When it gets close to your birthday, your mind probably starts to wander toward thoughts of gifts. What will you get this year? Will it be that bicycle you've been wanting? Or that video game all your friends are playing? Maybe it'll be your very first smartphone?
Wouldn't it be awesome if you got ALL of the things you've been dreaming of? Of course, that's not very likely, because our wants always seem to be greater than our resources. After all, those cool things certainly aren't free. In fact, many of them probably cost a lot of money. But why is that? Why isn't everything free? Wouldn't that be perfect?
Actually, economists would tell you that a world in which everything was free would not be perfect. Our society functions because people use their time and talents to produce a wide variety of goods and services that are bought, sold, and traded.
If everything was suddenly free, you would quickly discover that many of the things you want — and many of the things you need, such as food — might no longer be available! For example, farmers produce food for you to eat, because they receive income when you purchase that food. If the food didn't cost anything, farmers would have no incentive to produce the food you want and need.
If you want to investigate this idea on your own, ask your friends and family members who have jobs what they would do if they were no longer paid for doing their jobs. Would they continue to go to their jobs and work without pay?
Have you ever used the free wi-fi service provided by a store or a restaurant? If you have a laptop or a smartphone, you probably know that free wireless Internet service can be found in many different places.
When's the last time you visited your local library? A quick visit to browse the shelves will reveal a host of entertaining resources you can borrow and enjoy for free. In addition to books, you'll also likely find magazines, newspapers, computers, and movies.
If you ever go grocery shopping, you've probably noticed that many stores often offer free samples of various products. They give away samples free to get you to try their products, which they hope you'll choose to purchase one day.
If you think about it, there are probably many other free things that you run across from time to time. But are these things really free? Economists will tell you no! In fact, an economist would probably reply with a well-known saying: “There's no such thing as a free lunch."
This saying originates from an old practice in which taverns would offer customers a “free lunch" in order to get them to purchase more expensive drinks to go with them. Even if you buy a drink, the sandwich is still free, right? Economists say no, because one of the foundational principles of modern economics is that you can't get something for nothing.
Economist Milton Friedman popularized the saying in 1975, when he wrote a book that used the phrase as an illustration of the economic principle of opportunity cost. According to Friedman, the true cost of anything “free" is the next-best alternative that was given up (foregone opportunity) in order to take advantage of the “free" item.
In other words, we are forced every single day to make economic decisions. These decisions require us to weigh our options and make choices that trade off one option for another. For example, going to a tavern for a “free lunch" and purchasing drinks to go along with it means you didn't go home to eat a sandwich and a glass of water, which could've ultimately cost you less than the “free lunch" you just had.