Yes, Virgina, There is a Free Lunch; W. Peterson

THEFREEMAN IDEAS ON LIBERTY Yes, Virginia,ThereIs a Free Lunch by William H. Peterson "In the sweat of thy face shalt thou eat bread." So an angry Lord Jehovah thundered down on Adam and Eve-that unrighteous couple who had eaten of the forbidden fruit and were forthwith banished from the Garden of Eden and its endless bounty. And so was born, in the Old Testament version, the primal eco nomic law of scarcity-man caught in a life long dilemma of unlimited ends in a world of limited means, including life itself. Here, Virginia, sweat means work, effort, fatigue. It also means production, possible economic growth (the creation of more and more goods and services to allay man's basic needs of food, clothing, shelter), and, amaz ingly nowadays, a fresh bounty of luxury wealth, including cellular telephones, micro wave ovens, heart bypass operations, mutual funds, a winter flight to the sun in Cancun, Mexico, or to the ski trails of Aspen.

The Catch-22 with wealth creation is gov ernment intervention: state intrusion in the market process that is supposed to make things better (a free lunch) but ineluctably makes them worse. Catch-23 is its cost. Pro duction involves choices, often hard choices, about how to use scarce, or economic, reDr. Peterson, an adjunct scholar at the Heritage Foundation, is Distinguished Lundy ProfessorEmer itus of Business Philosophy at Campbell University, Buies Creek, North Carolina. sources with alternative uses. Thus God's commandment to banished Adam and Eve seems to have been: "Look, I'm no longer promising you a rose garden, only the oppor tunity to grow one." Catch-23 recognizes that nature still metes out her blessings sparingly, begrudgingly, whether in the Third World or on Park Avenue. Man fatedly wants more than he is able to get. Man then has to strategically think about wealth creation, to decide how and what to choose among consumer and capital goods. At the same time, he must decide what not to choose, given his limited-repeat, limited-time, energy, talent, and other re sources, including, of course, cash and credit.

So life foists decisions daily, hourly, and even faster, on the firm-and govern ment-as well as on the individual. As if you didn't know firsthand, Virginia. Man's plight-and opportunity-is that he perforce has to choose and exchange among compet ing options. He has to give up one thing for another. Choice by choice he seeks to opti mize his resources. He has to sort out avail able options and single out but one in any action. Early on in life, man gets a powerful message: He can't eat his cake and have it too. To get he must give, to earn more he must invest more in skills and tools so as to boost his output and consume more. Self-interest under the rule of law spurs him to fashion 538 tools for mind, hand, and, not so incidentally, society. Cost. Aye, there's the rub. Man soon finds out that an opportunity taken means an opportunity forgone, that a costless Garden of Eden is not of this world. This law of opportunity cost recognizes that making choices innately involves cost-benefit analysis or, in the words of Ludwig von Mises in Human Action, "taking and renunciation."

Take one benefit and you at once renounce another. Tradeotfs Nothing is for nothing. Something is only for something. Remember that Robinson Crusoe took off precious time from fishing to make a net in order to raise his catch. Trading-off is a rule of life, a facing-up to universal scarcity, to feeling, say, a gnawing sensation in the tummy three (or more) times a day, a gnawing not to be ignored (even if yielding to it can be overdone). Hunger de mands action but not just any action. Or as an old Chinese saying has it: A hungry man must wait a long time before a roast duck flies into his mouth. Milton Friedman has popularized this tradeoff idea as "There Ain't No Such Thing As A Free Lunch" (TANSTAAFL). Henry Hazlitt had a similar idea and got at state intervention's blindness to opportunity cost in his classic, Economics in One Lesson (1946): "The art of economics consists in looking not merely at the immediate but at the longer-run effectsof any act or policy;it consists in tracing the consequences of that policynot merely for one group but for all groups."

Thus the law of opportunity cost, or no free lunch, is a hard fact of life-as far as it goes. But in life's unending demand for choosing this quid for that quo lies the makings of, if not a free lunch and if not impeded by state intervention, a freer lunch-and a tastier, healthier, more variegated lunch at that. Look, Virginia: Every human action, the good and the bad, the noble and the ignoble, substitutes one state of affairs for another-a perceived better state for a perceived inferior state. The acting individual seeks a profit or 539 lesser loss in each and every action. He is driven to seek an ever greater output for an ever lesser input-a freer lunch. And he can't help improving the lot of others in the process. Recall how Adam Smith tagged man's self-interest under the rule of law as "an invisible hand [promoting] an end which was no part of his intention." As he went on in his The Wealth of Nations (1776): "By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good."

Another eighteenth-centurywriter, Jonathan Swift, also gave credit for a more bountiful lunch to self-interest under the rule of law, noting its intimately related drive for inven tion and entrepreneurship. In Gulliver's Trav els (1726) he wrote, "And he gave it for his opinion, that whoever could make two ears of corn or two blades of grass to grow upon the spot of ground where only one grew before, would deserve better of mankind, and so do more essential service to his country, than the whole race of politicians put together." Swift's point on interventionist do-gooding politicians is well taken. It came at the peak of mercantilism when politicians in Europe actively interfered in markets through guilds, bounties, tariffs, quotas, production limits, colonial restrictions, and other interventions, thus winding up doing bad. A lesson emerges: Free, or private, choices tend to maximize returns and spur economic growth; coerced, or public, choices tend to minimize returns and impede economic growth. Under privateproperty rights, the law of opportunity cost becomes a tool ad vancing wealth creation and social coopera tion.

To be sure, conditions change, private miscalculations occur, private mistakes are made. "The Edsel is here to stay," said Henry Ford II in 1957. Nonetheless, thanks to pri vate enterprise, the history of man is onward and upward in terms of getting more of the good things of life, a freer, if not quite free, lunch. That lunch shrinks in size and quality 540 THE FREEMAN • SEPTEMBER 1997 under state intervention. It can even sink out of sight, as in the cases of ancient and inter ventionist Egypt, Greece, and Rome. Free to Choose Yet civilization struggles on. And in that struggle is the story of freedom and free enterprise, savings and investment, entrepre neurship and invention-of payoffs in wealth from what Milton and Rose Friedman see as man's optimum political and economic state of being "free to choose." Man's progress is seen in the long steady improvement of cap ital goods, or tools, with each tool represent ing at once savings (forbearance) and invest ment (productivity), or cost and opportunity.