TANSTAAFL
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TANSTAAFL is an acronym for the adage "There Ain't No Such Thing As A Free Lunch," popularized by science fiction writer Robert A. Heinlein in his 1966 novel The Moon Is a Harsh Mistress, which discusses the problems caused by not considering the eventual outcome of an unbalanced economy. This phrase and book are popular with classical liberals and economics textbooks. Similarly, the acronym "TINSTAAFL" is used, meaning "There Is No Such Thing As A Free Lunch"
Details
Simply put, TANSTAAFL means that one cannot get something for nothing. Even if something appears to be free, there is always a catch. You may get free food at a bar during "happy hour", but the bar-owner either figures out a way to get you to pay or gets some sort of benefit (such as attracting new customers, who will return on other occasions and pay for their food).
TANSTAAFL may or may not always hold at the individual level, depending on the interpretation of the phrase—you might get a "free" lunch if someone else buys it for you, willingly or not. But if it seems that an individual is getting a "free lunch" (e.g. a company cuts its costs and gains a competitive advantage), someone always ends up paying the cost of the "lunch" (e.g. the cuts increase factory pollution). If there appears to be no direct cost to any single individual, there is a social cost. Similarly, someone can benefit for "free" from an externality or from a public good, but someone has to pay the cost of producing these benefits.
Strictly speaking, the idea that there is no free lunch at the societal level applies only when all resources are being used completely and appropriately, i.e., when efficiency prevails. But when inefficiency exists, one can get a "free lunch" by abolishing it. For example, microeconomics argues that the pollution example of the previous paragraph is allocatively inefficient. A tax or other program that forces the polluter to internalize this externality would improve efficiency, increasing social welfare. In practice, however, others who are benefiting from the inefficiency will use their political or social power to prevent you from doing so. That is, the polluter may use lobbying and campaign contributions to preserve his or her ability to legally pollute.
To a scientist, TANSTAAFL means that the system is ultimately closed—there's no magic source of matter, energy, light, or indeed lunch, that cannot be eventually exhausted. Therefore the TANSTAAFL argument may also be applied to natural physical processes; see thermodynamics.
In mathematical finance, the term is also used as an informal synonym for the principle of no-arbitrage.
Citation
- "Oh, 'tanstaafl'. Means 'There ain't no such thing as a free lunch.' And isn't," I added, pointing to a FREE LUNCH sign across room, "or these drinks would cost half as much. Was reminding her that anything free costs twice as much in the long run or turns out worthless." – Manuel, The Moon Is a Harsh Mistress (1967), pg 129
- "A sperm-and-ova bank insures the future of the race; a tissue bank insures the future of the individual. But somebody has to pick up the check; it's a tanstaafl situation." – Lazarus Long in The Number of the Beast, chapter 44 by Robert A. Heinlein
- "There's no such thing as a free lunch." – popularized by economist Milton Friedman; New York Mayor Fiorello LaGuardia spoke it in Latin in 1934
- The book by Edwin G. Dolan "TANSTAAFL, the economic strategy for environmental crisis" (Holt, Rinehart and Winston, 1971, ISBN 0030863155) may be the first published use of the term in the economics literature.