I believe the idea is described well as “Growing Sheets of Meat”. It would dramatically decrease the price of meat. And so, I got to thinking, say this technique started working well with our bovine friends. For the purposes of argument, all bovine meat can be cultured in giant vats, with the same taste/health-quality as regular meat; and for a significant fraction of current meat prices.
But, for the purposes of argument, say the same situation had not occurred for the other products we get from cows. Such as leather, jelly, etc..
What would happen to the price of leather?
I would think the price of leather would rise. If we assume that the price to take care of a cow is the same, then after some market clearing the other products one gets from a cow that can not be mimiced by this culturing technology would have to have higher prices to offset the lower amount of revenue from the meat of the cow.
But, this strikes me as very odd, since in general, technology is supposed to decrease the price of goods, isn’t it?
Excess demand would be satisfied by the cheaper mode of production. Thus not likely resulting in increased revenue for the ranching firms.
Example:
A train line is opened between Los Angeles and Chicago, it costs the train company $0.04 per passenger and the stagecoaches $40.00 per passenger. I don’t see how this implies that stagecoaches suddenly experience an increase in demand. Indeed, there might be an industry-wide increase in demand for transport between LA and Chicago, but this excess demand would be serviced by trains, not stagecoaches (now replace trains with in-vitro meat and stagecoaches with cow-meat in my example. Also, I’ve been trying to be careful with where I say revenue v. profit and cost v. price; perhaps I mixed one up somewhere?).
After market clearing, the excess demand will be met by the cheaper mode of production. (if I haven’t made it clear already, I guess I should state now that I’m assuming that the cost of raising in-vitro meat is significantly less than that of cow-meat)
Interesting question. If you think this through, I think that you’ll agree that in a free market the price of leather almost certainly has to fall.
Under current conditions, and in-line with your assumptions, the discounted marginal value product of beef cattle is beef. This means that cattle are produced for the beef that they provide, not for the skins that serve as the raw material for leather. The excess skins that are not purchased by the leather industry are discarded or sold for even more submarginal uses.
With in-vitro meat, the demand for cattle is reduced. Depending on the specifics, it might even be reduced so far that skins replace beef as the marginal product. This will free up resources (land, labor, cattle feed, etc.) that were previously used for cattle production. These resources will be employed by their next marginal uses. These next marginal uses must be less in demand than production of beef was, otherwise these resources would already have been deployed in these other uses. The price of these newly freed resources will thus be less than what it was under previous conditions. The leather industry will thus be completing for less expensive resources and their costs will fall. The reduced costs will eventually result in increased production and lower marginal utility for the consumer.
Revenue per unit of beef will go down but the in-vitro producers won’t care because they care about total profits. Costs will decline faster than revenue for these companies, resulting in higher profits during the readjustment process to an evenly rotating economy. (see Man, Economy, and State, Chapters 7 and 9)
With the decrease in the price of beef, the prices of substitutes or near-substitutes will go down. Everyone will have more money but we have no way of knowing exactly how they will change their purchasing decisions as a result. They might replace some chicken with beef or buy higher quality beef. Then again, they might decide for health reasons to replace grease burgers with tofu.
Finally, this all requires more than just technology. It also requires the capital to build in-vitro production facilities.
If you have the technology to grow meat, wouldn’t you also have the technology to grow leather? What if you could “train” the leather to grow in certain patterns or colors, thus reducing the costs associated with leatherworking?
I also think people, being people, may demand “real” meat instead of this genetically modified material. The assumption of in-vitro meat being equivalent to real meat is dubious. Are we talking about grain fed beef or grass fed beef?
This idea has been around for at least twenty years. Technically speaking it’s probably feasible in the mid run. Economically speaking I seriously doubt it will ever beat free range ranching in South America or ever conventional ranching used in the US and Europe. Oh, and from a strictly technical point of view if you have the means to grow muscular tissues economically in vitro you should have no problem growing skin… in fact skin may be the first in vitro tissue we’ll see coming into widespread use (medical field).
Truth to be told if somebody found a mean to “grow meat” economically he should watch his back against just two things: unionized ranchers and their government buddies.
Alright, I think I have a better way of explaining how I’m thinking about this. Our conclusions are exactly opposite, but I don’t exactly see where either goes wrong.
Here:
Supply and Demand of cattle remain initially at equilibrium.
In-vitro meat technology is introduced, the demand for beef-cattle decreases as people eat in-vitro meat instead of cow meat.
Assuming that the ranchers are at levels of competitive pricing, the price/MR decreases below ATC. Which in response, causes ranching firms to go out of business, and bringing the supply of cattle down.
However, the introduction of in-vitro meat has not affected the demand for cow-skins (I’m assuming for the purposes of argument that in-vitro leather hasn’t been invented), and yet the supply of cattle and thus cow-skins has decreased, causing an increase in leather prices
I’m not sure what you mean by ATC, but I’m going to guess that this is average total cost (or something similar). If this is correct, then you’re buying into two neoclassical fallacies. First of all, the fact that this is the average cost means that some ranchers have lower costs and others have higher costs. With lower prices, those with above-average costs will be going out of business, bringing the average cost down.
Secondly, and this is a critical point, costs don’t determine price. It’s the other way around. The ultimate determinate of value is the marginal utility of consumers. At this point, however, we’re in the middle of the production process, so we have to look at how cattle producers can best serve their customers.
The only remaining cattle producers are those that can produce cattle for less then the cost of the cow’s leather. All of the employees of the sub-marginal producers want to work for the remaining producers, so labor costs are down. The land owned by the sub-marginal producers is available for sale at lower prices, so land costs are down. The costs of electric fencing, cattle feed, large animal veterinary services, and other capital costs are also down. In order to compete with the other super-marginal producers, each super-marginal producer has to lower its prices.
So, the revenues of the most efficient providers has declined but their costs have declined even more, leaving them with larger net profits. The price of leather has gone down.