How will McDonalds adjust and evolve in a “Peak Burger” world? Will its profit shrink to zero? Will this corporate giant collapse as every cow is plucked and it can no longer make their tasty healthy fries? While a Sober Mel Gibson fought hard for gasoline in “Mad Max”, will future Gibsons really be fighting over the last few Chicken McNuggets?
This salient case study (perhaps Harvard Business school will publish this blog post and send me royalties?) is triggered by this thoughtful comment I received; “So specifically Matthew in your vision of smooth adjustment and win-win and rationality: How will McDonald’s consumers and McDonald’s itself evolve as we hot-step towards 9 billion on the planet all waiting to be served greasy cow meat from motorized palanquins? How will this win-win play out?”
I do not eat at McDonalds anymore. Its cusine isn’t yuppie enough for my Berkeley tastes. But, McDonalds knows this. McDonalds has tried to attract customers such as me with fancier coffees such as the McCafe. In India, there is no BIG MAC on the McDonalds’ menu! This salient data point highlights that for profit firms cater to the demands of their consumers. These firms have an incentive to get to know their customers through basic market data. Now, such firms will respond to changing customer tastes and demographics but they will also respond to changing input prices. If the marginal cost of producing a Big Mac goes up (because of scarce land for cows), then Big Mac prices will rise. McDonalds may choose to offer products whose inputs are less land intensive. How much land does it take to make a spicy-bean burger? Well, I don’t know but I do know that our smart firms will figure out how to economize on scarce inputs (such as land) to make them.
Economists believe that through human capital and capital investment we can raise yields to get more output from our finite earth.
If there are 9 billion people on the planet by the year 2060 and they each eat 2,000 calories a day, then we will need 18 trillion calories a day of intake. Somebody will become quite rich as they figure out how to produce such food while economizing on costly inputs. Yes, our diet patterns may change (similar to McDonalds shifting their product mix). If you know, we face a future food crisis then you can make a fortune buying canned goods now and storing them as the days of pain near. I do not plan to store up on such canned goods. In a market economy, free market prices signal scarcity. Prices rise and fall. If they significantly rise, then our entrepreneurs will get to work and seek out new ways and new places to grow the food. We will face choices over GMO foods and other issues.
As the world develops, world population growth will slow. Income growth does predict rising meat consumption. Increasing meat prices (due to “Peak Cow”) would slow this trend in aggregate meat consumption growth. My concern is the exacerbation of the tragedy of the commons. I do not want to see the Amazon be chopped down in the world’s pursuit of a burger. To resolve this issue, we need enforced property rights. The raw hunger in capitalism for final goods does damage the commons and makes the Tragedy of the Commons problem even more severe. The answer here is to privatize the commons.