By William K. Black
(Cross posted at Benzinga.com)
P.J. O’Rourke’s column: “Dear Mr. President, Zero-Sum Doesn’t Add Up” claims that the following metaphor explains President Obama’s world view and policy choices: “life [is] like a pizza, where if some people have too many slices, other people have to eat the pizza box.”
A zero-sum interaction occurs when one party’s gain must exactly match the other party’s loss.
O’Rourke’s straw man attacks on Obama
O’Rourke creates two, related straw man positions that he falsely ascribes to Obama.
“But the worst thing that you’ve done internationally is what you’ve done domestically. You sent a message to America in your re-election campaign. Therefore you sent a message to the world. The message is that we live in a zero-sum universe.
There is a fixed amount of good things. Life is a pizza. If some people have too many slices, other people have to eat the pizza box. You had no answer to Mitt Romney‘s argument for more pizza parlors baking more pizzas. The solution to our problems, you said, is redistribution of the pizzas we’ve got—with low-cost, government-subsidized pepperoni somehow materializing as the result of higher taxes on pizza-parlor owners.”
O’Rourke is a deficit hawk even in response to the Great Recession
Obama’s central economic policy was actually to spur economic growth – a positive-sum policy. To spur growth, Obama proposed a program of moderate stimulus, which House Republicans and conservative (“Blue Dog”) Democrats reduced to modest levels that did not come close to replacing the enormous drop in public sector demand caused by the Great Recession’s severe rise in unemployment. Obama’s policy positive-sum growth policy, even though it was weakened by his conservative opposition’s negative-sum policies, produced what UMKC macro-economists (and other progressive economists) predicted – modest growth. The eurozone’s negative-sum austerity policy, as our macro-economists predicted, threw the eurozone back into a gratuitous recession.
The Great Recession caused a massive redistribution of income and the gratuitous second eurozone recession is continuing to do so. The recessions largely redistribute income towards the wealthy. O’Rourke calls redistribution “evil,” but seems not to understand that his recommended policy of austerity is a leading driver of redistribution towards the wealthy. O’Rourke expresses no opposition to the eurozone continuing policies that redistribute income towards the wealthy. His complaint is that we are not following the eurozone’s negative-sum policies that (under O’Rourke’s metaphor) reduce pizza production and increasingly segment the surviving production between premium pizzas that only the wealthy can eat regularly and round things whose taste resembles the taste of the pizza box.
O’Rourke has gotten his pizza metaphor reversed. Obama’s positive-sum policies produced economic growth while the eurozone’s negative-sum austerity programs caused a recession. Under O’Rourke’s metaphor, it was Obama who made more and bigger pizzas. Had the members of Congress who, like O’Rourke, favor the negative-sum policy of austerity not diminished and warped Obama’s proposed stimulus Obama would have created even more and larger pizzas with better toppings available to a broader group of diners.
I have explained many times why austerity is a terrible response to a Great Recession that decreases already inadequate public and private sector demand, decreases growth (often to the point of producing a new recession or depression), increases unemployment, increases human misery due to cuts in valuable programs, and often increases the budget deficit. I have not expressly made the point that such a lose-lose-lose-lose proposition is a negative-sum strategy. O’Rourke’s austerity policies are far worse than zero-sum. Using his metaphor, the policies O’Rourke favors shrink the number and size of pizza pies and deny them entirely to millions of people. The loss of pizzas in the periphery of the eurozone is so severe that Italy, Greece, and Ireland are losing their best and brightest university graduates to emigration. Negative-sum strategies like austerity are weapons of mass economic destruction.
A stimulus program in response to a Great Recession is a positive-sum strategy. It produces a win-win-win-win result by increasing growth, decreasing unemployment, decreasing human misery, and reducing the budget deficit.
O’Rourke’s criticism of Obama’s economic policies invents and reverses the facts. “The evil lies in denying people the right, the means, and, indeed, the duty to make more things.” U.S. businesses are sitting on immense, unprecedented levels of funds. They have the “right” and the “means” “to make more things.” They do not do so because consumer demand to purchase “more things” has been greatly reduced by the unemployment caused by the Great Recession.
The pizza magnates of the far right and their equally tasty boxes
One of the CEOs who went out of his way to make his customers know how much he hates Obama runs a giant chain called Papa John.
Papa John can make all the “things” it wishes. Obama has not removed either its “right” or the “means” for it “to make more things.” I’m married to an Italian-American and we ate part of what Papa John calls a pizza – once. We have never repeated that mistake, but we do defend the right of Papa John “to make more [round, tasteless, unhealthy, and greasy] things.”
I can see why O’Rourke used cardboard pizza boxes and pizza as his metaphors. “If some people have too many slices, other people have to eat the pizza box.” The hard right specializes in selling “things” it calls “pizza” that are hard to distinguish in taste or texture from the cardboard of a pizza box. Papa John’s pizza peers included Godfather’s Pizza (Herman Cain) and Tom Monaghan (founder of Domino’s Pizza and an ultra-right wing law school). Tom is my favorite given his effort to buy a town in Florida and forbid the sale of contraceptives in the town. That would have been an epic negative-sum event. In an earlier version of his zero-sum riff, O’Rourke used Domino’s as his example.
“If I have too many slices of pizza, you have to eat the Domino’s box.”
It gets even better. Tom sold Domino’s to – Bain Capital – in 1998. Yes, Mitt Romney bought Domino’s from Tom. Bain took what had been mediocre round “things” and was able to “make more things” by lowering quality. Bain’s managers let the quality of the “things” it made fall to dreadful levels for over a decade. Domino’s round things became notorious.
“In a 2009 survey of consumer taste preferences among national chains by Brand Keys, Domino’s was last — tied with Chuck E. Cheese’s. In December that year, Domino’s announced plans to entirely reinvent its pizza. It began a self-flogging ad campaign in which consumers were filmed criticizing the pizza’s quality….”
We have three children, so I have endured a number of birthday parties for their friends at Chuck E. Cheese’s at which their round things were served. To be tied with Chuck E. Cheese’s for last place in quality means that Domino’s round things could not be differentiated by taste from the Domino’s box. The Domino’s box was made with fresher and tastier ingredients than the round thing within. Domino’s quality improved only as Bain was on the way out. Romney cites Domino’s as one of his greatest successes. Cardboard round things: the taste of success in Mitt’s America. It is impossible to compete with Romney’s unintentional self-parody.
O’Rourke’s column reveals that he does not understand one of the most basic concepts of capitalism. Firms have no “duty to make more things.” Honest firms make things because they believe they can sell them for a profit. If demand is inadequate, firms recognize that making more things will cause them losses because they will be unable to sell the “things” at a profit. O’Rourke’s failure to understand this point is telling because he emphasized it in criticizing another author.
“Roberts is no kid. What his Ph.D. is in, I don’t know; but if it’s economics, he skipped some required reading: The Wealth of Nations, Book IV, Chapter 8, ‘Consumption is the sole end and purpose of all production.’”
There is nothing a firm can do to restore inadequate demand caused by the high unemployment produced by a recession. The result is enormous waste. Firms have enormous unused productive capacity. Workers want to work but cannot find jobs (or find only part-time jobs). They cannot find jobs because firms won’t employ sufficient workers to end underemployment for the same reason that they will not produce at capacity. When they produce fewer goods they need fewer workers.
Only a government with a sovereign currency, because it is not profit-driven and is not subject to bond vigilantes, has the “right, means, and, indeed the duty” to act in a recession to provide the otherwise inadequate demand that can make it possible for firms to profitably “make more things” (because the demand will exist for consumers to purchase them) and hire more workers. That is what a properly designed stimulus program does and why it is a positive-sum strategy. Obama, the proponent of stimulus in 2009, helped firms make more things. It was legislators who shared O’Rourke’s love of negative-sum austerity who reduced the vital stimulus. O’Rourke’s preferred policy has kept firms from making as many things and hiring as many workers as they would have if Obama’s proposed stimulus program had not been weakened by Congress.
The policies that O’Rourke promotes are the problem. He has shown a remarkable ability to support a wide range of the world’s most destructive negative-sum policies. The more he witnesses such policies inflict terrible losses, the more passionately he embraces his dogmas and the more breezily he dismisses the “stupidity” of those whose policies have succeeded and proved positive-sum. There are excellent grounds for criticizing many of Obama’s policies. O’Rourke’s column is remarkable for not presenting any of those grounds and relying instead on falsely ascribing policies to Obama where he actually supported the opposite (successful) policy.
Bill Black is the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. He spent years working on regulatory policy and fraud prevention as Executive Director of the Institute for Fraud Prevention, Litigation Director of the Federal Home Loan Bank Board and Deputy Director of the National Commission on Financial Institution Reform, Recovery and Enforcement, among other positions.
Bill writes a column for Benzinga every Monday. His other academic articles, congressional testimony, and musings about the financial crisis can be found at his Social Science Research Network author page and at the blog New Economic Perspectives.
Follow him on Twitter: @williamkblack