Tuesday, September 2, 2008

The First Rule of Economics

There is no free lunch. You've heard all the terms like free health care, free benefits, and free education. At first glance, they appear to cost nothing, but it is the unseen that bears the cost.

French economist Frederic Bastiat's (1801-1850) pamphlet pointed this out in "What is Seen and What is Not Seen", where he says, "There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen."1

I always laugh when I hear people talking about the "free" benefits they get with their job. They think of them as a perk to the job, but really they are just a trade off between their wage. Their employer only has a certain amount to pay each worker before that business is no longer profitable. If the employer spends more of this money on their benefits, the employer must spend less on their wages.

The seen is always evident, but the unseen is where the key to the economic equation lies.

The trite expression "There is no free lunch" has become trite precisely because it has turned out to be true for so long and in so many different contexts.
-Thomas Sowell

1. There is No Free Lunch. Walter E. Williams. September 24, 2001.

1 comment:

Anonymous said...

As it is said, "NO FREE LUNCH". Many are deceived by there boss or managers. A typical example is the United states of America, they promise to help countries that are in need but in return they ten to steal an rub them of there rights and total freedom. So wise people think before they accept the lunch offered to them... i hope you are wise