TANSTAAFL
|
|
TANSTAAFL is an acronym for the adage "There Ain't No Such Thing As A Free Lunch," popularized by science fiction writer Robert A. Heinlein and promulgated in his 1966 novel The Moon is a Harsh Mistress, a libertarian utopia. This phrase and book are popular with classical liberals and economics textbooks.
- "Oh, 'tanstaafl'. Means 'There ain't no such thing as a free lunch.' And isn't," I added, pointing to a FREE LUNCH sign across room, "or these drinks would cost half as much. Was reminding her that anything free costs twice as much in the long run or turns out worthless." -- Manuel, The Moon is a Harsh Mistress (1967), pg 129
- "There's no such thing as a free lunch." -- popularized by economist Milton Friedman; New York Mayor Fiorello LaGuardia spoke it in Latin in 1934
Simply put, it means that one cannot get something for nothing. Even if something appears to be free, there is always a catch. You may get free food at a bar during "happy hour," but the bar-owner either figures out a way to get you to pay or gets some sort of benefit (such as attracting new customers). This may or may not be true at the individual level, depending on the interpretation of the phrase.
Though it is possible for an individual to get a "free lunch" (as when a company cuts its costs and gains competitive advantage by polluting the air), someone ends up paying the cost of the "lunch." Even though there is no individual or private cost, there is a social cost. Similarly, someone can benefit for free from a beneficial externality or from a public good. But someone has to pay the cost of producing these benefits.
Strictly speaking, the idea that there is no free lunch at the societal level applies only when all resources are being used completely and appropriately, i.e., when efficiency prevails. But when inefficiency exists, one can get a "free lunch" by abolishing it. For example, microeconomics argues that the pollution example of the previous paragraph is allocatively inefficient. A tax or other program that forces the polluter to internalize this externality would improve efficiency, increasing social welfare. However, others may be benefiting from the inefficiency and use their political or social power to prevent you from doing so. That is, the polluter may use lobbying and campaign contributions to preserve his or her right to pollute.
Advocates of the TANSTAAFL principle believe markets are efficient unless due to interference by the government or other "outside" forces. The free market is seen as the solution to issues such as pollution.
The TANSTAAFL argument may also be applied to natural physical processes; see thermodynamics. In mathematical finance, the term is also used as an informal synonym for the principle of no-arbitrage.