What is 'There Ain't No Such Thing as a Free Lunch (TANSTAAFL)'

"There ain't no such thing as a free lunch" (TANSTAAFL), also known as "there is no such thing as a free lunch" (TINSTAAFL), is a phrase that describes the cost of decision-making and consumption. "There ain't no such thing as a free lunch" expresses the idea that things appearing free always have a cost or that nothing in life is free.  

BREAKING DOWN 'There Ain't No Such Thing as a Free Lunch (TANSTAAFL)'

The TANSTAAFL concept is important to consider when making various types of decisions. It can help consumers make wiser decisions by considering all indirect and direct costs and externalities. 

In economics, TANSTAAFL describes the concept of opportunity costs, which states that for every choice made, there was an alternative not chosen.  Decision-making requires trade-offs and assumes that there are no real free offerings in society.  For example, products and services gifted (free) to individuals are paid for by someone else.  Even when there is no one to assume the direct costs, society bears the burden.  

TANSTAAFL Origin

TANSTAAFL is thought to have originated in 19th century American saloons where customers were given free lunches with the purchase of drinks. From the basic structure of the offer, it is evident that there is a cost associated with the free lunch: the purchase of a drink.  However, there are subsequent costs resulting from the consumption of the free lunch.  Because the lunches were high in salt, customers were enticed to purchase more drinks.  The proposal of a free good or service with the purchase of another good or service is an oxymoronic tactic many businesses still use to entice customers.

Other Meanings and References

TANSTAAFL has been referenced many times for various reasons.  For example, in 1933, former New York City mayor Fiorello H. La Guardia used the Italian phrase “È finita la cuccagna!" (translating to "no more free lunch”) in his campaign against crime and corruption.  Popular references to the phrase can also be found in Robert Heinlein's "The Moon Is a Harsh Mistress" as well as in Milton Friedman’s book “There Ain't No Such Thing as a Free Lunch.”  

Across different disciplines (e.g., economics, finance, statistics, et al), TANSTAAFL has different connotations.  For example, in science, it refers to the theory that the universe is a closed system.  For example, a source of something (e.g., matter) comes from a resource that will be exhausted.  the cost of the supply of matter is the exhaustion of its source.  In sports, it was used to describe the health costs associated with being great at a sport, like "no pain, no gain."  Despite the different meanings, the common factor is cost. 

Investing

For investments, TANSTAAFL helps to explain risk. Treasury bills (T-bill), notes, and bonds offer a nearly risk-free return; however, the opportunity cost of investing in one of these instruments is the forgone opportunity to invest in an alternative, riskier investment.  

As an investor moves higher on the risk spectrum, the phrase TANSTAAFL becomes even more relevant as investors provide capital with hopes of achieving larger gains than what less-riskier securities yield; however, this choice assumes the cost that growth prospects may not be achieved and the investment could be lost.

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