I’m gonna try to break down a topic that I don’t know much about.  Inflation. Its increasing faster than a tan on a Jersey Shore guidette (I had to do it, Snookie. Love ya babe).   I’m not an economics guy – the extent of my training comes from my pothead teacher in High School that talked more about his music collection than the difference between macro, micro or voodoo economics – but I’ve been dwelling on the concept of ‘inflation’ lately.  What is the real reason for it?  I fear that I may oversimplify the issue here, but at the risk of sounding naive, I’ll take a stab at explaining why I think it happens.

Cool looking pizza

Prices today are higher than 10, 20 or even 2 years ago.   My girlfriend just bought a $2 tomato.   What’s that about?  Personally, I always judge the rate of inflation by the price of a slice of pizza.  In college, I could get a slice for $1.  My dad used to brag that in his youth, he could get 2 slices and a soda for .50 cents.   Today, its at least $2.50 for a plain slice almost anywhere you go.  I actually fear the day when my kids have to pay $10 for a slice and a small soda…and that’s because the medium soda costs another $3, and all I had was the 10 bucks.  That day is coming soon people…

So here’s my thing.  People are always saying, “Well the cost of this went up or the cost of that went up so I had to raise my prices.”  And the cycle continues.  Well why does the cost of things go up?   I think it has more to do with “people, ” as a country and as the human race, becoming increasingly lazy.

Lets go back to the pizza.  Say Pepe’s Pizzeria sells a pie for $15.  The cost of the cheese, sauce ingredients, and dough per pie costs $1.75.  That’s an 88% markup.  HUGE!  Now, we sell X amount of pies and make Y money.   The pizzeria is happy.  Mr. Pepe and the gang have a lot of money.  All the employees get their share.  They buy houses, cars, vacations, and Blu Ray players (…I still dont’ know why these are necessary…I should note I don’t have an Ipod yet, so I’m still a Neanderthal in the world of tech toys).  Then, suddenly the people that supply the elements to make our pizza, say the dairy farmers, decide they want to make more money but they don’t want to make more cheese.  “Too hard.”   “Too much work.” “Ugh.”  Its not like the cow is saying, “I need better living conditions here or I’m not letting you take my milk!’  That cow is just trying to avoid becoming a steak.   She’ll do whatever you want…But nobody wants to do more pumping…

So the dairy farm raise the prices of the cheese.  Mr. Pepe wants to keep his income at the status quo, but he doesn’t want to hire more people (he fears he’ll lose money), nor does he want to explain to his workers that they have to work harder to keep up production because then they’ll want more money too.  He feels like he puts in enough energy, thus he doesn’t want to work to find other ways to improve his business (marketing, advertising, working to gain a bigger market share)….so he raises the price of the pizza pie.  He’s lazy, so he figures he’ll put the onus of keeping his business afloat onto his loyal, pepperoni-loving customers.  Suddenly its $17 for a pie, then $18.50, then $400…This keeps happening.  Mr. Pepe doesn’t have to care, as he sips his Mai Tai on the beaches of his vacation home in Aruba.   Next thing you know, I can’t get a slice of pizza and a soda for less than 20 dollars and its all because nobody wants to squeeze the cow’s teets a little more than they’re already doing.  The cow’s happy, Mr. Pepe’s happy, and I’m broke.

All I can resolve from this is that I love pizza..but it gives me gas…However, I can’t stop eating it, despite the constant increase in prices.   I am a slave to inflation.  So I’ll keep on living, paying more and more for pizza, and ultimately, producing more and more tempestuous flatulence – only I promise you this, the pain will be from the prices, not the pepperoni.

Lesson:  Inflation is killing us.  If everybody could work just a little harder, and get rid of the Blu Ray player (or at least wait for the initial price boom to drop), we could keep inflation down to a reasonable, odorless, pain-free rate.

……And that’s How Hyman Breaks It Down.