The Problem of Social Cost in a Genetically Modified Age

Abstract

Genetically modified pollen drifting onto the field of a neighboring farm may cause substantial harm. If the bystanding farmer is growing non-genetically modified crops, she may suffer a pecuniary loss due to genetic pollution. If the pollen is patented, the patentee may also claim harm stemming from the unauthorized distribution of its proprietary genetic material. Disputes arising from pollen drift present classic legal questions arising under the law of neighbors and classic economic questions broached most famously by Ronald Coase in his essay on The Problem of Social Cost. The application of the Coase Theorem and its most applicable corollary strongly suggest that: 1) balancing rules under nuisance law should be applied on a case-by-case basis to determine whether any particular genetic polluter should be liable for damages caused by pollen drift; and 2) most bystanding farmers should have viable defenses to patent infringement. Venerable legal principles applied to this new problem suggest the same two conclusions. Proving both propositions provides a textbook demonstration for the usefulness of economic analysis and solves a world-wide multi-billion dollar legal problem.

Keywords: patents, GMO, pollen, agriculture, Coase, law and economics, nuisance

JEL Classification: D23, D61, D62, K12, Q1