Pay-What-You-Want test ran Panera out of bread

One of the creeds that libertarian thinkers and activists live by is TANSTAAFL, ‘There ain’t no such thing as a free lunch.’ This was recently proven true around the United States as a major restaurant chain called it quits on a Utopian experiment.

Bloomberg reported on February 4 that Panera Bread was shutting down its free meal cafe in Boston, where customers could pay whatever amount for their food they could afford to or what they thought was fair. They’ve also shut down the other locations in Chicago; in Clayton, Missouri; Portland, Oregon; and Dearborn, Michigan

“Despite our commitment to this mission, it’s become clear that continued operation of the Boston Panera Cares is no longer viable,” Panera Bread said in a statement. “We’re working with the current bakery-cafe associates affected by the closure to identify alternate employment opportunities within Panera and Au Bon Pain.”

There are certain cases in which this model can work. When the British rock band Radiohead released their seventh studio album, In Rainbows, they self released it as an online download. While there was a suggested price, visitors to their website were able to pay what they wanted, including £0. The download was available for two months before the disc was released in traditional record stores.

The reason this was able to work out for Radiohead is because they weren’t giving away any physical goods. They wrote the songs, recorded the songs, and they had engineers in the studio and artists working on the album art that they paid once. As soon as they uploaded the album to the website, it was over. They just sat back and let the money come in.

In Rainbows (2007) by Radiohead.

Digital downloads are like pressing a torch to a piece of wood to make two torches. The flame is copied without being taken away from the first torch. Even though more people downloaded the album for free than paid for it, people still paid. Between the digital download, the CDs, and the vinyl records, the album sold over 3 million copies. No physical goods were ever given away for free.

In contrast, Panera was constantly giving away food for free or at severely below-market prices. Somebody had to make all that bread they were giving away, and make it again every day. It ended up causing the whole pay-what-you-want experiment at their free meal cafes to fail, with losses incurred.

This is a perfect example of political theory taking precedence over actual observable patterns and processes in real-world economies. Not all people in the economy are rational actors.

This is why Marxist socialism fails in every country where it’s applied, especially Cuba and Venezuela. When religious conviction in political ideas doesn’t produce the expected economic outcomes, people start getting imprisoned and executed as traitors for allegedly sabotaging the revolution. There’s never a second thought given to the idea that, when economic decisions are made based on ‘each according to his ability and each according to his needs’, people’s ability suddenly wither away and their needs suddenly pile up like leaves during autumn.

Political convictions can be detrimental when applied to market economies, and it’s not just the progressives running Panera who are figuring this out. American conservatives are also learning this lesson the hard way.

This month, a sports shop in Colorado went out of business after the owner, a proud conservative, stopped selling Nike products in a misguided show of patriotism. He kicked Nike out of his store, Prime Time Sports, because Nike sponsors Colin Kaepernick, and Colin Kaepernick kneels during the national anthem in protest of police violence against black Americans.

Prime Time Sports had over $320,000 worth of Nike apparel, which they sold at half price until it was all gone. The owner refused to restock any Nike products, and the losses ultimately killed his business. “Being a sports store without Nike is kind of like being a milk store without milk or a gas station without gas,” the owner said in an interview. “How do you do it? They have a monopoly on jerseys.” (They don’t actually have a monopoly, but they are one of the top 5 sports brands in the world, according to both Forbes and the Times of India.)

The pattern of politically-motivated economic suicide continues. In 2018, groups of die-hard Donald Trump supporters were tricked out of tens of thousands of dollars in an Iraqi dinar investment scam. The backbone of the scam is a 2017 video clip of President Trump vaguely commenting that soon, all currencies in the world will be “on a level playing field.”

Trump was actually talking about correcting perceived trade imbalances with China, not about the Iraqi dinar. With Trump increasing US troop levels in Iraq and Syria to fight the Islamic State, these supporters of his who “invested” in dinars truly believe that he will cause a “currency revaluation” that will make the dinar jump in value from 1/1,000th of a penny to several dollars each. They then thought that they would sell their old Iraqi cash bills like Bitcoin and become millionaires.

“I love my president, and I was like, ‘Oh my God,’” said one buyer when interviewed. “If it happens, it’ll be awesome and there’ll be a huge party at my house.”

The Iraqi dinar scam is at least fifteen years old. The ones most familiar with it are US soldiers who invested in early versions of those scams while they were deployed to Iraq, in the belief that the war might be over soon. As far as the pay-what-you-want scheme that Panera Bread tried, it hasn’t worked out very well in practice since at least 1917.

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Featured image courtesy of Legal Insurrection. In Rainbows image courtesy of Wikimedia Commons.

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