The Future for Frankenstein Foods

Economic outcomes in the “plant breeding industry” are being driven by interactions between advances in scientific knowledge, changes in the legal framework for intellectual property rights, and competitive forces in the market. While extended property rights have created the foundation for new markets, the opportunities arising from scientific discoveries have provided powerful incentives for firms to enter these markets and invest in biotechnology. The competitive forces unleashed by these developments are likely to transform the production of new plant varieties. Scientific discoveries in molecular biology are the bedrock of the biotechnology revolution, and have created the potential for much vaunted gains in agricultural productivity and for new products. There are at least two broad classes of molecular technologies that are relevant to an economic analysis of crop breeding. One group improves the efficiency of all plant breeding, including conventional plant breeding, and includes techniques such as double haploidy and marker assisted selection. The other and much more controversial group are the transgenic technologies used to produce GMO’s. To justify the huge wave of private investment in intellectual property that has fuelled the biotechnology revolution to date, as well as to ensure continued investment in further development of the technology, two necessary conditions must be satisfied. Consumers must purchase the final product, and companies must be able to appropriate enough of the potential value embodied in improved crop varieties to realise a profitable return on their investment. Concerns about inadequate incentives to invest in further development of GMO’s and/or plant breeding include the following issues: consumer resistance to GMO’s and the consequent lack of a viable sized market for the end product of GM food; unanticipated costs of monitoring compliance and enforcing intellectual property rights in enabling proprietary molecular technology as well as in improved crop varieties. developments in patent law creating excessive transaction costs, possible patent gridlock, and the “tragedy of the anti-commons”, freedom to operate problems for public research and plant breeding programmes, Consumer resistance to GMO’s poses the most immediate threat to the return on past investments in biotechnology, but may prove relatively transitory. Less widely recognised threats to future investment relate to possible breakdowns in the functioning of the patent system, and/or to difficulties in appropriating realised benefits from biotechnology when embodied in self-pollinated broadacre field crops. Recent extensions to the scope of intellectual property rights in plant genetic resources merely provide a mechanism for private appropriation of some or all of the benefits from molecular technologies, but do not guarantee the emergence of efficient markets in intellectual property rights. Nor do they necessarily overcome high costs of monitoring compliance and enforcing rights in intellectual property in biotechnology. Such difficulties are most unlikely to be resolved by additional government funding of what traditionally has been a public sector activity.