Econ geeks like me know George Mason University economist Russ Roberts as one of the best commentators on the dismal science, not only for his Chicago-school clarity but also his ability to communicate economics to a broad audience through everything from novels to a popular podcast. So I was delighted when he asked me to be the guest for today's audio installment, which you can find here.
The highlight for me was his explanation of what "There's ain't no such thing as a free lunch" (TANSTAAFL) means, and how it squares with my own suggestion that, at least from a consumer's perspective, lunch really can be free.
From Robert's summary of this part of the podcast:
What do economists really mean by this phrase? Common interpretation: If you think it's free it's only because you are not counting the externalities and repercussions. Suppose you go up to a sort of friend and say "I'm going to take you to lunch, a fancy restaurant." Friend demurs. Maybe feels he might feel pressured to reciprocate. Or that he might be asked for something down the road. Is if free to you if you never intend to reciprocate or do anything even if asked? It may be free to you, but it costs someone else or costs you in opportunity cost.
Everything has an opportunity cost--something else could be done with those resources. Walking down the street, someone presses into your hand that you recognize as a coupon for a meal at a great restaurant. No out of pocket costs, don't even have to deal with Russ's conversation, better than even daydreaming through Russ's conversation. It's free in the out of pocket sense, free in the sense of everyday language; but in fact it still costs you your time--the time you spend eating at the restaurant is time you're not doing something else. That's what economists mean by Tanstaafl ("There ain't no such thing as a free lunch"). Reading Wikipedia takes your time as a reader. Tiny cost, eyeball cost, zero compared to the alternative of looking up the information somewhere else--which would also have the eyeball cost. Milton Friedman meant the opportunity cost.
So there you have it. In the purely monetary economy, there are plenty of free lunches. But include such non-monetary factors as time, attention and the value of the other things that you might have done with your time and attention, and eventually you'll pay, one way or another. Fair enough--free in the monetary economy is close enough for me.
We had a lot of fun on the podcast and Russ is always a treat to learn from. Check out the rest of his summary of the wide-ranging conversation here, along with reading sources and furious comments from Russ' listeners (or better yet, download it to your iPod and listen to it as God intended in the car)