My two older children laugh when I tell them that life is trade-offs. They laugh because I have been telling them that all of their lives. I am sure they both think it is the maxim by which I live my life. Even today, if I were to ask them, “what is life?” they would immediately respond, in unison: “trade-offs.
Life is trade-offs. You can’t get something without giving something up. If you give something up, you should expect to get something. It is true in Newton’s Laws of Motion and it is true in the Laws of Thermodynamics. It is certainly true in the laws of economics.
That life is trade-offs is evident in the saying that “there is no such thing as a free lunch.” One way or another, you lunch will be paid for. Somewhere in the economy, somebody has to give something up to pay for your meal. Whoever did so, expects something in return. It might be cash payment from a third party or it might be something more intangible. The payor may expect nothing from the person eating lunch, be he expects something, sometime.
It is as if the person sitting down for lunch passes an invisible IOU forward. It will be passed around the economy, maybe for years. It will eventually find its way home. Okay, maybe the recipient will die before his IOUs find their way home, but you get my point. All debts are paid and everything is paid for. Unless you are God Almighty, you cannot create a free lunch.
The problem today is that a huge percentage of Americans believe they can vote for a free lunch. They believe that they can force others to buy them lunch – or food or housing or medical care or birth control – and there will be no cost. They believe that insurance companies can be forced to pay on pre-existing conditions and there will be no cost. They believe that college grants can continually expand and there will be no cost. As we have seen, however, there is always a cost.
The cost is in economic friction and reduced investment. The cost is in reduced growth and stagnation. The cost is in reduced standards of living and in diminishing prospects.
The recipients of the psuedo-free lunches are unable to make the connection between their free meals and the stagnating economy that is bearing down on them and causing them to become ever more desperate for the next handout. They are feeling the IOUs come due but they don’t understand. They can’t see the connections. They just don’t get it.
Like a garage tinkerer working on a perpetual motion machine, these people believe that you can get something without giving up anything. The tinkerer believes that energy can flow from nowhere and the free lunchers believe that wealth can flow from a ballot box. They don’t understand thermodynamics and they don’t understand economics.
The perpetual motion tinkerer doesn’t much hurt anyone. This week something more than 50 million economic tinkerers decided to vote for an economic perpetual motion machine. It won’t work. Life is trade-offs.