy Beds
When I taught economics, I’d explain the idea of “efficient markets” to my students. This is actually a core idea of why markets can deliver desirable results for society and why actual markets often do not. The idea is quite simple: Markets work well when everyone — buyers and sellers — have all pertinent, available information about the goods and services they’re buying and selling. Then, people can make informed decisions that align with what matters to them.
If I want to buy a Murphy bed on the phone but no store will even tell me what kind of beds they sell let alone send a picture from their cell phone to mine, I can’t make a good decision and am likely to be disappointed. Moreover, I will have to go from store to store to find out whether any of them sells Murphy beds and at what prices – a use of my time that takes away from other things I want to do. So, I am even worse off.
In the stock market, some people often have information on what a company is doing that most people do not have. If those with the information believe the company will do better because of it, they may invest in the stock; those who do not have that information will obviously be at a disadvantage. On Wall Street, this is referred to as insider information. Using such information to buy or sell stocks is illegal — for obvious reasons.
Insider Trading: Bad Even When Insider Knowledge is Wrong
The company whose stock it is may or may not be helped by the contents of the secret information. If it isn’t, those who don’t have the information and did not invest in the company may do better than those who invested based on the secret information. It doesn’t matter. Trading on such privileged information is illegal because markets do not work efficiently when everyone does not have the same information. It just doesn’t matter whether or not the information is accurate or, if accurate, is correct.
The reason why market inefficiency is bad from an economist’s perspective, is that those with insider information may not be the ones who will generate the most economically (and socially) useful results from their investments or their buying and selling decisions.
Back to GMOs
When applied to GMOs, the issue is clear. Some people would like to have information about what foods have GMOs in them so they can avoid them. They may be willing to pay higher prices for non-GMO foods, which, in turn, would likely increase the planting of non-GMO crops. It doesn’t matter whether this group is right. The lack of information makes the market less efficient and, so, leaves some consumers dissatisfied. Also, it may give companies that make GMO food a price advantage relative their non-GMO competitors, which may (or may not) have higher costs. Even though organic can sometimes be a substitute term for food that does not contain GMOs, as a proxy it’s far from perfect. For this reason, the markets in food commodities are not perfect and are, in fact, inefficient: Some sellers have information unavailable to some buyers.
According to conservative thinking, what makes capitalism superior to other systems is the assumption that markets are efficient. If conservatives are really interested in market efficiency, here is an obvious inefficiency they should want to eliminate. That they do not reveals the obvious: Most conservatives don’t really care about efficiency. What they actually care about is first protecting the prerogatives of corporations.