The development impact of genetic use restriction technologies: a forecast based on the hybrid crop experience

Advances in biotechnology have made available gene-manipulation techniques that enable the protection of genetic material from unauthorized use and the prevention of self-supply of commercial seeds by farmers—in order to allow enhanced appropriation of the values of innovation in agricultural R&D. These techniques have become known as Genetic Use Restriction Technologies (GURTs). This paper forecasts the potential impact of wide-spread adoption of GURTs by the providers of HYV seeds on the yield development in developing countries. To do so, it assesses (1) the effects of enhanced appropriation through GURTs on the technological expansion at the yield frontier and (2) the effects of technological protection of value-adding traits through GURTS on the diffusion of yield gains from the frontier to developing countries. These assessments are based on a particular hypothesis, which is that GURTs will replicate across most staple crops the experiences that were made with a previous use restriction technology (hybridization) in only a few crops. The estimation of impacts is carried out as a simulation and is based on expansion and diffusion parameters estimated for hybrid seeds over a 38-year period. It shows that the impact of GURTs on developing countries' yields will vary considerably. Specifically, those countries that currently have the lowest yields would be most adversely affected in their future yield development by the wide-spread use of GURTs

On Backstops and Boomerangs: Environmental R&D under Technological Uncertainty

The literature on environmental R&D frequently studies innovation as a two-stage process, with a single R&D event leading from a conventional polluting technology to a perfectly clean backstop. We allow for uncertainty in innovation in that the new technology may turn out to generate a new pollution problem. R&D may therefore be optimally undertaken more than once. Using and externding recent results from multi-stage optimal control theory, we provide a full characterization of the optimal pollution and R&D policies. The optimal R&D program is strictly sequential and has an endogenous stopping point. Uncertainty drives total R&D effort and its timing.stock pollution, backstop technology, multi-stage optimal control, pollution thresholds, uncertainty

Pests, plagues, and patents

The paper investigates the interaction between dynamic forms of incentive mechanisms (patent systems) and dynamic forms of problems (adaptations of pests and pathogens). Since biological problems recur, the design of the incentive mechanism must take into consideration: a) the need for investments into R&D that take into account the impermanence of the solution concepts; and b) the impact of this impermanence on the anticipated lifespan of any patent awarded for an innovation. The results indicate that patent systems must be carefully tailored to the nature of the problem under consideration

Hijackers and Hostages in Non-binding Linked-Issues Referenda: Analysis and an Application

Non-binding referenda ('petitions') are an instrument of direct democracy that allows citizens to signal preferences to politicians outside the electoral cycle. This paper analyses a particular form of petitions, so-called linked-issues petitions, which have been described as an 'abuse of direct democracy'. It discusses the use of linked petitions by petition initiators, its take-up by voters in terms of volume and voter motives, and applies the analytical insights to a controversial referendum held in Austria in 2002 that linked issues of transboundary nuclear risk and Eastern enlargement of the European Union.

On Biology and Technology: The Economics of Managing Biotechnologies

This paper considers those sectors of the economy that operate under the same regimes of rewarding private innovators as others, but differ in that they face recurring problems of resistance, as occur in the pharmaceutical and agricultural industries. This recurrence originates in the natural processes of selection and evolution among humanity’s biological competitors. The paper examines the capacity for decentralised patent-based incentive mechanisms to result in socially optimal outcomes in these sectors under scale- and speed-dependent evolution of pathogens. It demonstrates that there is a fundamental incompatibility between the dynamics of the patent system and the dynamics of the resistance problem under both types of evolution. Under scale-dependent evolution, the externalities within a patent-based system indicate that decentralised mechanisms will result in systematic underinvestment in R&D that decreases further with an increasing severity of the resistance problem. Under speed-dependent evolution, a patent-based system will fail to target socially optimal innovation size. The overall conclusion is that patent-based incentive mechanisms are incapable of sustaining society against a background of increasing resistance problems. The paper concludes with appropriate policy implications of these results.Biotechnology, R&D, Patents

Endogenous Information Structures in Conservation Contracting

Landowners are commonly not only better informed about their private cost of conservation than conservation agencies, but also frequently in a position to spend resources on improving their knowledge about contract-relevant parameters before signing a contract on offer. We extend and generalize the literature on conservation contracting by endogenizing the information structure in a setting where the conservation agency is both asymmetrically informed about the efficiency of the landowner and unable to observe whether the landowner collects information after being offered the contract and before signing it. In this setting, we study the optimal contract the conservation agency should offer to the landowner conditional on the cost of information collection. This contract needs to balance moral hazard and adverse selection problems since by encouraging a landowner to collect information, the conservation agency simultaneously increases the landowner's incentive to misreport his 'type'. We term this the 'information rent effect'. Due to its presence, the terms of conservation contracts have to be significantly altered relative to a contract offered based on exogenous information structure or a contract based purely on information collection.

Biodiversity Conservation on Private Lands: Information Problems and Regulatory Choices

This survey paper examines various information insufficiencies in biodiversity conservation and their impact of regulatory choices. We surveyed the literature in the field and identified four major types of informational insufficiencies in making efficient biodiversity conservation decisions: 1) biological uncertainty 2) natural uncertainty 3) individual information, and 4) monitoring problem. The consequences of these four types of information insufficiencies on the choice of regulatory tools are explored. We discuss in this context three types of regulatory tools: land takings, environmental fees/charges, and contracts. The efficiency of each type of regulatory tools is shown dependent on the specific informational constraints that the regulatory faces.Biodiversity conservation, Information, Regulatory tools

On Backstops and Boomerangs: Environmental R&D under Technological Uncertainty

The literature on environmental R&D frequently studies innovation as a two-stage process, with a single R&D event leading from a conventional polluting technology to a perfectly clean backstop. We allow for uncertainty in innovation in that the new technology may turn out to generate a new pollution problem. R&D may therefore be optimally undertaken more than once. Using and externding recent results from multi-stage optimal control theory, we provide a full characterization of the optimal pollution and R&D policies. The optimal R&D program is strictly sequential and has an endogenous stopping point. Uncertainty drives total R&D effort and its timing

Non-Strategic Punishment when Monitoring is Costly: Experimental Evidence on Differences between Second and Third Party Behavior

This paper studies monitoring and punishment behavior by second and third parties in a cooperation experiment with endogenous information structures: Players are uninformed whether the target player cooperated or defected at the cooperation stage, but can decide to resolve the information imperfection at non-negative cost at the punishment stage. We examine how monitoring and punishment respond to changes in monitoring costs, and exploit the evidence to gain new insights about commonalities and differences between second and third party behavior. We establish three effects of positive monitoring costs relative to the zero-cost baseline and find that each one affects third parties differently than second parties: A «direct punishment cost effect» (the supply of non-strategic punishment decreases), a «blind punishment effect» (players punish without resolving the information imperfection) and a «diffusion effect» (defectors make up a smaller share of the punished and receive weaker punishment). The first effect affects third parties less, the other two more. As a result, third party punishment leads to increasingly weaker incentives for cooperation relative to second party punishment as monitoring costs rise. In addition, the differences between second and third parties suggest the presence of a «pure role effect»: Taking into account elicited beliefs and risk preferences, third parties punish differently from second parties, not just more weakly

Precision requirements in pesticide risk assessments: Contrasting value-of-information recommendations with the regulatory practice in the EU

Pesticides, while rendering immense agricultural benefits, potentially entail risks to human health and the environment. To limit these risks, market approval of a pesticide is typically conditional on an extensive risk assessment demonstrating its safety. The associated testing procedures, often involving significant numbers of animals, however are not only costly; as has become apparent from recent discussions about the active substance glyphosate, testing is often incapable of providing definitive answers on concerns like human carcinogenicity. An important regulatory task, whether explicitly acknowledged or not, is hence to decide what level of remaining uncertainty is deemed acceptable in making the final market approval decision. Economic principles suggest a value-of-information (VoI) approach for this informational task. After presenting the basics of the VoI framework, this paper analyzes the actual regulatory practice in the EU's pesticide approval process, pointing out the defaults and substance-specific procedures that shape the precision of the European Food Safety Authority's (EFSA) risk assessment and hence the level of knowledge under which the European Commission decides on the approval of substances. The comparison between theory and practice uncovers substantial deviations, providing valuable insights for restructuring the risk assessment guidelines