Is there Such Thing as a Free Good?

free_lunchBy: Isabelle Chapman (Mrs. Stewart)

The word free has enraptured consumers and producers alike, causing a dispute among economists to whether a truly free good exists. Some may argue that products from nature such as air and water are free goods, however others insist that because of their scarcity, not even these goods are actually free. Similarly, because of humanity’s hurry to turn a profit, many companies and producers rush to put a price on every latest product, minimizing the number of free items.  Our tendency as consumers to look for the greatest deal, places us in a position that makes “free” merchandise seem fair and reasonable. Although the present market industry makes it seem like free goods exists, due to scarcity, limited resources and producers desire to make  maximum profit, truly free goods are non-existent.

In order to prove that the concept of a free good does not exist, it is essential to know its definition. According to the business dictionary, the term free good is defined as an “Item of consumption that is useful to people, is naturally in abundant supply, and needs no conscious effort to obtain it.” (Buisnessdictionary.com) This definition eliminates much of what consumers consider a free good. Just because an item is labeled free, does not mean it fulfills the given definition. In fact, most products are not free because they result in opportunity cost. By choosing one product the consumer forgoes the utility achieved by getting the other product; thus solidifying the fact that no good is free. Moreover, abundance is an essential part of the definition; a free good should not be scare or limited, its availability should be extensive and not require any restrictions. A free good must also be free of effort. For example, a consumer should not have to buy one product to get one more of that item for free; the decrease in utility, or happiness, and the amount the consumer had to pay for the first good contradicts the meaning of free. Economists call goods that have an opportunity cost, are scarce, and cost money Economic Goods. These are the majority of products in our market. Now that we are aware of the definition of a free good, let’s apply its meaning in order to prove that no totally free good exists.

The famous saying “There ain’t no such thing as a free lunch,” (Joshua Kennon) is a popular saying among many economists that was coined in order to simplify the explanation of economic goods. Originating from the 1930s, this phrase explains how in old pubs they would hand out free lunches to workers; however they would make the meals excessively salty so that they would buy drinks. Even though the workers thought they were getting a free meal, the money they spent on drinks reversed the money that they “saved” on their food. Similarly, the same thing goes with someone paying for your lunch. While the lunch is free for you, it cost the other person money. Although some things, such as a free lunch, might seem without charge, the amount of money it cost someone else makes the lunch or item not free. As previously, discussed all economic goods have an opportunity cost. In this example, the friend paying for the other person’s lunch forgoes his utility that could have been achieved through another item. No matter how it may seem or appear a good is never free because it always costs someone something. Though in our society the concept of a free lunch is prominent, in truth “it is impossible for a man to get something for nothing. (Joshua Kennon)” Unfortunately, this statement appears to be correct. Because almost all our resources, including labor and time, are scarce, it is impossible to get one object without preventing opportunity cost. The problem of being unable to achieve constant utility, fuels the argument that no free good exists. The obligation to choose between two goods contradicts the meaning of a free product; free products should not be a part of a choice. When a good is free of charge there is absolutely no opportunity cost, however because our market has scarcity it is near impossible to find a completely free product. The free lunch concept illustrates that every good has an opportunity cost due to scarcity and limited resources.

But what about natural resources and goods? Are they free? Unfortunately no. Due to limited resources no natural goods are really free. Their scarcity prohibits them from being in abundance because of the immense world population and the restrained means of getting these products. In the 19th century, Frederic Bastiat wrote a petition to the Chamber of Deputies in France arguing that “The [parts] that Nature contributes are always free of charge. (Frederic Bastiat)” He claimed that because the earth produced it, it costs humanity nothing to obtain it. Although in a perfect economy this argument makes sense, Bastiat is ignoring the fundamental problem with our society… all of our resources are scarce. His controversial view ignores the fact that the demand for these goods exceeds the supply. The regulations and prices put on these resources prove their scarcity and show the effort needed to get these goods. Most classical economist agreed with Bastiat’s view, however, as time went on and the population increased, modern economist began to considered natural resources as economic goods. Similarly, many economists considered air as the only true free good. Because of its abundance and its availability, air fulfills the definition of a free good, but many companies are now selling oxygen in cans and bottles for hikers, making air an economic good. The debate between whether or not air is still considered a free good continues to baffle economists. Some claim that “if we pollute the air, we change it from a free good to a good that we have to pay to clean up.” Many people think that further down the road air will not be free because of the continued pollution and over population; we will have to spend money in order to obtain this good. This statement proves the controversial and blurred line that makes air a free good.

Producers are always looking for a new way to turn a profit. As shown above, they are even willing to can air to increase their wealth. Although there might have been at one time other free goods, our desire as humans to make money, has decreased the market of free goods. Every new product someone discovers is immediately sold in some way. Why would any producer spend money getting something they were going to hand out for free when they could make money selling something else? It is the need for money that limits the number of “free” goods that are available to consumers. Even offers such as buy one get one free, trick consumers into thinking they are getting a great deal. Although the company claims that the product is free, the cost of the initial good acknowledges the want of producers to turn more profit. In hopes of gaining more wealth and expanding their brand, companies use these deals to make it seem like they are thinking of the consumer in “giving away” items when in actually they are enticing them to buy more.

No matter what the situation, there will always be some sort of cost. The absence of abundance and the presence of scarcity make it nearly impossible for a completely free good to exist. The view classical economists take on natural resources ignore the problems of increasing population and producers desire to make a profit. Because of this, the controversial argument to whether air is truly a free good or not continues to remain unsolved and causes confusion among modern economist. Likewise, consumer’s obsession with finding the best deal, leaves them susceptible to producers gimmicks of offering them “free” goods, when in reality they still have a cost. The idea of the free good will continue to baffle economists. Scarcity and limited resources always entail opportunity cost and eventually free goods will cease to exist.

Sources:

Bastiat, Frederic. <i>Fallàcies of protection, being the Sophismes économiques of Frederic Bastiat. Transl. from the 5 th ed. of the French by Patrik James Stirling. With an introd.     note by Herbert Henry Asquith</i>. London [usw: Cassell, 1909.

http://www.businessdictionary.com/definition/free-good.html

Kennon , Joshua . “No Free Lunch – A Look at Opportunity Cost.” About.com Investing for Beginners. http://beginnersinvest.about.com/od/Opportunity-Cost/a/There-Is-No-Such-         Thing-As-A-Free-Lunch-Opportunity-Cost.htm (accessed June 26, 2014).

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