Pizza: The Ultimate Free-Market Good

Australian blogger Tex writes in praise of the free market [via Samizdata].

People who have a belief in the value of individual enterprise, free markets and competition often arrive at their belief via very different paths. Many of my colleagues (Alex Robson, John Humphreys, Jason Soon) were educated on these matters. They actually understand this stuff. They read books and everything.

I'm glad economists exist. I'm glad they are there to help run things. I'm glad people actually like reading Hayek, the Friedmans and all that lot. I'm glad my colleagues like discussing ontological libertarianism vs. practical libertarianism. I'm glad they can debate the finer points of the regulatory costs of free trade agreements. They do this all the time at our monthly libertarian dinners.

But personally, this shit gives me a headache. While they're excitedly chatting about Wilhelm Eurogasm vs. Generic Chicago Genius, I'm usually desperately trying to signal the waitress to fetch me some lager to ease the pain.

My entire interest in and understanding of economics exists at a far more basic, everyday level. In my left-leaning early twenties, I started to wonder - for example - if I wanted to go grocery shopping at 4am, why a supermarket shouldn't be allowed to stay open at 4am to sell them to me. I came to realise that being able to spend my money how and when I want was simple common sense, as I could never get a sensible explanation from anyone as to why it was a good idea to curb my spending with regulations. More importantly, if I were free to spend more of my money how I wanted, then there would be more people who would compete for my dollar, offering me incentives via both price and product to choose their goods over the goods of others.

For me, nothing - nothing - in recent years has confirmed my faith in the wonders of markets and competition more than one humble little sector of our economy: the pizza industry.

I'm a pizza addict. Ten years ago, I would have to part with the best part of twenty bucks to get one large pizza delivered. Suppliers in my area were limited and it sometimes arrived cold. When in Sydney a few years ago - in an area not well serviced by the Pizza men - I shelled out nearly fifty bucks for two delivered pizzas + a drink. Nowdays, I can get two large pizzas - easily enough to feed three people - for less than $15. It arrives quickly, is great quality, and there are a far greater variety of pizzas to choose from.

So in ten years, pizza prices have more than halved, the quality has gone up, the delivery times are quicker, and there's a greater menu to choose from. And it's 100% the result of competition. As a couple more suppliers moved into the area, the "coupon wars" began. Maybe a couple of coupons per month would arrive in the mail, offering a few bucks off per pizza. Then other companies started to price-match. Nowdays, my letterbox is flooded with pizza coupons, each subsequent one outmatching the last.

Not only have prices for delivered pizzas more than halved, but "pick-up" pizzas went through a fascinating descent in prices: Dominos would have pick-up pizzas for $7.95 each, then Pizza Haven would offer the same for $6.95, and so on, until we are now being offered a fantastic meal for what seem to be "loss leading" prices: $3.95 for a large pizza. That's a meal for two people for less than the price of a sandwich at many places. The suppliers seem to figure that you'll buy drinks or side orders while you're there, which is where they'll make their money. At the very least, they've given you a $3.95 pick-up sampler of a pizza you'll pay more to have delivered.

Kevin Brancato points to an article from Ananova describing the debut of warm pizza vending machines in the UK.

Vending machines that deliver hot pizzas in less than two minutes are to be installed in railway stations and other public places around Britain. [...]

For ?4, the machine selects a customer's choice of topping on a vacuum-packed, nine-inch pizza, unwraps it, cooks it and dispatches it on a cardboard plate, says the Daily Telegraph.

Of course, the ultimate vision of free market pizza excellence was described by Neal Stephenson in Snow Crash.

Why is the Deliverator so equipped? Because people rely on him. He is a role model. This is America. People do whatever the fuck they feel like doing, you got a problem with that? Because they have a right to. And because they have guns and no one can fucking stop them. As a result, this country has one of the worst economies in the world. When it gets down to it -- talking trade balances here -- once we've brain-drained all our technology into other countries, once things have evened out, they're making cars in Bolivia and microwave ovens in Tadzhikistan and selling them here -- once our edge in natural resources has been made irrelevant by giant Hong Kong ships and dirigibles that can ship North Dakota all the way to New Zealand for a nickel -- once the Invisible Hand has taken all those historical inequities and smeared them out into a broad global layer of what a Pakistani brickmaker would consider to be prosperity -- y'know what? There's only four things we do better than anyone else


microcode (software)
high-speed pizza delivery

The Deliverator used to make software. Still does, sometimes. But if life were a mellow elementary school run by well-meaning education Ph.D.s, the Deliverator's report card would say: "Hiro is so bright and creative but needs to work harder on his cooperation skills."

So now he has this other job. No brightness or creativity involved -- but no cooperation either. Just a single principle: The Deliverator stands tall, your pie in thirty minutes or you can have it free, shoot the driver, take his car, file a class-action suit. The Deliverator has been working this job for six months, a rich and lengthy tenure by his standards, and has never delivered a pizza in more than twenty-one minutes.

Oh, they used to argue over times, many corporate driver-years lost to it: homeowners, red-faced and sweaty with their own lies, stinking of Old Spice and job-related stress, standing in their glowing yellow doorways brandishing their Seikos and waving at the clock over the kitchen sink, I swear, can't you guys tell time?

Didn't happen anymore. Pizza delivery a major industry. A managed industry. People went to CosaNostra Pizza University four years just to learn it. Came in its doors unable to write an English sentence, from Abkhazia, Rwanda, Guanajuato, South Jersey, and came out knowing more about pizza than a Bedouin knows about sand. And they had studied this problem. Graphed the frequency of doorway delivery-time disputes. Wired the early Deliverators to record, then analyze, the debating tactics, the voice-stress histograms, the distinctive grammatical structures employed by white middle-class Type A Burbclave occupants who against all logic had decided that this was the place to take their personal Custerian stand against all that was stale and deadening in their lives: they were going to lie, or delude themselves, about the time of their phone call and get themselves a free pizza; no, they deserved a free pizza along with their life, liberty, and pursuit of whatever, it was fucking inalienable. Sent psychologists out to these people's houses, gave them a free TV set to submit to an anonymous interview, hooked them to polygraphs, studied their brain waves as they showed them choppy, inexplicable movies of porn queens and late-night car crashes and Sammy Davis, Jr., put them in sweet-smelling, mauve-walled rooms and asked them questions about Ethics so perplexing that even a Jesuit couldn't respond without committing a venial sin.

The analysts at CosaNostra Pizza University concluded that it was just human nature and you couldn't fix it, and so they went for a quick cheap technical fix: smart boxes. The pizza box is a plastic carapace now, corrugated for stiffness, a little LED readout glowing on the side, telling the Deliverator how many trade imbalance-producing minutes have ticked away since the fateful phone call. There are chips and stuff in there. The pizzas rest, a short stack of them, in slots behind the Deliverator's head. Each pizza glides into a slot like a circuit board into a computer, clicks into place as the smart box interfaces with the onboard system of the Deliverator's car. The address of the caller has already been inferred from his phone number and poured into the smart box's built-in RAM. From there it is communicated to the car, which computes and projects the optimal route on a heads-up display, a glowing colored map traced out against the windshield so that the Deliverator does not even have to glance down.

If the thirty-minute deadline expires, news of the disaster is flashed to CosaNostra Pizza Headquarters and relayed from there to Uncle Enzo himself -- the Sicilian Colonel Sanders, the Andy Griffith of Bensonhurst, the straight razor-swinging figment of many a Deliverator's nightmares, the Capo and prime figurehead of CosaNostra Pizza, Incorporated -- who will be on the phone to the customer within five minutes, apologizing profusely. The next day, Uncle Enzo will land on the customer's yard in a jet helicopter and apologize some more and give him a free trip to Italy -- all he has to do is sign a bunch of releases that make him a public figure and spokesperson for CosaNostra Pizza and basically end his private life as he knows it. He will come away from the whole thing feeling that, somehow, he owes the Mafia a favor.

The Deliverator does not know for sure what happens to the driver in such cases, but he has heard some rumors. Most pizza deliveries happen in the evening hours, which Uncle Enzo considers to be his private time. And how would you feel if you had to interrupt dinner with your family in order to call some obstreperous dork in a Burbclave and grovel for a late fucking pizza? Uncle Enzo has not put in fifty years serving his family and his country so that, at the age when most are playing golf and bobbling their granddaughters, he can get out of the bathtub dripping wet and lie down and kiss the feet of some sixteen-year-old skate punk whose pepperoni was thirty-one minutes in coming. Oh, God. It makes the Deliverator breathe a little shallower just to think of the idea.

But he wouldn't drive for CosaNostra Pizza any other way.

You know why? Because there's something about having your life on the line. It's like being a kamikaze pilot. Your mind is clear. Other people -- store clerks, burger flippers, software engineers, the whole vocabulary of meaningless jobs that make up Life in America-other people just rely on plain old competition.

Better flip your burgers or debug your subroutines faster and better than your high school classmate two blocks down the strip is flipping or debugging, because we're in competition with those guys, and people notice these things. What a fucking rat race that is. CosaNostra Pizza doesn't have any competition. Competition goes against the Mafia ethic. You don't work harder because you're competing against some identical operation down the street. You work harder because everything is on the line. Your name, your honor, your family, your life. Those burger flippers might have a better life expectancy -- but what kind of life is it anyway, you have to ask yourself. That's why nobody, not even the Nipponese, can move pizzas faster than CosaNostra. The Deliverator is proud to wear the uniform, proud to drive the car, proud to march up the front walks of innumerable Burbclave homes, a grim vision in ninja black, a pizza on his shoulder, red LED digits blazing proud numbers into the night: 12:32 or 15:15 or the occasional 20:43.

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I'm sorry, but Pizza vending

I'm sorry, but Pizza vending machines don't cut it. Give me a hot CosaNostra Pizza any time.

Good post, Tex. Strangely,

Good post, Tex.

Strangely, I've been keeping my own pizza example for a couple weeks now, as I came to realize that Pizza Hut's lunch buffet - in a roundabout way - exemplifies how Marxism doesn't work.

It was a Saturday when I went up to the local Pizza Hut at around noon. I didn't have too much time, so instead of ordering a specific pizza off the menu, I went the quicker route and decided to opt for the DIY pizza buffet, whereas Pizza Hut employees simultaneously set out several pies on a continuous basis for the buffet line.

The first problem is the practice of hoarding and rationing. At the height of lunch hour, the Pizza Hut workers often have a tough time supplying the appropriate amount of pizza to meet demand. More often than not, the supply of the pizza winds up considerably below, rather than above, customer demand. Therefore, even though Joe may only be hungry for two slices, he'll collect three or four 'just in case' the buffet is cleaned out and he's stuck with the broccoli pizza as his only choice during his next trip to the buffet. Joe may even take 8 pieces in order to "set aside" for the rest of his family at the table who are eating their current portions. If 5 is eaten, then 3 are laid to waste. The pizza may also get cold sitting at his table, but he guards himself against the possibility of a full pizza-shortage crises. And since everyone is paying one flat fee, there's no incentive to limit one's intake in the buffet line. Might as well stockpile.

The second problem is predicting customer needs. This isn't like ordering a specific pie at the table, whereas you can tailor-order the toppings and crust to your liking. The buffet supplier has to guess the appropriate variety of pizza pies to satisfy a typical customer base. Again, more often than not, the guessing is usually wrong. Pineapple-littered and vegetarian pizzas often move slowly, wasting away under the heat lamps. Meanwhile, the common pizzas (pepperoni and mushrooms) go quickly, which exacerbates the hoarding and rationing problem again.

The Pizza Hut buffet signifies the drawbacks of central planning economics. Collectivists often fail to "predict" the appropriate amount of a good or service to produce. When a finite public good is available for one set fee, people tend to take more than they should, because there is no cost-effective reason for taking less. Additionally, as in the pizza example, not only is the production amount usually flawed, but also the production type. Without knowing what each customer wants, it becomes a guessing game.

But, when time is an issue, I'll still opt for the Pizza Hut buffet and hope equilibrium occurs by chance that day. :)

People went to CosaNostra

People went to CosaNostra Pizza University four years just to learn it. Came in its doors unable to write an English sentence, from Abkhazia, Rwanda, Guanajuato, South Jersey

South Jersey?!? For his sake, he'd better be talking about England.

- Josh, South Jersey born and bred