The Santaniello theorem of irreversible benefits

Irreversible benefits favor an earlier introduction of GM crops versus a later one. A non-trivial question is if they also weigh more than reversible benefits similar to irreversible costs but in the opposite direction. In this contribution, I will show that indeed irreversible benefits do weigh more than reversible ones and indeed result in an irreversibility effect, albeit a positive one. The problem can be summarized by the following theorem: “Irreversible benefits justify the immediate introduction of transgenic crops, even if future uncertainty about reversible benefits include negative benefits and traditional cost-benefit analysis, and treating all benefits and costs as reversible would reject the introduction.” I call this theorem—in honor of Vittorio Santaniello—the “The Santaniello Theorem of Irreversible Benefits.”GMOs; irreversible benefits; real option; uncertainty

The Option Value of Scientific Uncertainty on Pest - Resistance Development of Transgenic Crops

In this paper the option value of waiting under scientific uncertainty will be derived using the difference between the geometric Brownian motion and the mean reverting process by applying contingent claim analysis. The results will be compared with those generated by either using a geometric Brownian motion or a mean-reverting process only. An example based on the decision problem whether or not to release herbicide tolerant rape seed in the EU will be used to illustrate the differences. The paper contributes to the suggestion made by biologists to further analyze the sensitivity of the results using the real option approach, provides insights about the magnitude of error that can be made by choosing the wrong process, provides a solution to the problem and highlights the implication for the decision of whether or not to release transgenic crops. The results show that scientific uncertainty is less important than one would expect at first hand.biotechnology, cost-benefit analysis, real option, scientific uncertainty

Editor’s introduction. the future of agricultural biotechnology: creative destruction, adoption, or irrelevance?–in honor of Prof. Vittorio Santaniello.

With the death of Prof. Vittorio Santaniello in the summer of 2007, the International Consortium for Agricultural Biotechnology Research (ICABR) lost one of its most enthusiastic founders and most important contributors. This special issue celebrates Prof. Santaniello’s commitment to the establishment of an independent forum of discussion for agricultural biotechnology issues by collecting high-quality, peerreviewed scientific contributions to the ICABR Conference held June 12-14, 2008 in Ravello, Italy. The conference theme, The Future of Agricultural Biotechnology: Creative Destruction, Adoption, or Irrelevance? in Honor of Vittorio Santaniello, was an invitation to look at the current status of scientific knowledge in agricultural biotechnology and to the new challenges ahead. Participants from around the world found their way to the Amalfi Coast to present their contributions and begin to pave the road ahead. Their efforts were framed by seven excellent plenary sessions.biotechnology; research & development; economic growth

Minimum Distance Requirements and Liability: Implications for Co-Existence

The co-existence of conventional and transgenic products in the food chain introduces new elements in the evaluation of the profitability of transgenic crops and, consequently, on the farmer’s adoption decision. In particular, one emerging problem farmers are facing in Europe is related to the legal liability of transgenic crop cultivation. In Europe, a mixture of ex-ante regulations and ex-post liability rules governing transgenic crops emerges. One of the predominant ex-ante regulations discussed at the EU-level is a minimum distance requirement to neighbouring fields in order to avoid cross-pollination. The ex-post liability rules differ. They depend on the legal frameworks of individual members of the EU. The current interpretation of, for example, Italian and German law does not exclude ex-post liability for farmers planting transgenic crops in the case of cross-pollination. In this paper, we analyze the value of planting transgenic crops when farmers face ex-ante regulatory and ex-post liability costs under irreversibility and uncertainty. The regulatory instrument analyzed is the minimum distance to neighbouring fields. First results indicate that under irreversibility and uncertainty the value of cultivating transgenic crops presents a trade-off between ex-ante regulatory and ex-post liability costs with respect to farm size. From this, it is not possible to conclude a priori the net effect on the size of the adopting farms, if, ceteris paribus, a minimum distance regulation is adopted within the EU and farmers can be held liable ex-post.Coexistence, ex-ante regulation, ex-post liability, real option, uncertainty

Potential damage costs of Diabrotica virgifera virgifera infestation in Europe – the “no control” Scenario

The Western Corn Rootworm (WCR or Dvv., Diabrotica virgifera virgifera Le Conte) was first detected in Europe in the early nineties in Serbia. Since then the beetle spread to more than 15 European countries. We assess the potential damage costs of the invasive species Diabrotica virgifera virgifera LeConte (Dvv.) in Europe under a “no control” scenario. While previous studies considered benefits and costs at country level this study explicitly investigates the external benefits of control in one country for other countries. The assessment considers the spatial and temporal aspects of invasion considering a number of scenarios developed together with experts. The results indicate enormous economic benefits can be gained by controlling further spread of Dvv. They economic benefits of control range between 143 million Euro in the best case and 1739 million Euro in the worst case scenario. The most likely scenario results in average annual economic benefits of 472 million Euro. Even in countries that not face high damage costs control can be justified as this will reduce the speed of spread of the WCR and generates a positive externality for other regions with higher damage costs.damage control, invasive species, spatial model

Correcting for multiple destination trips in recreational use values using a mean-value approach; An application to Bellenden Ker National Park, Australia

This paper focuses on an empirical application of the travel cost method, to estimate the recreational use value of Bellenden Ker National Park, part of the Wet tropics World Heritage Area Queensland, Australia. Walking appears to be one of the main activities associated with recreational experiences in the region. Substantial socio-economic as well as environmental benefits are expected to be gained if the areas was to be developed further, with regard to walking tracks, provided that this would be done in an environmentally sustainable way. Two overnight tracks within the park have been selected to obtain information about visitors’ experiences with the tracks in the past, to address specific needs for possible future developments. A standard assumption for interpreting travel costs as a valid proxy for the price of a trip is that the travel cost be incurred exclusively to visit that particular site. However, this assumption often proves to be invalid as people tend to combine destinations. We propose a method commonly used in multi-criteria decision-making to correct for multiple trip bias. A value of $AUS 15.2 mln has been estimated as the net present value of recreational use in 2001 values at about six percent real rate of interest in perpetuity. This value appears to be rather small compared to other TCM studies undertaken in the area, for national parks that were similar in size and visitor numbers.multi-criteria analysis, multiple trip bias, travel cost method, Wet Tropics World Heritage Area, Resource /Energy Economics and Policy,

Irreversibility, Uncertainty and the Adoption of Transgenic Crops: the Case of BT-Maize in France

This study applies a real option approach to quantify, ex-ante, the maximum incremental social tolerable irreversible costs that would justify immediate adoption of Bt maize in France. Based on field trials, we find that incremental private reversible benefits in the agricultural sector are -18 million euro yearly for maize for animal feed and 1 million euro yearly for maize for human consumption. Incremental social irreversible benefits from reduced insecticide use are negligible. The maximum incremental social tolerable irreversible costs are -28 million euro yearly for maize for animal feed and 0.4 million Euro yearly for maize for human consumption.Bt maize, real option, France, field trials, irreversible social costs, Crop Production/Industries, D6, D8, Q1,

Coping with ex ante Regulations and ex post Liability Rules for Planting Bt-maize – The Portuguese Experience

This study investigates the attitude and practices of GM and non-GM maize farmers in Portugal. Thirty seven GM maize farmers were interviewed representing 22.5% of the total number of GM maize notifications in the country. Additionally, 66 non-GM maize farmers were surveyed in an attempt to investigate their opinion on the Bt technology, its viability and its future. The most interesting finding is that almost half of all the surveyed maize farmers (GM and non-GM) stated that the ex ante regulations are rigid and difficult to apply. On the contrary, the ex post tort liability rules are very clear and provide the appropriate security for the continuation of the GM maize cultivation.Coexistence, Bt-maize, Portugal, Agricultural and Food Policy, Crop Production/Industries,