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Is there such thing as a “free lunch”? – How to think like an economist

If you ask an economist the question in the above title, the answer is probably a big “no”. Suppose the economist invites you to lunch and pays the bill. Does that mean you get a free lunch? Below is what the economist would say:

Economist: There’s no monetary cost. Today. But there’s an expectation that you’ll return the favor and treat me to a future lunch.

You (believer in the free lunch): But you don’t realize I’m not a nice person. I don’t plan on reciprocating and I’m going to keep that promise to myself. Today’s lunch is free.

Economist: No. Even if you don’t plan to reciprocate, the guilt at being a moocher is a cost.

You: You don’t realize just how not-nice I am. I have no conscience. So I do get a free lunch.

Economist: Alas, no. You have to listen to me talk while we’re eating.

You: I won’t be listening. I’m going to daydream about an upcoming vacation. I’m going to pretend to be pay attention.

Economist: Still not free. The cost of having lunch with me, even when I pay, even when you don’t plan on reciprocating and even when I do all the talking that you ignore, is the pleasure you would have received doing something else instead. Whatever you gave up to have lunch with me. Not just the money. Not just the time. But the value or pleasure you would have received from doing something else.

The conversation above is part of an article by Prof. Russ Roberts on the concept of opportunity cost and the economic way of thinking. Read the full article here.

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