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  • Mathieu Provencher

Market Failures - GMOs and Fracking

Here's a Free Markets case study for you guys: What can we learn about the experience of GMOs and of Fracking in the USA? GMOs (Genetically Modified Organisms) and Fracking (gas and extraction by exerting high pressures underground) have been open to free markets in the USA.

The main problems with GMO seeds is that they are engineered to be infertile and they are very invasive... Farmers have to purchase these seeds year after year without any hope of getting any from their current crops. In addition, if a farmer is growing GMOs close to you, there is a very high chance that his or her crops will invade your land, at which point he or she can sue you because you are using GMOs without having paid for them (they can apparently cross-pollenise with normal crops but not with other GMO crops).

SO, why would ANYONE create such problematic products!!!! Simple, the ones that create these GMO seeds want them infertile to make sure farmers have to buy them year after year (assuring a good demand) and they don't want to spend money fixing the infestation problems because they can simply sue the ones "using" their seeds without permission. This is what any free-market industry would do people, they maximize profits by doing everything they can to increase revenues and decrease costs. The government of the USA has been very unwilling to regulate this market properly and we see now the impact of this approach... everyone pays more (the farmers and thus the consumers) and these seeds are not as available as they could (because they are so strictky controlled by the owners of the intellectual property rights). The ones that gain are, as you may have guessed, the producers of these GMO seeds...

Fracking is newer and a bit simpler. The government of the USA (yes these clowns again) gave very few restrictions and regulations to the industry in the hopes that they would bring very high amount of natural gas and oil to the markets. The american government is stressing a lot about their "energy dependency" problem (which is actually not a problem if you don't wage war to everyone you happen to come across) and Fracking, it is believed, may help reduce that problem.

So, what actually happened is that a seemingly high amount of Fracking wells have been built too fast and with too few precautions and have led to natural events that would normally not have happened. Examples that I am aware of are tremors and water contamination (which obviously also affect animals around these areas). Again, this is something ANY economist would have been able to predict very easily... if you give a full go to private individuals, they will try to maximise their profits, which is this case clearly means not building good infrastructures. It is cheaper to do so and it doesn't seem to affect their revenues, it only pollutes the other users of the land (animals and citizens).

Relatively free markets tend to be very good at providing certain goods and services BUT firms have to be regulated to make sure they act in everyone's best interests, not only their short-term profit maximisation!

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