If, as is often done in the literature, a distinction is drawn between old and new biotechnology, the latter involving the application of genetic engineering techniques, then it is clear that the effects of new biotechnology to date are only just beginning to be realized. For example, many of the new biotechnology firms have not yet begun to make profits. If there is to be a biorevolution, then the equivalent of the storming of the Winter Palace remains some way off.

However, biotechnology has already begun to have some important effects. This is seen, for instance, in areas related to medical sciences. One example is diagnostic kits made with monoclonal antibodies, which are already being sold commercially. Bioscot is marketing a diagnostic kit that allows fish farmers to detect a dangerous fish virus that can rapidly kill the entire stock of fish, and is working on a similar kit, using the same technology, that will facilitate the identification of a potato virus. In the therapeutic area, where monoclonal antibodies can be used for tumour imaging and treatment, the potential has not yet begun to be realized.

Genetically engineered products are also beginning to have an impact in the area of animal and human vaccines. In July 1986, the U.S. Food and Drug Administration approved the first genetically engineered vaccine for human use: a hepatitis B vaccine. The conventionally produced vaccine for hepatitis B was introduced in 1982; it is made by harvesting the excess of a hepatitis B viral surface protein from the blood plasma of people infected by the virus. Although there is no evidence that the conventional vaccine may be contaminated by hepatitis itself or by AIDS, some are reluctant to use blood-derived products. This was one factor that motivated the pharmaceutical company Merck, Sharpe and Dohme (which also produces the conventional hepatitis B vaccine) to develop a genetically engineered version in search of an estimated market of $300 million. The genetically engineered vaccine is produced by inserting a gene from the hepatitis B virus into yeast cells, causing the latter to produce the viral surface protein, which triggers immunity to the virus when incorporated into a vaccine. This method avoids the use of human blood (New York Times, 24 July, 1986). Genetic engineering is also being used widely to produce certain proteins (for example, insulin, interferon, and some enzymes), with important industrial implications in some instances.

In the field of agriculture and food processing, where biotechnology will possibly have its greatest effects, the overall impact is still limited. For example, bovine growth hormones, to be examined in more detail below, have not yet been licensed for use in the United States, though approval is anticipated in the next two or three years. Moreover, they have been temporarily banned in Europe for environmental-health reasons. Porcine and chicken growth hormones are even further from commercial applications. The fruits of new biotechnology applied to plants remain distant, since plants are far more complex organisms than the bacteria, viruses, yeasts, and fungi on which most work to date in biotechnology has been done. For instance, nitrogen-fixation in nonleguminous crops, such as rice, wheat, and maize, remains a distant prospect, although genes from other plants and even from bacteria have been successfully introduced into various plants. Nevertheless, new biotechnology and related developments are already having a significant impact by improving efficiency and increasing the substitutability of various agricultural inputs. Examples include corn-based fructose sweeteners, which substitute for sugar cane and sugar beet (Ruivenkamp, 1986), and the cloning of palm plants in Malaysia to increase the efficiency of palm as a source of vegetable oil (Elkington, 1984; Bijman et al., 1986).

Old biotechnology is having an impact in minerals production. About 10% of the copper in the United States is being produced by bacterial mineral leaching; similar techniques are being used and developed further in the Andean Pact countries in Latin America. New biotechnology may be of use in improving the efficiency of the bacteria (Warhurst, 1985). Although bioprocessing is technically feasible as a substitute production method in the area of bulk chemicals and energy, it remains on the whole uneconomic under prevailing relative prices (particularly oil) and the existing state of bioprocess technology. Single-cell proteins are a further area where great potential was foreseen as a way of producing sustenance for both humans and animals, and where significant investment was undertaken by large corporations, such as ICI. But a combination of relative prices and technical factors has tended to rule out rapid expansion in this area as well in the near future. [For very useful surveys of recent developments in these and other areas see Sasson (1988) and Walgate (1990) ]

In terms of actual achievement, as these examples illustrate, it is fair to conclude that at the present time the picture remains mixed. Not only are new biotechnologies being introduced in limited areas, but their rate of diffusion, upon which economic impact ultimately depends, is still very low. While there certainly are rumblings of change, by and large the forces of production of the old regime remain relatively firmly intact. The revolution may come. But most producers who are still, by choice or circumstance, locked into old technologies, or who refuse to be shaken by rumours of coming winds of technical change, are not yet seriously threatened.

In assessing the likely future impact of biotechnology, it is worth bearing two factors in mind, each having somewhat contradictory implications. The first is that there are many powerful groups in our society with a vested interest in highlighting, if not exaggerating, the potential future impact of biotechnology. Since for the most part the technologies and their associated products and processes have not yet been tested in the market place, the context is conducive to exaggeration. These groups include new biotechnology firms who must satisfy shareholders on the basis of their future prospects rather than their current financial performance; old companies that have moved into the biological area under pressure of declining profits in existing markets and who must similarly satisfy financial backers; consultants who have moved into biotechnology and are selling their wares; and university scientists who either were in, or have moved into, this field and who seek at least an increase in their research grants, or perhaps a share in the financial rewards that are to be made in an area of rising demand. All have invested their capital, financial or human, in biotechnology. Together these groups are capable of producing the same kind of 'hi-tech hype' in the field of biotechnology that has been a feature of other areas. An example of the latter is factory automation, where the much-heralded paperless factory of the future still performs much better on paper than on the ground [see, for example, Voss (1984) on the substantial problems of implementation that have been encountered in factory automation].

This is not to say, however, that the big-optimists will be denied their revolution, but rather only to stress that they often have a vested interest in the predictions they make. This is where the second factor-uncertainty-enters. As with all nonincremental technical change, uncertainty is significant. In the face of such uncertainty, expectations will differ regarding what the future will bring, and therefore where investment chips should be placed. One way to assess future prospects of biotechnology is to attempt to measure these expectations, directly or indirectly. In doing this the firms, scientists, and consultants mentioned in the preceding paragraph may be viewed in a different light, as investors who could be placing their chips on alternative spots. Since they are placing their capital (financial or human) where their mouths are, it must be accepted that they are firm in their convictions that, like microelectronics and information technology, biotechnology will generate new products and processes, and with them opportunities for profit. For example, the expectations underlying Monsanto's investment of around $2.7 billion over the next ten years in research in the life sciences must be taken seriously. So must the decision of MITI in Japan to select biotechnology as one of the 'next generation basic technologies'.

Accordingly, it may be concluded that, while there are reasons to expect a degree of 'unwarranted hype', a number of important groups are strongly of the view that biotechnology-like microelectronics and information technology-will have a broad, nonincremental, impact. However, as with previous technological revolutions, it is also likely that the main effects will be some time in coming.

In view of the infancy of new biotechnologies it is hardly surprising that very few rigorous studies exist of the economic impact of biotechnology. When this survey was initially undertaken I was able to find only three that go beyond rather vague indications of the likely direction of economic effects, and attempt further quantification. These are considered, along with some critical comments, in the next section.