by Don Boudreaux on February 8, 2007

in Economics

In a comment on Russ’s recent post on global warming, "ben" says

Actually you are surrounded by free lunches. You are typing on one, wearing one, and you drive one. Technology is a free lunch.

Although I understand ben’s point — and agree with what I take to be its thrust — I disagree with it.  It’s true that technology — indeed, the entire global division of labor — brings to each of us goods and services that, in the absence of this system, none of us would enjoy.  Each of us consumes incalculably more than each of us could, on our own, produce.

But at the risk of being pedantic, these things aren’t free.  They exist only because people put forward their time and energy and resources to help produce them.  There is a cost to our prosperity — but it is a cost well worth paying.

Here’s an analogy.  A friend of a friend (so I’m told!) once bought a copy of Adam Smith’s Wealth of Nations in a used-book store deep in the heart of the state of Georgia.  The buyer paid just a few dollars for the book (say, $10).  The buyer soon discovered that the book is a first edition.  The buyer then sold the book for a princely sum (say, $10,000).

Is it accurate to describe his profit here as free?  I think not.  It cost the person who got it $10.  True, in this case, the profit was unusually large and unusually unexpected.  But, nevertheless, it did not fall upon the person free of charge.  He — the person who profited — had to sacrifice something of value to get the profit.

Even if the bookstore owner had given the book to the customer free of charge, the profit would not be free.  Someone — in this counter-example, the bookstore owner — incurred a cost in order to give rise to the profit.

I think it to be a mistake to identify genuine profit — true benefits whose values unambiguously are greater than the costs people incur to create these benefits and to secure these benefits — as free.


14 comments    Share Share    Print    Email

Previous post:

Next post: