I’ll start with the prosciutto, the shrimp cocktail and the Caesar salad. And for my entrées, I’d like the lobster tail, the filet mignon and the penne with chicken.”
My friends and I ordered such wonderfully gluttonous dinners every night of Spring Break. All food aboard the cruise ship was free, so we gorged ourselves to near sickness without a moment’s hesitation. There was no feeling of wastefulness if we failed to finish our food — after all, we weren’t paying a dime. We had every reason in the world to consume without end, and that’s exactly what we did.
Carnival Cruise Lines hardly invented the idea of the free lunch; it dates back to at least the mid-1800s. Saloons would offer free meals to patrons, but charged high prices for alcohol. Many patrons rightly criticized the practice, complaining that the lunch was hardly free after buying drinks.
“There’s no such thing as a free lunch,” has become a popular rejoinder toward promises of something-for-nothing. Milton Friedman, the late Nobel laureate economist, even used the phrase as the title of an economics textbook. But this idea has implications far beyond Spring Break bar tabs; it’s a profound statement about how our market economy works.
Free stuff is a myth: Somebody always has to pay, whether or not that somebody is you. Every product and service is created with an investment of resources by hard-working people. The prices we pay reflect both the scarcity of resources and everyone else’s demand for them.
In those unassuming little numbers, we convey information about the vast and complex sum of human activity. Billions of human beings, most with wildly different goals, peacefully coordinate their activities thanks to the elegant simplicity of prices. It’s not necessary to know every piece of the production puzzle when prices so succinctly summarize the most relevant details.
If a late frost ruins Florida orange crops, I can remain totally ignorant of that fact while still conserving my use of oranges. Oranges become scarcer, their price rises, and I have all the incentive I need to buy fewer oranges. Since I’m using less, there’s more to go around for everyone else. No one has to tell me to conserve — the higher price tells me to cut back.
Prices encourage conservation, not because it’s morally right, but because wastefulness hits us where it hurts: our wallets. A very relevant example is our broken U.S. health care system. In 2006, only 12 percent of all U.S. health care spending came directly from consumer’s pockets — the rest was paid by government and private insurers.
It shouldn’t be surprising, then, that out of $2.2 trillion spent on health care, $1.2 trillion is wasteful, going mostly to redundant or unnecessary procedures, according to PricewaterhouseCoopers.
Americans expect third parties to pick up the check for medical care, so it’s no wonder that we use more than we may need. But like the free lunch, the costs of our consumption eventually come back to us in higher premiums and taxes.
There’s no such thing as a free lunch, or free health care, or free anything. Everything costs something, regardless of how that cost is distributed. Someone, somewhere, always pays the price for your consumption—and don’t be surprised if, sooner or later, that someone is you.
Tom VanAntwerp is a senior business major from Gastonia. E-mail him at firstname.lastname@example.org