Practical Economics: There’s No Such Thing As A Free Lunch

by Ron Haynes

This is a post in The Wisdom Journal’s series: Practical Economics. In this series, we will examine the way economic principles work in the real world.

earth In the real world, you and I both know that we live on a planet of scarce resources, that our desire for unlimited goods and services flies in the face of the dwindling availability of our planet to meet those desires. We would all love to have everything we want at our beck and call, but it isn’t going to happen. Even if we could have everything we wanted, we wouldn’t have enough time to enjoy it.

So since we can’t have everything, we’re forced to choose between the alternatives we can afford and sometimes choosing to use one resource (time, money, talent), forever reduces that resource’s availability in the future. This is why non-politically motivated economists say, “There’s no such thing as a free lunch” also known by the acronym TANSTAAFL.

Certainly, goods and services can be provided to one group or another free of charge (“free” health insurance, “free” education, “free” housing, “free” transportation), but those goods and services are NOT free. Someone has to pay for them and using such terminology is disingenuous at best, a flat out lie at its worst.

Nothing is free

We may be able to shift costs, but ultimately, anything touted as “free,” cost someone something. On a deeper level, the idea of “there’s no such thing as a free lunch” keeps us from escaping reality. You can’t just will (or wish) yourself that “free lunch” or pull it out of your ear. Remember that the next time you hear someone declare their right to a job, a house, a car, medical care or an education. Each of those items costs money, time, and talent. Jobs, homes, cars, doctors, and diplomas don’t grow on trees (well, diplomas might). When someone decides they have the right to one of these things, think about WHO is going to provide it for them because there’s no such thing as a free lunch.

About the author

Ron Haynes has written 1001 articles on The Wisdom Journal.


The founder and editor of The Wisdom Journal in 2007, Ron has worked in banking, distribution, retail, and upper management for companies ranging in size from small startups to multi-billion dollar corporations. He graduated Suma Cum Laude from a top MBA program and currently is a Human Resources and Management consultant, helping companies know how employees will behave in varying situations and what motivates them to action, assisting firms in identifying top talent, and coaching managers and employees on how to better communicate and make the workplace MUCH more enjoyable. If you'd like help in these areas, contact Ron using the contact form at the top of this page or at 870-761-7881.


If you enjoyed what you just read and would like to get FREE email updates with the freshest articles from The Wisdom Journal delivered right to your inbox, subscribe today! It's ridiculously easy and you can unsubscribe at any time. Since your email address is never sold or abused, you can subscribe with confidence, PLUS you'll get free reports/guides/eBooks, subscriber only benefits, and other perks.


{ 11 comments }

Evan

Wait Hold on a second Ron are you telling me that if the government provides health care it won’t do it for free and I will have to pay higher taxes? Hmmm I think this post should be forwarded to Big O’s Advisors.

Ron

Haha! Great Idea!!

I’ll get right on it …

Farouk

that’s so true, i read the same thing too in the book the 48 laws of power

KP

If nothing’s free, then what happens to that saying – “The Best Things in Life are Free”?

Ron

It’s bogus. Nothing is free, even “the best things.” A beautiful city park is created with tax dollars and the labor of construction workers and maintenance crews. Friendships require investments of time and affection otherwise they deteriorate. Love is the same way. So is everything else. They all require either an investment of time or money or labor of some sort. It may not be YOUR time, money, or labor, but someone has to make the investment.

Nothing is free.

Sarah

Hmm, obviously nothing is free, someone, somewhere pays for or works to give these ‘free services’. However, despite the misnomer, certain so-called ‘free’ things, such as free eductation, or a free health service should be paid for by all, for the good of society as a whole and to ensure that in the future the poor don’t have to stay in poverty because they are not educated enough to get a decent job, and so that those who are sick and poor don’t die just because someone else was too mean and uncaring to pay our extra taxes to cover these less well-off members of society.

Ron

I agree that the poor should be taken care of, just not by government. Government has botched it for decades as evidenced by our rising poverty rate. We aren’t better off since Johnson’s “War on Poverty.” Americans are the most generous people on the face of the planet, giving to charity FAR more than any other country, so we aren’t “mean and uncaring.”

The question is: where do you stop? How much waste and fraud do we have to endure before we realize that paying “extra” taxes is just lining the pockets of bureaucrats and criminals?

If someone is uneducated and unable to get a job, whose fault is that since education is “free.” What’s the cancer survival rate in countries with “free health care?”

The Biz of Life

From “John Maynard Keynes, R.I.P.” by Richard McKenzie:

The late great economist Milton Friedman frequently peppered Keynesian enthusiasts in the 1960s and 1970s with a remarkably simple question that needs to be remembered today: Where does the government get the money it spends on roads (or bridges to nowhere)?

Friedman followed with an equally revealing observation: When the government engages in deficit spending, it must borrow the extra funds from someone who could have spent them on private-sector projects. An increase in government spending could be totally offset by a decrease in—or a “crowding out” of—private spending, as lendable funds are diverted from private to government uses. The net effect can be no net increase in aggregate demand—and no multiplier effect. Indeed, with the inevitable waste in government stimulus projects, the multiplier effect could as easily be negative as positive.

The country will learn anew an old lesson: Don’t count on the federal government to wave away the country’s economic troubles with some refurbished fiscal wand. The wand didn’t work in the 1960s and 1970s (it only contributed to “stagflation”). The wand is an illusion that should have died with Keynes long ago. We will also relearn the oft-repeated wisdom of Keynes when he wrote, “Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.”

Jim Richardson

Yes, I couldn’t agree more. There’s no such thing as free lunch. That’s why people have to be practical when spending. I’m now on the middle of deciding if I should enroll on an online MBA or not. I have to risk some of my earnings if I do. I should really think about this first. Nice article by the way. I enjoyed reading it. Thank you for sharing this! Hope to see more interesting article from you. Keep it up!

Rigina

how about the “free good” in the study of Economics? For example the sunshine, the air… we need then and nomally they are free of charge.and no one is willing to pay a price for these “free goods”!

Ron

How would anyone go about charging for those “free goods?” Until someone develops a giant space based solar shade or manages to patent oxygen, they may be a “free good” in some economics textbook, but they really aren’t able to be valued anyway.

Previous post:

Next post: