Not Even Sunlight is Free

Teaching the Principles of Economics course to the first semester students at the Gokhale Institute is my absolute favorite thing to do. Both of these things matter – teaching this specific course matters, because I get to help young people realize how awesome economics can be. But teaching at the Gokhale Institute also matters, because it is the place where I myself learn economics.

We just finished the first week of teaching this past week, and in the last class I just about got enough time to introduce to students the concept of opportunity costs.

There is no such thing as a free lunch.

Read that line carefully, and tattoo it onto your brain. That’s the easy bit – tattooing it onto your brain. Applying it ceaselessly, day in and day out, to everything that you do – that’s the really, really hard bit. I wish I could say I practice what I preach, but let’s quickly move on.

So one of the keys to thinking like an economist is always remembering that everything has a cost. This may be one reason economists have fewer friends than they otherwise would. Sometimes people are very happy holding on to the naïve view that something is free. We like the idea of a bargain. We don’t want to hear about the hidden or non-obvious costs. Thinking about foregone opportunities, the choices we didn’t make, can lead to regret. Choosing this college means you can’t go to that one. Marrying this person means not marrying that one. Choosing this desert (usually) means missing out on that one. Sometimes, people just want to eat their cake and have it, too, without being reminded that they missed out on a spectacular piece of pie.
All true. But if you want to get the most out of life, you have to take account of the opportunity cost, the foregone alternatives. Better to make good choices and learn how to live with them than make bad choices in blissful ignorance that lead to ruin.

Again, there is no such thing as a free lunch.

Part of the reason teaching this is so much fun – besides it’s innate importance – is challenging students to come up with a “free lunch”. And I enjoy extending this challenge to my students: give me an example of a free lunch!

Here’s Raghav Agarwal:

In today’s session you said nothing in life is free and there is always an opportunity cost. That got me thinking about and identifying all the costs I incur in my daily life but there is one thing I failed to identify a cost to and that is sunlight. So the purpose of me writing this mail is to understand the price we pay for sunlight (if there is any) and that’s about it.

Whatay enjoyable question! Before you read my answer, try answering it yourself. Is not sunlight free? Once you’re done, read my take:

Whatay lovely question!
1. How do we use sunlight? If it is something as simple as sitting in the sun, and basking in it’s warmth, the opportunity cost is doing something else with that time (sitting in an air-conditioned room, for example)
2. If sunlight is used to generate electricity, there will be opportunity costs in terms of the capital (the machinery) used to generate this electricity. That machinery (and the raw material used to make it) could have been put to different use.
3. If sunlight is used to make plants grow, something else could have been done with that land (construct buildings, for example).So if you ask me, there’s opportunity costs at play here too!

So if you ask me, nope, not even sunlight is free.

I hope some of you disagree with my answer. I hope some of you have other contenders for “But this is free, surely?”. Let me know, and I and my students shall ponder over your responses!

Here are other posts on EFE with the tag “opportunity costs“.