David R. Henderson  

Henderson on TANSTAAFL

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At the start of every class I teach, I give my students what I call "The Ten Pillars of Economic Wisdom." These pillars, I tell them, are the basis for a huge percent of economic analysis and if they master them, they will have accomplished a lot. None of the pillars, of course, is original with me. What is original is my choice of these ten, as well as the way I state some of them.

Pillar #1 is "TANSTAAFL." It stands for "There Ain't No Such Thing As a Free Lunch." Science fiction writer Robert Heinlein popularized the acronym in his novel The Moon is a Harsh Mistress. Of course, to be grammatically correct, it should be "TINSFAAFL": There Is No Such Thing as a Free Lunch." What follows is my exposition and application of this simple, but profound, insight.

There are two meanings of the expression. One is always true, while the other is usually true.


These are the opening 3 paragraphs of "TANSTAAFL, There Ain't No Such Thing as a Free Lunch," one of the Econlib Feature Articles for March. This one is by me.

In the piece, I apply the principle to individual decisions, including decisions about the use of time, and decisions by politicians. I highlight the heroic effort by PBS's Jim Lehrer to get Obama and McCain to make tradeoffs in their policy positions. I also, as the last paragraph says, point out another meaning of the term TANSTAAFL that is also commonly used.


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COMMENTS (8 to date)
David Boaz writes:

This is all good. But you let Ike off the hook just a bit. He said, "The cost of one modern heavy bomber is this: a modern brick school in more than 30 cities. [etc.]" True, but the cost is also (for today's bombers), let's say, 4 pounds of apples or a lunch at a deli for each of America's 115 million households. Even Ike seemed to take for granted that the money was the government's, to spend on either weapons or domestic projects.

Kevin Erdmann writes:

I did a post on this a while ago. Sometimes this gets turned on its head, I think.

1) Consumer surplus is a kind of free lunch, and in some ways we are very uncomfortable with that.

2) Sometimes, we assume that disregarding costs in the political realm is a sign of ignorance, but I suspect that it is more a display of power.

http://idiosyncraticwhisk.blogspot.com/2013/10/sorry-milton-its-free-lunches-we-cant.html

Andrew_FL writes:

@David Boaz-Reading the entire quote, I don't think you are being fair to Ike. Only the school and the highway comparisons suggest a trade off that could be construed to assume the Government must be the ones to spend the money. And in the former case only if you assume every time a politician speaks of schools he means public schools.

His other suggestions for what could be done with the money I would not think make that assumption.

Well, I suppose he could have meant that every time the Government decides to build a fighter jet, it decides not to buy half a million bushels of wheat.

David R. Henderson writes:

@David Boaz,
Andrew_FL answered you in the comments.

Jim Glass writes:

I completely agree with the substantive points you make, but have always disliked the "there's no free lunch" expression, because there is in economics one very important free lunch that has fed us plushly: voluntary exchange.

If you have something I value more than you do, and I have something you value more than I do, and we voluntarily exchange these things, then we are both better off and have increased our welfare "out of nothing".

Zero consumed, but a positive sum transaction with the gain created and shared voluntarily between us. Something from nothing making two better off than before is close enough to "free" to meet the definition in my book.

Moreover the widening and deepening of this mechanism over the the last couple, three hundred years has compounded to give us 80-year life expectancies, deca-trillions of wealth, Inter-web entertainment and the like, all totally unimaginable in all prior human history.

That too seems like one heck of a free lunch to me, since all this wealth and welfare was created from nothing -- it sure wasn't taken from anybody else in the prior subsistence agriculture world.

Some might object that it all isn't truly a "free" lunch and didn't truly come from nothing since an awful lot of hard work and suffering on the part of a great many was involved over those last few hundred years, and yes an awful lot of resources were "given up" in voluntary exchanges, to create all our welfare today.

True enough, but the same work and suffering was incurred by all for countless thousands of years prior, with resources changing hands all that time, without creating any such welfare at all -- so at the very least, we've gotten one heck of a bargain on our lunch bill.

Moreover, we today are certainly gorging on a free lunch. We did nothing at all to morally deserve being born to our unprecedented life spans, accumulated wealth and Interwebs, any more than did a medieval serf or slave in the Athenian silver mines. We are just damn lucky. That's a free lunch for us in anybody's book, or should be.

IMHO we should all be really grateful for this, keep in mind and value the free-lunch mechanism by which our free lunch was endowed upon us, and try to deserve it by working to spread its impact through the poorer rest of the world and into future generations.

So while I completely agree with the points in your piece, I just don't like seeing them under the "there's no free lunch" slogan, because there is one, IMHO, and it's truly important and we should be hugely grateful for it and foster it.

That's my opinion, knowing full well about all the marginal transfers of scarce goods and scarce labor that go into creating the luncheon buffet, and I'm sticking with it.

OTOH: "Never trust someone offering you a free lunch", "Never believe a politician promising you a free lunch", no problem at all, not a quibble, can't be said often enough.

Syed Ahsan writes:

Prof Henderson,

1. If most of the resources we have are scarce and it nearly always involve trade offs, than what I wonder in life is "Balance"?? Can the Govt ever invest in one program without hurting other of its priorities??

2. I wonder if there is an optimum investment level in every program being run by the government. If there is, then by not investing any more amount in that program and diverting the available funds to any other program is not necessarily "trade off" in the classical sense??


3. I think you should do a piece on the remaining nine pillars for the not so opportune out there.
Thanks

rvman writes:
Never look a gift horse in the mouth." That is, when someone offers you something for free, accept it without questioning.

That's not what that expression means. The expression means "When someone gives you something for free, don't carp about the quality." When you look into a horse's mouth, you are looking at its teeth - the wear amount and pattern is a traditional way of evaluating a horse's age and health. It is about appreciation, not skepticism.

If skepticism is your game, ask the Trojans about whether they should have looked THEIR gift horse in the mouth. (Or the belly, or somewhere.)

David R. Henderson writes:

@Syed Ahsan,
1. If most of the resources we have are scarce and it nearly always involves trade offs, then what I wonder in life is "Balance"??
Economists would say that you achieve “balance,” if by “balance” you mean “the optimum,” when the marginal benefit from the last dollar of expenditure equals the marginal cost.
Can the Govt ever invest in one program without hurting other of its priorities??
No.
2. I wonder if there is an optimum investment level in every program being run by the government.
Yes. See my answer above. More often than not, given how much harm government does and how wasteful it is, that optimal amount is zero.
If there is, then by not investing any more amount in that program and diverting the available funds to any other program is not necessarily "trade off" in the classical sense??
No, that is a trade off in the classical sense.
3. I think you should do a piece on the remaining nine pillars for the not so opportune out there.
I’m planning a series of pieces over the next few years. Thanks for that encouragement.

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