The Two Dirtiest Words in Economics: Free and Fair

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The two dirtiest words in economics are four-letter words beginning with “f”: free and fair. More economic mischief has been wrought through these two words than any others. These words have seemingly straightforward uses. Free can simply mean that no money or anything of value was given in exchange for a benefit. Such a benefit can then be described as free. Fair is fundamentally about equality and balance, ensuring that different sides to a transaction benefit in proportion to their contribution. Such benefits can then be described as fair or fairly distributed.

The Pitfalls of “Free”

But even in these seemingly straightforward uses of “free” and “fair” lurk dragons. Let’s start with “free.” We live in a world not of our own making. Everything we have, even the molecules that make up our body, are derived from elsewhere. So there’s a sense in which nature owns us and we don’t own it. Even so, nature has no way of assigning property. What one human calls “mine” and another calls “thine” arise from conventions, the construction of social realities of the sort brilliantly described by philosopher John Searle in a book by that title (The Construction of Social Reality).

The origins of property are shrouded in myth (did Zeus, born to Rhea in Crete, give possession of this island to King Minos?). And what about ownership of property in the present? It would take us too far afield to examine the basis and legitimacy of the claims humans make for owning one thing and not another. Suffice it to say, we find ourselves owning lots of different things, with such ownership being largely uncontroversial so long as it matches up with societal, legal, economic, and cultural norms.

So here’s the problem with “free.” If something is unowned, in the sense that no human has claimed ownership of it, then it’s free, but in an uninteresting sense. The pebble you find on the beach, the salt water in the ocean (but not the desalinated water we produce from it), and the air you breathe are all free in this sense. But usually we don’t consciously think to ourselves, “Gee, it’s great that the air is free.” Instead, we just take it for granted.

Where “free” becomes interesting and treacherous is when what is free is owned by someone else. If Alice owns X and says to Bob, “you can have X for free,” Bob needs to look very carefully at X, at Alice, and at X’s provenance (i.e., who owned X before Alice or otherwise has claims on X). This is why, when Bob learns that Alice wants to give him X for free, his first question is likely to be, What’s the catch? Are there any strings attached, and if so, what are they?

It’s become a cliché to say “there’s no free lunch.” At some level we know that this is true, and yet, who hasn’t been treated to a free lunch? Anything of value has at some point been paid for, whether by money, time, or sweat. So there’s a sense in which anything of value that’s given for free did not come for free to the one who is giving it. An exception is when somebody gives you a gift, but got it as a gift from someone else (like musical chairs with Christmas presents). Track back far enough, and at some point the gift that was given for free was not free to the one originally giving it.

All of this is obvious upon reflection. Unfortunately, when we hear the word “free,” we tend to leave reflection behind: our eyes glaze over and a psychological haze clouds our minds. “Free” is a bewitching, magical word. When we hear that something is free, we instantly want to know more. Merchants know this too well. Amazon, for instance, found that making shipping free rather than charging a nominal fee vastly increased their sales (see how often you can spot the phrase “free delivery” on the website). Of course, the shipping wasn’t free — customers paid for the shipping through their Amazon Prime membership or in other ways.

But the thought that the shipping was free somehow unburdened, or “freed,” the pocketbooks of customers to spend more liberally, or “more freely.” Behavioral economist Dan Ariely, in a series of fascinating books (such as Predictably Irrational) details the psychological havoc that the word “free” plays on people, getting them to behave irrationally, and yet in predictable ways. The underlying impulse is to cash in as much as possible on “free stuff.”

So what’s really the problem with “free”? The problem is that we focus so much on getting something for nothing that we miss that almost always there is some mutual transaction of value. In other words, there’s almost always a hidden cost. The rare exception is true altruism, in which a benefit is given with no hidden obligation on the one receiving the benefit and no hidden cost to others. Holocaust rescuers, typically non-Jews who risked their lives to deliver Jews from the Nazis in World War II, and asked for nothing in return, constitute the best example I know of true altruism (see the Oliners’ work in this area). What they gave was free to the receiver, but not to the giver.

Yet most of the time, there’s some quid pro quo, some reciprocal benefit that is sought from the benefit that supposedly is given for free. In writing this, I don’t mean to sound cynical. Instead, I’m counseling a healthy realism. Richard Feynman, perhaps the greatest physicist of his generation, used to urge his fellow scientists not to fool others, especially lay people. To this advice he immediately added that the easiest person to fool is yourself. Free stuff is a rife area for self-deception.

We like to feel good about ourselves, and giving stuff for free to others does just that. There’s something powerful, even intoxicating, about giving. What does it say about you that you’re the type of person who can confer benefits on others for free. As psychologist Erich Fromm remarked in The Art of Loving:

[Giving is] expression of potency. In the very act of giving I experience my strength, my wealth, my power. The experience of heightened vitality fills me with joy. I experience myself as overflowing, spending, alive, hence as joyous. Giving is more joyous than receiving, not because it is a deprivation, but because in the act of giving lies the expression of my aliveness.

In The Gift, Marcel Mauss takes this point further, arguing that gift-giving is at the heart of all human culture as it establishes bonds of reciprocity.

In highlighting such undercurrents to gift-giving and free stuff, let me repeat that I’m not trying to strike a cynical chord. Genuine altruism (i.e., doing something good at personal cost with no expectation of gain) is great when it happens. But genuine altruism happens in the absence of an economic calculation. And with most of the stuff that’s advertised as “for free,” there is an economic calculation (interestingly, the word “economics” comes from the Greek and refers to the management of a household; giving, therefore, even within families typically involves such a calculation, even if it is not in terms of dollars and cents). Moreover, we exercise practical wisdom in becoming aware of what that calculation is, whether we’re the givers or the receivers.

Sometimes economic calculation shows that an act of giving “for free” falls short of pure altruism, involving some expectation of gain or benefit to the giver, and yet still providing a net benefit to the receiver. These are win-win situations, so that all parties end up better off. The promise of salvation in some religious faiths is characterized in this way: God gives salvation freely to those who by an act of faith receive it. And yet, the saved are expected to live better lives in consequence. Both God and those saved thus benefit. The benefit is mutual.

Of course, atheists might argue that belief in God is a delusion, and that the saved are in fact being duped by religious leaders. That will of course involve another economic calculation. Interestingly, salvation is often cashed out in terms of redemption, and redemption is a business term about buying back something one used to own. But enough about religion.

“Free” becomes a problem when economic calculation reveals that self-interest trumps mutual interest and dishonest dealing replaces honest dealing. In such cases, “free” comes with strings attached and someone is being taken for a ride. And it might not be you, the recipient of the free gift, but some third party.

Imagine walking down the street with a friend who promises to give you, with no strings attached, $100. Next thing you know your friend mugs someone on the street, relieving that person of $100, which he then gives to you. Perhaps your friend never calls in this favor. But even though there’s no cost to you, there is a cost to the victim, and to call your $100 free is a misnomer. There’s a story to be told, and it must to told. “Free” doesn’t capture that story.

If second parties exploit or extort third parties to provide you with “free stuff,” then essentially you are receiving stolen merchandise. But even in the absence of such “ripped off” third parties, “free” can be a problem. Of course, there are things that are called free, but when you read the fine print you find that they are anything but free. With such supposedly free items, if you receive them or don’t act promptly to rescind them, you incur a legal liability and an obligation to pay (such as a free teaser subscription that quickly ends up charging your credit card).

But even when there is no legal pressure or threat, free can still be a problem. The deep underlying problem with getting stuff apparently for free is that we are social creatures who are hardwired to keep a mental record of accounts and see ourselves as under obligation to those who give us gifts, whether they are actually free or only perceived as free.

In his book Influence: The Psychology of Persuasion, Robert Cialdini brilliantly details the tacit obligations that givers put on receivers by giving them free stuff. The ploy is simple: Alice insists on giving Bob something for free. Once Bob (often a stranger) has received it (often reluctantly), Alice asks Bob for a donation. Put in these stark terms, the ploy seems cheap and transparent. And yet it works, not 100 percent of the time but often enough to justify the ploy.

Most readers have probably received a donation request in the mail in which you receive a “free gift” of stickers with your name and address printed on them, or a return envelope with postage stamps affixed (“hey, they spent money on those stamps”), or even an envelope with a dime or quarter visible from the outside. Even such very minimal gifts of free stuff get us unconsciously primed to want to make things right by returning the favor, and of course, the favor requested is always bigger than the gift originally given. In unmasking this ploy, Cialdini urges his readers to resist such manipulation and refuse to reinforce it. It’s good advice.

Often we think of free as an all-or-nothing concept. In other words, either the thing costs us nothing and is free, or the moment it costs us anything, it is no longer free. But free can also come in degrees. In a sense, anything that we come to feel entitled to or take for granted is regarded as free.

Take some benefit that the government provides. Perhaps it is a common good, like access to a road or bridge. Perhaps it is a targeted good, like a tuition remission or disability payment. In any case, even though we recognize that in some sense all of us, collectively as taxpayers, are paying for these things, because no one in particular seems to be paying for them, we come to regard them as free.

Equating entitlements with free stuff is, of course, more a matter of human psychology than economic reality — for any government entitlement, there’s always some underlying economic calculation. But here’s the point: entitlements do not merely come to us as all or nothing; they also come to us in degrees. If we receive a tuition remission that knocks off 20 percent of our tuition, it could also be increased. Why not knock off 30 percent?

Let’s dig a little deeper. Entitlements, and free stuff generally, do not come to us by degrees merely as a matter of quantity. They also come to us by degrees as a matter of frequency. The friend who gives you $100 by stealing from a stranger could do it just once. But he could also decide to be still more generous to you and steal $100 for you every week. When free stuff comes in degrees, whether in quantity or frequency or both, it can be viewed as a spigot that can allow for more throughput (quantity) and greater duration (frequency).

Seeing “free” as matter of degree in this way highlights perhaps the biggest pitfall with free stuff, namely, that we tend to get addicted to it. Rather than considering the underlying economic calculation and the total cost and benefit to society as a whole, we focus on getting the goods while the getting is good. Rather than delaying gratification for the greater good, we strive to maximize our own selfish immediate benefits.

Michael Lewis is one of the most popular writers on economics and finance. In his book Boomerang, he recounts Arnold Schwarzenegger’s attempts as governor of California to reform the state’s finances. Regardless of one’s views on Schwarzenegger politics, as an independently wealthy outsider to California politics, Schwarzenegger could at least approach the state’s fiscal problems without an agenda or prejudice. Moreover, because it was California, he could override the legislature and go directly to the people. He did just that. As Lewis explains,

[Schwarzenegger] came into office with boundless faith in the American people—after all, they had elected him—and figured he could always appeal directly to them. That was his trump card, and he played it. In November 2005 he called a special election that sought votes on four reforms: limiting state spending, putting an end to the gerrymandering of legislative districts, limiting public employee union spending on elections, and lengthening the time it took for public school teachers to get tenure. All four propositions addressed, directly or indirectly, the state’s large and growing financial mess. All four were defeated; the votes weren’t even close. From then until the end of his time in office he was effectively gelded: the legislators now knew that the people who had elected them to behave exactly the way they were already behaving were not going to undermine them when appealed to directly. The people of California might be irresponsible, but at least they were consistent.

The consistency in this example is the universal psychological propensity to prefer stuff for free and in ever increasing quantities as well as ever increasing frequency. The four points of reform that Schwarzenegger tried to get enacted by going to the people all speak, whether directly or indirectly, to the spigot of free stuff. Schwarzenegger’s reforms were designed to turn down (not off) the spigot. The California electorate decided to keep turning it counterclockwise.

Ultimately, the problem with free stuff is that getting it becomes addictive. We lose track of who ultimately is paying for what comes to us for free. That, obviously, invites waste and abuse. But the most serious problem is the enfeeblement of our souls. Getting and depending on free stuff, especially if we are in a position to help ourselves and don’t need it, makes for dependency and irresponsibility. Becoming addicted to free stuff means that in the end we are making things worse, not better, both for ourselves and for others. All bills eventually come due. They may get paid in different denominations, but the bill for addiction is always extraordinarily high.

Perhaps by this point in our story, you are not convinced that “free” is such a pernicious concept after all. Perhaps you think that I’m overblowing the matter, and that even though “free” may have occasional problems, on the whole it is a benign concept. Let me therefore turn to “fair.” And after that let me turn to the combination of “free” and “fair.” If so far you think that I’ve overblown concerns about “free,” I hope by the time I deal with the combination of “free” and “fair” you’ll be convinced mixing the two is lethal, like combining opiates with meth.

The Pitfalls of “Fair”

Like “free,” “fair” has both a psychological and an economic dimension, and both dimensions are fraught with controversy. Obviously, Adam Smith and Karl Marx would have vastly different views of what constitutes economic fairness. Smith, committed to free markets, would regard as fair a capitalist system in which entrepreneurs, by investing capital, get to keep the things produced at their instance. Marx, seeing in free markets unending exploitation of workers, would regard the same system as unfair in how it distributes the fruits of labor.

Thus, if we’re talking fairness in an economic sense, we need to be clear about our economic presuppositions and what, with respect to those presuppositions, constitutes a just, or fair, economic system. Unfortunately, regardless of one’s preferred economic system, no actual system lives up to its ideals. Marxism, with its “from each according to his abilities, to each according to his needs,” inspired a Soviet system in which an elite class of rulers could shop in special stores stocked with western goods and could live in private dachas far removed from the drab apartment projects where most of the Soviet citizens had to live (leaving aside those consigned to the gulag).

Perhaps it’s possible to specify how far from its ideal an actual economic system strays and from there to calculate to what degree one economic system is less just or fair than another. Nonetheless, economic fairness, in the sense of consistency with an economic system of thought, is not where most of the danger resides with the concept “fair.” True, “fair” comes to us in the guise of an economic concept, but its real force is moral and psychological. Its worst feature is to act as a bludgeon to get us to back down where we need to assert our rightful claims.

To be clear, just as “free” has an unproblematic sense of a benefit conferred with no expectation of return (no hidden strings, no injured third parties), so “fair” has an unproblematic sense. “Fair” is about giving to each one’s due, where what’s due is proportionate to one’s contribution and where everyone in the apportionment of what’s due can agree on who deserves what. So long as these conditions hold, “fair” is unproblematic.

A negotiation ought to begin with the participants agreeing that they will strive for a fair outcome and to give parties to the negotiation the opportunity to question and probe, at any point in the negotiation, where they think their interests might be treated unfairly. The attitude needs to be, “I want to treat you fairly and you need to let me know when you think I’m not.” Such an attitude is healthy, and in such cases, “fair” is not a dirty word.

Unfortunately, most people quickly realize that the word “fair” carries immense power in negotiations, and that it can gain quick advantages that are unwarranted. Consider a homeowner selling a house just after a housing crisis. Prices are depressed. The mortgage is under water. The owner gets an offer that’s less that what’s owed on the mortgage and a lot less than what the owner originally paid. The owner, to the prospective buyer, plaintively announces, “that price just isn’t fair.”

But what’s not fair about the price offered? Comps in the area are all going for way less than they used to. The price offered is in line with current market value. Sure, it will seem to the owner that life is unfair and that circumstances conspired unfairly to lower the price that could realistically be asked for the house. But what does that have to do with the fairness of the price offered?

Yet by challenging the fairness of the offer, the owner performs a psychological ju-jitsu. Rather than focusing on the real market value, the focus is now suddenly on the motives and morality of the buyer. The charge of unfairness, rather than leading to a healthy negotiation in which both parties can happily agree on a price or otherwise amicably part company, now invites the buyer to work against himself, questioning his motives, and even feeling guilty. “What sort of person am I to give the owner an unfair price?”

The natural temptation to the charge of behaving unfairly is to fold instantly and give in to the charge, raising one’s offer or otherwise weakening one’s negotiation position. The temptation is to get flustered, to blush, to react emotionally. Such a response to the charge of unfairness is primal. Young children, when appealing their case to adults, will almost invariably declare that what the other child did “is not fair.”

Responding to the charge of unfairness requires clarity of thought and self-control. Our natural impulse is to react. What we need to do is stand back calmly and ask, “what exactly am I doing that’s unfair?” Perhaps you are being unfair. In that case, let it be spelled out. But perhaps it only feels unfair to the party making the charge because of their own misguided views.

If there’s a housing crisis and the price of a house has dropped precipitously, wouldn’t it also be unfair to the buyer to be expected to pay more than the going rate? After all, you, as the buyer, would then be in the same position, with an overpriced house that you couldn’t sell for the price you bought it if necessity demanded that you sell it (unless you could successfully perform the same ju-jitsu of “that’s not fair” on the next prospective owner).

A plaintive “that’s not fair” from a party in a negotiation can be confusing but not necessarily wicked. The party making the charge is often hurting. But the hurt is often for reasons other than any inherent unfairness in the transaction being negotiated. Any clear-minded negotiator on the other side will see through this quickly, asking the question “what in particular is unfair about what I’m proposing,” and indicate, with proper nuance and niceness, how in fact no unfairness exists (if in fact it doesn’t).

Where “fair” becomes wicked is when it is used not negatively, as in “that’s unfair,” but positively, as in “we’re being fair to you so shut up and accept what we’re offering you.” Of course, the point is never put quite so baldly (except, perhaps, in a mafia extortion racket). But it is often the clear subtext, and it can be even more potent as a subtext than text.

Such a use of “fair” is intended to shut down conversation and compel compliance. It can come at us with self-righteous indignation: “how dare you question the fairness of our dealings.” It can also come as a self-righteous preening: “we’ve striven for integrity and fair dealing at every step in our enterprise, and we always treat our customers fairly.”

Well, maybe and maybe not. Watch this brief video of Bernie Madoff, taken a year before his arrest for the largest Ponzi scheme in history, and many years into the perpetuation of this scheme. The brazenness of his protestations that the investment world is securely regulated, and by implication that the integrity of his business dealings is above reproach, is, in light of subsequent events, jaw-dropping:

The best response to “we’re treating you fairly and you need to be good with that” is a calm assertiveness that refuses to back down, that demands clarity about the points where fairness is in question, and that attempts to reinstate the attitude that ought to guide truly fair dealings. That attitude requires everyone in a negotiation honestly to say, “I want to act fairly and please point out any place where you think I’m not.” Fairness that is unchallengeable is not fairness at all. Negotiations become fair because participants feel free to question points where they think fairness may be compromised.

The points made in this section about fairness are drawn from the best book on negotiation I’ve read, namely, Chris Voss’s Never Split the Difference. Voss was an FBI hostage negotiator who parlayed his negotiation skills into the world of business through his Black Swan Group. The lessons he draws apply to economics but also more broadly.

As the points made in this section clearly show, there are pitfalls associated with “fair” just as there are with “free.” But readers of this and the last section may wonder if I’ve indeed shown that “free” and “fair” are really the dirtiest words in economics. Perhaps they’re just dirty. Or perhaps they are just like many moral concepts, with both a bright and a shadow side.

In the next section I hope to convince you that “fair” and “free” become weaponized when put in combination. Together, they work a powerful one-two punch. They are like chemicals, even if not too harmful apart, that become deadly when mixed. Together, “free” and “fair” act as force multipliers, vastly amplifying the power they have individually.

Weaponizing “Free” and Fair” by Combining Them

The way “free” and “fair” get combined, and thereby weaponized, is by identifying a state of affairs as “unfair” and then promising to resolve or alleviate it by making stuff available for “free.” “Free” thus becomes the means to achieving an end, the end being to bring about or restore “fair.” This way of combining “free” and “fair” is extremely powerful, and it’s hard to think of a tactic that has caused more economic harm or societal confusion.

Let’s look at this one-two punch more closely. First in the order of attack comes “fair,” identifying some state of affairs as unfair. There are lots of problems in the world. Misguided political and economic policies are responsible for many of them. In such cases, however, the solution may be to enact better policies, undoing what caused the damage in the first place.

Take skyrocketing tuition costs at colleges. College students in the 1950s and 1960s could still work summer jobs and pay for their tuition and living costs for the academic year. In the late 1950s, one private religious college that I know set its tuition cost for the full academic year at under $170. That same school, today, charges $35,000 in tuition and fees. That’s a 200-fold increase, well beyond the Consumer Price Index’s inflation rate, which from 1955 to 2020 came in at less than a 10-fold increase.

The financial burden on college-bound students and parents is therefore far heavier today than it was in the past. How did we get to this place? In my view, it happened because of a positive feedback loop (a positive feedback loop in this case being a very negative thing!) between colleges on the one hand and the government/banks on the other, where the government would guarantee ever increasing student loans, and the schools would take advantage by continually jacking up tuitions because students were now in a position to pay the exorbitant costs by going deeper and deeper into debt. As a consequence, U.S. student debt now exceeds $1.5 trillion.

So what’s the problem? Clearly, it’s that colleges have been incentivized to act less like a going business concern and more like a racket cashing in on government largesse. And schools likewise, by being able to charge more and by seeing other schools charging more and by, as a consequence, needing to offer students ever more extravagant perks, are incentivized to raise their costs. It’s a vicious spiral, a positive feedback loop. And the victims are the students and their families who have to shoulder the ever increasing costs and often have go into debt.

But is what’s happening with college tuitions unfair? The situation here is complicated and it’s not clear that an assault on fairness is the best way to characterize it. Easy loans for students, especially back when tuitions were not so high, seemed like a way of helping students. But as with so many good intentions, there was an unintended consequence, in this case, skyrocketing tuition costs. Yes, students and their families are getting hurt and student debt is out of control. But what’s the best way to redress this problem?

One approach is to bring market discipline to the student loan business. Student loans are nondischargeable, which means that the only way to get out of paying them is by dying. People saddled with large student debts are even known to joke about pseudocide, which is to say faking their deaths to get out of paying their student debts. You know that things have come to a bad spot when humor visits such dark places.

All other loans are dischargeable, meaning you can get out of them by going broke and declaring bankruptcy. If student loans were, through some law or policy change, made dischargeable, lenders would be incentivized to limit loans to students who seem likely to finish their course of study and achieve gainful employment. Also, lending decisions would take into account schools where students are likely to graduate and pay back the loans.

Schools therefore also need to be properly incentivized. If students are going to be incurring a large financial liability for their education, the schools need to be committed to bringing on students that can thrive behind their walls and are likely to graduate. Believe it or not, there are schools with graduation rates in the single digits. Perhaps there even needs to be some tuition remission for students enticed to attend such schools.

I’m not saying that the policy changes I’m describing (or gesturing at) here are the solution to skyrocketing student tuition costs and debt. But at least such proposals are trying to get at the root of the problem by understanding how we got into this present mess and how we can start to extricate ourselves from it. Hard work and careful decisions will need to be made.

In contrast, by weaponizing “free” and “fair,” one attacks this problem with a much blunter instrument. Like a sledgehammer, the use of “free” and “fair” in combination promises to eliminate the problem of skyrocketing school tuitions and debts with one hard blow. Isn’t it obvious that the present system is unfair? And isn’t it obvious that the reason it’s unfair is that education was never meant to cost anything in the first place? The present educational system is unfair, and the way to make it fair is to make education free.

To think that we’re being treated unfairly makes us angry. Anger in turn clouds our minds. And getting stuff for free, which usually doesn’t need any help from anger, is enough to turn our brains to mush as well. Unfair, anger, and free together make for a potent, toxic mix. We become convinced that we’re being treated unfairly. And we become further convinced that we’re being exploited to pay for stuff that should have been free from the start. In this way, “fair” and “free” become more formidable than any WWE tag team.

There’s a fundamental problem with using “free” to resolve “fair,” and it’s this: there’s never enough free stuff to make things fair. According to the Rich Register, the total wealth of the 5,000 wealthiest people in the U.S. comes to $3.6 trillion. That could retire the entire existing student debt. But it won’t put a dent in health care costs. That $3.6 trillion is wealth accumulated over years. If it is expropriated, that money won’t be created again. The companies and enterprises that produced it will be gutted. And so, the goose that lays the golden eggs will be dead.

Britain’s former prime minister Margaret Thatcher put it this way: “eventually you run out of other people’s money.” The appetite of “fair” is insatiable. And “free” can never satisfy it. The fact is, we typically do ourselves and others a favor by paying our own way. When we pay for something, we value it and don’t waste it. Free, on the other hand, invites waste because there are no incentives to practice wise management of scarce resources when things are free.

Interestingly, in the case of education, people actually learn better when they have to pay for instruction. Some self-help gurus (e.g., Anthony Robbins) charge exorbitant sums for their courses even though their ideas are readily available in books. It’s not just to make money — it’s to train learners who thoroughly imbibe the master’s teaching.

People pay the money to these gurus because in the act of paying, they commit themselves to learning and implementing the material in a way that they wouldn’t otherwise. You can see this difference in the course completion rate with Khan Academy, which offers its courses for free, and courses taken for a fee at a conventional school.

Examples of the “fair” and “free” tag team abound in politics, and that’s true worldwide. Often when politicians put “fair” and “free” in combination, it feels more like a publicity stunt than a serious political proposal. Does anyone really think that higher education in the U.S. can be made entirely free? When the various government budget offices put pencil to paper, the money never seems to be quite there. The problem with free stuff is that there’s just not enough of it to go around.

Education isn’t the only arena in which “free” is supposed to make things right for “unfair.” Health care, already mentioned, is an even bigger arena. Free Medicaid for all! Free day care for all! And where “free” seems unrealistic even to the most unrealistic advocates of “fair” and “free,” there’s always heavy subsidization, which is free money to help diminish a perceived inequity, even if it can’t be eradicated by going totally free. Just to be clear, there’s a part of everyone who would like all this stuff to be free. But for economics to be worth its salt requires sober thinking, and that means dispensing with myths like the tooth fairy.

The free-fair combo gains much of its strength not from actually being a viable solution but from the illusion of being a viable solution. It thereby becomes a pose rather than an actual problem solver. Yet there’s plenty of mischief to be accomplished even in the pose. The free-fair combo plays perfectly with the victim-victimizer duality. The victims are those being treated unfairly. The victimizers are those treating the victims unfairly. Obviously, the fair thing to do then is to take from the victimizers and give it to the victims. What’s free to victims thus comes as a cost or just penalty to the victimizers.

But are the victims really victims and are the victimizers really victimizers? Or have they only been conveniently dubbed as such to advance a political agenda? Are the victimizers in fact just political opponents? Are the victims just useful pawns to be cynically manipulated? And is the free-fair tactic just a ploy for using the victims to subdue the victimizers? And who exactly is engaged in such a ploy?

To expand on this last question, Who expropriates or redistributes from the victimizers to give to the victims? Who champions the victims by punishing the victimizers for their unfairness? In the free-fair tactic, the role of the individual or entity engaged in such expropriation, redistribution, and punishment is usually muted (best to stay behind the curtains and not be too obvious). But at times it is loud and clear.

Consider this video of Hugo Chavez, the deceased dictator of Venezuela, going into a neighborhood and by fiat declaring that the dwellings of persons and businesses are herewith expropriated (listen for the word “expropriese”):

When economic and fiscal details need to be hammered out, when politicians actually have to get their hands dirty with the messy business of making political sausage, “free” is never fully able to resolve “unfair.” Sure, there is political capital to be gained in making the lives of the “unfair victimizers” more difficult, to see them get their comeuppance by relieving them of excess cash and property. And sure, there is political capital to be gained in giving what’s expropriated (whether by taxes or my more muscular means, as with Chavez) to the “unfairly treated victims.”

But at the end of the day, even if the victimizers are reduced to penury, the victims never quite seem to get enough free stuff to make their lives substantially better. Those who prosper, instead, are the rulers with the power to move capital and property from victimizers to victims, invariably charging a substantial intermediation fee for their services to humanity. It’s a deep mystery, but somehow the ruling class always seems to come out all right!


The lesson of this essay is clear: whenever you hear the words “free” or “fair,” and especially when you hear them uttered together, reach for your wallet. Do the economic calculation to determine whether what’s said to be free is free indeed. Examine carefully any claims about fairness or unfairness to see whether they hold up. And especially, if you hear both four-letter words uttered in the same breath, analyze whether making stuff available for free is really the solution to some perceived unfairness. By so defending yourself against “free” and “fair,” you help to restore economic sanity and make the world a better place.


Dan Ariely, Predictably Irrational, revised and expanded edition (New York: Harper, 2010).

Robert Cialdini, Influence: The Psychology of Persuasion (New York: William Morrow, 1984).

Richard Feynman, Surely You’re Joking, Mr. Feynman! (New York: W. W. Norton, 1985).

Erich Fromm, The Art of Loving (New York: Harper, 1974).

Michael Lewis, Boomerang: Travels in the New Third World (New York: Norton, 2011).

Marcel Mauss, The Gift: The Form and Reason for Exchange in Archaic Societies, trans. W. D. Halls (New York: W. W. Norton, 2000).

Samuel P. and Pearl M Oliner, The Altruistic Personality: Rescuers of Jews in Nazi Germany (New York: Free Press, 1988).

John Searle, The Construction of Social Reality (New York: Free Press, 1995).

Chris Voss, Never Split the Difference: Negotiating as If Your Life Depended on It (New York: HarperCollins, 2016).