TANSTAAFL! Economics in Eight Words

TANSTAAFL! Economics in Eight Words

The emergency director of the bankrupt city of Detroit used this word on the radio last year. It is in fact an acronym made famous by Robert Heinlein in his 1966 novel The Moon is a Harsh Mistress it stands for “There ain’t no such thing as a free lunch! ” fundamentally it means everything has a cost.

The term comes from the trend of early 20th century bars and saloons to offer a free lunch, often composed of highly salty foods, to any patron who bought a drink (and then another, and another…).

So while things sometimes appear to be free they have a hidden cost. Sometimes those costs are hidden monetary direct costs, or sometimes they are societal costs.

So two examples…first direct and then societal:

1) in the bar senario you offer a lunch that you can cover in the profits you make on the drinks. So you attract customers by giving them free food for drinks…let’s say the food costs 2$ to buy and prepare, and the beer costs 1.25$, but you sell the beer for 4.50$ you made 1.25$ profit and the next beer makes you a clear 3.25$ for all the beers that follow.

2) Let’s use consumerism as the next example. I buy a MASEM industries useless-widget number 4. It comes in packaging, it was shipped to me and I eventually throw it out, because, well, it’s useless… Now I paid 2$ for the UW#4 and MASEM made 1.50$ profit. But who pays for the cost of the CO2 in the air, the shipping of my garbage to and from my house and the storage of the non-recyclable refuse created when I throw it away? We all do! It costs taxes for the garbage disposal, we no longer have access to the land that is the dump, our collective health declines due to the worsening air due to climbing CO2 levels, and I have less money in my pocket due to investing in a UW#4. Those costs are not all directly related to my purchase of the UW#4 but they do cost all of society something. And we have no choice but to pay.

So as you can see There is no such thing as a free lunch!

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