A Stitch in Haste

When you hear the term “price gouging,” you normally think of things like milk, batteries, flashlights, shovels, gasoline…

…and pizza?

“Pizzaioli” or pizza chefs in Naples, birthplace of the Margherita, handed out free pizzas on Wednesday in protest at high prices charged by rivals who, they say, use the spike in commodity prices to rip off consumers.
…
The group staged the protest in Piazza Dante to demand stricter price controls to defend the reputation of a traditional Neapolitan product which they said should be “the synthesis of quality and low cost.”

Commodity prices, like fuel prices, have fallen back from record highs in the past month on worries about global consumer and business demand as the world economy heads into a slowdown. But retail prices have so far failed to reflect that trend.
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Pizzaioli in Naples favor fixing the price of a slice at 3-3.50 euros ($4.40-$5.15) — when most pizza outlets charge a minimum of 4 euros and often nearly twice that much.

“In Naples and elsewhere in Italy that should be enough to cover costs and give a profit margin, without damaging quality,” Sergio Miccu, president of the Association of Neapolitan Pizza Cooks, told Reuters.

Put aside the utterly bizarre nature of the pizzaioli’s complaint: That their competitors are charging too much and should be forced to become more competitive. I think relevant facts about comparative quality are being omitted from the article.

In any event, these malcontent pizza peddlers are exhibiting a common, perhaps the most common, anti-capitalist fallacy: That the “correct” price of a good is merely the sum of its material inputs, perhaps enhanced by a “reasonable” profit. (“Reasonable” to be determined by politicians and bureaucrats, rather than by buyers and sellers.)

But in reality the only “correct” price for any good is whatever the customer is willing to pay and the producer is willing to offer. (That can of course be a range of prices rather than a single point, but that’s a side issue.) So if Italians are willing to pay, say, four euros for a slice of pizza, and pizzeria owners are willing to sell pizza for four euros per slice, then four euros is by definition a “correct price.” What other pizzeria owners, or Italian politicians, or you or I, happen to think about the matter is utterly irrelevant. We can express our indignation at the “excessive” price of Italian pizza by not buying any.

Entrepreneurship is a factor of production no less important (and arguably far more important) than land, labor or capital. “Profit” is a return to that factor of production no less legitimate than rent, wage or interest. Even in pizza, creativity, expertise, experimentation and risk taking are all ingredients no less real than dough, sauce and cheese. The capitalist earns his keep in no less valid a manner than his employees, landlord or suppliers.

The fact that the market does not do what you want it to do does not mean that there is a “market failure.” And your dissatisfaction in no way gives you standing to demand that the market be “corrected.”

Kip’s Law: Every advocate of central planning always — always — envisions himself as the central planner.

Previously:
–The Cost of Nothing and the Value of…
–In Memoriam: Mr. Ramen Noodle
–“No Company is Above the Law…”
–Sunday CuteTuber™: “I Just Wanted Pizza…”

Filed under: Capitalism, Kip's Law