What would McKinsey say?

March 11, 2009 in Economics

The NYTimes' Economix blog has a new post by Ed Glaeser, which reexamines my favorite Dr. Suess book, The Lorax, through a neo-classical lens.  Revealingly, it's titled "The Lorax Was Wrong: Skyscrapers Are Green."

And while I found the whole thing a bit overdone, I did enjoy one piece of the analysis:

Over the protests of the environmentally sensitive Lorax, the Once-ler [textile magnate and Lorax antagonist] builds a great industrial town that despoils the environment, because he “had to grow bigger.” Eventually, the Once-ler overdoes it, and he chops down the last Truffula tree, destroying the source of his income. Chastened, Dr. Seuss’s industrialist turns green, urging a young listener to take the last Truffula seed and plant a new forest.

Some of the lessons told by this story are correct. From a purely profit-maximizing point of view, the Once-ler is pretty inept, because he kills his golden goose. Any good management consultant would have told him to manage his growth more wisely. 

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