How Schnitzels Explain the Australian Economy

Australia Economy
Reddit

How many times have you dined at a restaurant, ordered something, eaten as much as you could, left scraps, and thought to yourself: Gee, if only the portions were smaller, I might have felt good about my purchase…?

Never? Me neither. Because very few people think like that. Those that do probably spend more time counting the number of zeroes in their banks accounts than they do picking up cheques at restaurants.

So it comes as something of a surprise to hear that restaurants in South Australia could soon be trialling smaller sized schnitzel servings in a bid to ‘reduce waste’.

That’s right: Smaller servings to rid the world (or South Australia at least) of that modern day scourge: schnitzel leftovers.

The organisation behind this push is Keep South Australia Beautiful (KESAB). KESAB is a non-profit organisation that, in their own words, delivers ‘world-class environmental sustainability programs.

Not content with offering such suggestions to restaurant owners themselves, KESAB has taken their ‘innovative’ idea straight to the state government. Remarkably, but perhaps not surprisingly, the South Australian government seems to think it’s a great idea, and has reportedly endorsed KESAB’s plans for a trial run.

All this begs the question: why? Why do we need to impose smaller schnitzel servings on customers through policymaking? Why can’t we devise better ways to limit waste without punishing customers, guilt tripping them into feeling responsible? These are all good questions with few, if any, good answers.

As KESAB CEO John Phillips attempts to explain:

We have to be innovative and look at good ideas, and this is one that’s come up. Sometimes I watch the body language of people when the meal comes out — their jaw drops literally when they see the size of some of the meals and a lot of the product is left on the plate. This is about educating people to look at their habits or behaviour so they can take personal responsibility.

Let us offer a few counterpoints to this argument:

For one, we suspect jaws drop because people can’t believe they’re actually getting a decent sized meal for the money they’ve paid. Unless the restaurant is willing to slash prices on those meals to reflect smaller portions, you suspect ‘most’ people aren’t offended by schnitzels they may not finish.

Their jaws certainly won’t be agape when, in several years’ time, they see the tiny smattering of food on their plate they once called a schnitzel. Having recently ‘dined’ at a McDonalds, I can assure you that, despite paying over a dollar more for a Big Mac than five years ago, the iconic burger has shrunk at least a quarter in size. That’s the glory of inflation at work. You pay more for less.

In any case, that people leave scraps on the plate is because they have a right, as consumers who have paid for their food, to eat as much (or as little) as they please.

Moreover, where is the NGO forcing restaurants to reduce waste? Fast food restaurants in particular are long-time participants in the creation of unnecessary waste, preparing (and inevitably throwing out) food made in advance of orders. That may be crucial to their business model, but it also lends itself to a large amount of waste. Good luck guilt tripping McDonalds or KFC into cutting waste…

As for taking personal responsibility for having the ‘temerity’ to leave uneaten food…the less about that the better. But we’ll say something anyway: Those sentiments epitomise the nanny-statism that pervades Australian society.

A better life, or a chain around your neck?

You see, it’s not the reduction of waste that’s the problem behind this idea. That should be the goal of every business. Not least because the reduction of waste boosts profit margins in both the short, medium, long, and any other term.

The worrisome aspect of this idea is that it ensures you, the consumer, will lose out in the end.

How?

Let’s assume that restaurant owners who serve schnitzels begin offering smaller portions.

At first, the portions will merely be smaller in size. Some won’t notice it. Others will. Of those that do, some will find the portions satisfying. Others won’t. At worst, they may stop patronising ‘reductionist’ restaurants altogether.

Maybe, through some stroke of good luck, the price of schnitzels at participating restaurants falls to reflect the smaller servings.

Over time, however, people would find themselves paying the same amount as they once did for less meat. Throw in creeping inflation, and, before long, they’d be paying more for the good fortune of eating a fraction of what they used to.

That’s not a great deal for consumers, whichever way you cut it.

We don’t have to speculate over whether this would unfold as I just described. We know it will, because it always does. It happens in any marketplace where you’re dealing with buyers and sellers. A seller’s entire modus operandi is to extract as much as they can from the buyer. And if they can charge you more for less, you better believe they will.

Rationing is no way to win customers

What would happen if restaurants decided on their own to lower portion sizes, without any outside assistance?

In any normal economy, of course, supply and demand economics would take centre stage. In the case of schnitzel servings, prices would, over time, decline as people realised they were being served smaller portions. Many would end up buying less of it.

In a hypothetical situation in which a restaurant only served schnitzels, such a change could be drastic enough to force the business to close.

But there’s a difference when NGOs and governments get together to force through broad-based changes, as is being proposed in South Australia. In a controlled market, supply and demand loses its effectiveness, as distortions occur on the back of state intervention.

What’s more, no ‘schnitzel’ policy could ever meet the needs of different consumers. The fact is that some people can’t eat entire schnitzels, while others can…comfortably.

Instead of having a one-size-fits-all schnitzel portion and price, maybe price elasticity would be the better course of action. Why not tailor menus to make it even easier for people to determine what sized portion they want? And then charge them less for it. Or don’t. But either way, let consumers decide. Not NGO/state-driven policies aimed at ‘reducing waste’.

By now, the parallels between the schnitzel revolution and our everyday economy should be obvious. Understand that the underlying philosophy behind this ploy is one that is by no means isolated to South Australian restaurants. It’s happening everywhere, across all facets of life.

Food prices continue to rise, despite a supposed problem with deflation. The Aussie dollar continues to decline in value on the back of lower interest rates and credit expansion. House prices keep rising despite non-existent wage growth. In all, you’re getting a lot less for what you’re paying than you ever have in the past.

The mantra of less is more, at least in the context of food, reflects an ideal in which people moderate their caloric intake as a way to improve their wellbeing. These are decisions that people make of their own volition.

In the future, this may take the form of a government-imposed diktat, regulating the dimensions of schnitzels on your plate. If you live in South Australia, start getting used to a world of smaller schnitzels servings. If you live anywhere else, don’t laugh at your neighbours just yet. If this idea takes hold, your state will be next.

As in gastronomy, so in economics…

Mat Spasic,

Contributor, The Daily Reckoning

PS: Lower interest rates are partly the reason why your purchasing power continues to decline.

In July, the RBA left interest rates at a record low of 1.75%. According to The Daily Reckoning’s Phil Anderson, interest rates are likely to remain low for a long time to come.

In his latest report, ‘Why Interest Rates Could Stay Low for the 21st Century’, he warns that you won’t be able to rely on your savings to fund your retirement. As Phil says, inflation — from low rates — is eating into your savings. You can’t rely on savings accounts or term deposits for your retirement. The regular return on a term deposit has halved in the last four years alone!

That’s why Phil wants to show you the best way to invest in this low interest rate environment. He’s prepared a four pronged strategy that’ll boost your wealth. You’ll learn where to park your cash over the coming decades to potentially profit in the coming low interest rate environment. To download the report, click here.

Reddit

Leave a Reply

Be the First to Comment!

Notify of
avatar
wpDiscuz
Letters will be edited for clarity, punctuation, spelling and length. Abusive or off-topic comments will not be posted. We will not post all comments.
If you would prefer to email the editor, you can do so by sending an email to letters@dailyreckoning.com.au