The thought leaders at McKinsey have issued a pretty good new report where they play the role of Paul Revere reminding us of potential doom; “Resource prices are rising and becoming more volatile. Without a resource revolution, we all face the prospect of damage to global growth, welfare, and the environment.”
The report has some pretty good graphs. For example, Exhibits 10 and 11 are cool and exhibit 21 offers a free lunch! Exhibit 26 pinpoints the waste in the capitalist system and McKinsey is ready for your call so they can help you to reduce that!
In fairness to the authors, they make several reasonable points but there isn’t a clear discussion in this 224 page document about the role that capitalism will play in helping us to achieve an efficient allocation of our scarce resources as the world’s population and per-capita income grows. In a world world where we are unable and unwilling to put a price on carbon and to price many environmental externalities, do capitalist entrepreneurs still see the price signals that incentivize them to take costly actions so that endogenous innovation takes place? Or will the world explode into a scarcity, scary Mel Gibson’s Mad Max by Thanksgiving Day 2056? We need the prediction markets to allow us to bet on such events because such price discovery will help us to collectively adapt to the challenges that McKinsey foresees.
Slightly switching topics, for some thoughts about historic preservation and the Sex Pistols, click here.
Capitalism is in the driver’s seat, running us toward the cliff, gleefully pressing the accelerator to the floor, and Michael Kahn perspicaciously asks if capitalism will install a parachute, before we reach the cliff and begin our descent to the bottom. Because there’s no chance that capitalism will allow us to brake or swerve, to avoid the cliff altogether. If capitalism does install a parachute, our descent will be slowed, and won’t that be grand? And, maybe the parachute will be a high-tech parasail, and some of the passengers will grab it, in order to hang-glide, while the rest plummet to their doom.
Economics has one clear lesson about capitalism: unconstrained and unregulated, capitalism will not achieve an efficient allocation of resources. Capitalism will put lead in gasoline, as a cheap way to compensate for a bad quality product, poisoning millions. Capitalism will use freon instead of a mechanical pump, to propel underarm deodorant and hairspray, opening a hole in the ozone, threatening all life on earth. Capitalism will market cigarettes as recommended by doctors, condemning millions to cancer and emphysema.
Capitalism will put lead in gasoline, as a cheap way to compensate for a bad quality product, poisoning millions
Exactly so. Capitalism isn’t an iron law, handed down from the clouds on stone tablets. Instead it is simply a way humans move stuff around. That is all. Fetishizing or abdicating thought to something humans dreamt up is often suboptimal. A capitalist will sell you the rope on Wednesday that you’ll hang him with on Saturday.
It is funny (not) how Chicago Schoolsters view the laws (sic) of Capitalism (the one true inertial reference frame for all of human life) as “true” facts that are as inescapable as the Second Law of Thermodynamics. Of course, they don’t really view the Second Law as inescapable so much as irrelevant, since the First Law says, “Hey, all is good. Everything is still here. Just burn those ashes and eat that sh*t. You’ll be warm and well fed.” Life goes on. Until the universe is a frozen ice cube, anyway (Third Law, sort of).
And one other thing. Why would any serious scholar pay one bit of attention to anything that comes out of McKinsey & Company? Especially this. Other more credible organizations and individuals have been making the same points for at least 50 years, starting with Rachel Carson, Luther Terry, Georgescu-Roegen and Herman Daly, Michael Harrington…Jeebus. The mind would reel if it weren’t all so predictable.
Hope everyone had a very Happy Thanksgiving!
I had to read this twice to determine if it was self-satire or word-salad from one of those jargon generator widgets, or maybe someone hacked Kahn’s account:
“In a world world where we are unable and unwilling to put a price on carbon and to price many environmental externalities, do capitalist entrepreneurs still see the price signals that incentivize them to take costly actions so that endogenous innovation takes place? Or will the world explode into a scarcity, scary Mel Gibson’s Mad Max by Thanksgiving Day 2056?”
No matter which, well played. Especially the part about “we” being “unable and unwilling” to act rationally to avoid climate catastrophe. Substitute “the sociopathic 1%” and it would be more correct.
Over at Three-Toed Sloth, Cosma Shalizi recounts a Thanksgiving fable that nicely illustrates the manner in which market forces efficiently allocate scarce resources.