Fogy Explains Economics (with Pizza)**
Recently I was asked to explain economics to some students who had no idea whatsoever of what it was all about. The S&P 500, the Dow Jones, and NASDAQ made no sense to them.
So where do you start?
I began by asking them what a salary was. After a short pause, the answer—that it was an exchange—came out quite easily. We agreed it was an exchange for services
The path seemed quite clear when I followed up: "How do you determine the value you’ve received? How many pizzas can that buy?"
Little did I know how easily the conversation would evolve once a pizza was thrown on the table.
Why the pizza analogy? I remembered when my family was bigger and my income was lower, we had to choose whether to have a pizza once a month or once every two months. The pizza itself had to be divided in such a way as to keep everybody satisfied—even if the division was proportional.
I very easily led them along this path and, for good measure, continued into cost, production pricing, and profit.
A pizza requires a number of immediate steps during preparation: the dough is mixed, rested, kneaded, rested again, and left ready for the pizza-making part. The basic ingredients—flour, yeast, water, salt, sugar, maybe eggs—depend on the type of dough. So even at this initial stage, the supplier becomes an important factor. Supply and demand figure strongly as more pizza parlours open and sell their wares.
The skill behind perfecting the recipe and method of production determines the success of the pizza base, often the first impression the consumer has when they take a bite. When demand is high and production is intense, a dedicated team might be employed just to produce the base—your labour force expands. For more moderate demand, dough prep and pizza-making may be handled by the same team, rotating shifts if it’s a 7-day operation.
As a commodity, pizza works well as an example of production and process. It’s easily calculable thanks to the somewhat limited options most parlours offer. More importantly, the slicing of each pizza illustrates the division of wealth—clearly seen when distributed. If you give me a piece of your wealth (pizza), I’ll give you something in exchange.
I can distribute my pizza in small or large segments. Two for dad, one for mom, one each for the older children, and half each for the younger ones. There’s still enough left for those helping to clean up.
An economy runs somewhat like this: each production phase is converted into consumption, taxed (not included here… yet), then ideally redistributed as benefits or loans.
So, after slicing up the pizza and dishing out economic truths one piece at a time, I asked: “What happens when next month’s pizza costs more?”
Was it inflation? Greed? Or just tariffs punishing us for wanting cheese from the wrong side of a border?
Maybe the dough didn’t rise, but the prices sure did—because someone somewhere decided to squeeze a little extra from the melt. And that, kids, is how you end up paying more for less, all while being told it’s efficiency, progress, or patriotism.
Economics: simple as pizza—until someone cuts the crust and dominoes the market.
Footnote: I really thought my idea was original. Turns out, I wasn’t the only one slicing up the world this way—but hey, it’s still my dough and my take.
See my newsletter:
https://www.linkedin.com/pulse/tariffs-trade-wars-cost-empire-nostalgia-shane-dale-3fhtf
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