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.