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Monday, February 03, 2020

On Free Lunches

I want to cull this from  page 2 of Greg Mankiw’s popular Essentials of Economics – used by hundreds of Econ 101 classes, tucked under the arms of thousands of students, who paid a hefty price for it:

You may have heard the old saying, “There ain’t no such thing as a free lunch”. Grammar aside, there is much truth to this adage. To get something we like, we usually have to give up something else that we also like.
I like to think of them, those thousands of scions of upper class households, products all of them of years of free lunches, nodding to this crackerbarrel truism. One of the great principles of education is to blind yourself to the self-evident. It is part of one’s self-fashioning, and it is especially useful as these scions go on to get positions in the upper ranks of management, investment, etc., and can look about them and say: I earned this.
By their truisms you shall catch them – this is the rhetorical ratcatcher’s faith. My faith, really. The crack in the neo-classical economics façade – the underpinning of that big neo-other, Neoliberalism – appears here.  If one looks deeply enough, many of the ideological decisions that go into the neoclassical model congregate around the idea that there is no free lunch – or as Mankiw translates it, there are almost always trade-offs.
The first and most important of those decisions is that the local difference between the person who pays for and offers the lunch and the person who eats it, free, is of no concern to economics. Thus, all sociology is given the bum’s rush at this banquet. The economist’s truth stops at the fact that if there is a free lunch, someone is paying for it, and that in the end, we are all someone. And it is true that if x is paying for y’s lunch, if we just move a level upward we can treat them as variables, so that y paying for x’s lunch is the same thing. But what if that move up the level is missing an essential fact – which is that there is always somebody paying for the lunch, and somebody eating it free? And what if there is a whole class of x’s who offer a whole class of y’s free lunch?


Sarah said...

Back in 1970, when my mother was just finishing her PhD in economics and I was a 16 year old first year college student I wrote a paper about logical positivism and the great questions that different disciplines ask. I talked to my mother about what those questions would be for economics and two I remember that she suggested were, "How much does it cost?" and "WHO PAYS?" I remember she especially emphasized the second one. (No surprise. She was a labor economist. No one who studies labor markets forgets this second question, unless it's deliberately.) Then she had to watch over the next 40 years as the operative question became, "How do we convince people to pay for those who are better off than themselves at the expense of those worse off?"

When I got interested in economics during the housing bubble she told me she would never recommend anyone to study the subject today- and she wouldn't have gotten into it herself if she'd known how it would develop.

Roger Gathmann said...

What a great story!
I think, cause I'm an idiot and an optimist, that political economics is turning slowly away from its Harvard business death march back to the land of the living. I'm probably wrong. I've been reading how the Pres of Harvard personally intervened to make sure they didn't give Gabriel Zucman, who works on inequality (and is the brain behind Warren's wealth tax) tenure - cause that is how they do things in the Hedge fund that pretends its a university. Luckily he found tenure on the West Coast at, I think, Berkeley. But still...