Caleb Fuller’s book No Free Lunch: Six Economic Lies You’ve Been Taught and Probably Believe is a well-written, easy-to-read short book (approximately 120 pages) that clearly explains foundational concepts of economics such as opportunity cost and how incentives change behavior. It is an excellent teaching tool that can be used by high school teachers or college professors to complement standard textbooks. The book cover echoes what I tell my students on the first day of class—do not use the “F-word”—“free.” While there might be a zero price for something, there is never a zero cost.

It is evident that Fuller genuinely loves and appreciates the economic way of thinking. Unfortunately, many students are bored in their economics class when they are too math-based and technical—when they lack real-life applications and relevant examples from pop culture, music, movies, and policy issues discussed on the news. Fuller states, “Most people don’t think economics can be life-changing because they confuse economics with forecasting, charts, diagrams, numbers, ideology, math, business, statistics, money, finance, stock markets, personal finance, or even ‘the economy’” (p. 6).

In No Free Lunch, there are no graphs or mathematical equations, so this book is accessible to laypeople; however, economics students and professors can learn from it because, unfortunately, many are adept at using sophisticated mathematical techniques, but their “economic way of thinking” IQ is low.

However, this book is distinguished because Fuller introduces readers to several important thinkers in economic history such as Frédéric Bastiat, Ludwig von Mises, Friedrich Hayek, Henry Hazlitt, James Buchanan, Milton Friedman, and Armen Alchian. The list of references at the end of the book is a valuable resource. Moreover, Fuller uses pertinent examples to make his points. Fuller uses the analogy of eyeglasses that the sound economic thinker must wear to see the unintended consequences of government rules and regulations.

Fuller’s book is divided into the following six sections:

Ch. 1 “Destruction Is Profit”
Ch. 2 “Lunch Is Free”
Ch. 3 “Intentions Guarantee Outcomes”
Ch. 4 “Exchange Is Exploitation”
Ch. 5 “Trade Is War”
Ch. 6 “Markets Are Unregulated”

I will provide an overview and analysis of each section.

Destruction Is Profit

Chapter 1 introduces the broken window fallacy. We are reminded that we must not just focus on the seen but also the unseen—destroying the window does not stimulate the economy. Understanding this helps people understand that there is no silver lining to destruction. In other words, after a natural disaster, the public and private sectors must spend money to clean up and rebuild. Indeed, workers will use their paychecks to buy goods and services, and we will have an apparently beneficial multiplier effect. However, economic thinking helps us understand that the money used to clean and rebuild has an opportunity cost. The extra spending does not create jobs, it just redistributes them.

Most economic fallacies are based on the failure to examine policy effects on all groups and consider the long-term effects—this is the main point in Henry Hazlitt’s influential Economics in One Lesson. Fuller quotes Hazlitt, “Economics is haunted by more fallacies than any other study known to man.”

Fuller uses what he calls the “opportunity cost lens” (p. 15). Unfortunately, because most voters do not own these “set[s] of glasses,” there is a “gulf between what professional economists believe about the world and the average person’s beliefs” (p. 17). He cites George Mason economist Bryan Caplan, who had studied this phenomenon.

Fuller uses interesting examples regarding the opportunity cost lens to explain why lines are longer at grocery stores in poorer neighborhoods, why retirees spend less money eating out while spending more time cooking at home, and why more women than men attend church.

He cites Robert Higgs who dispelled the myth that World War II was good for the economy and helped end the Great Depression.

Fuller does an excellent job of conveying that destruction does not boost the economy.

Lunch Is Free

Fuller emphasizes the importance of understanding scarcity. Scarcity—unlimited wants, limited resources—implies having to make choices. Because we must make choices, goods and services must be rationed. Fuller explains the benefits of the price system as the allocation mechanism. Politicians do not always like market prices; therefore, they “protect” consumers with price ceilings and sometimes cater to special interest groups with price floors. Policymakers forget that in the real world, there are unintended consequences. As Fuller puts it, “When we ignore opportunity cost, we end up grounding policies in false utopias instead of in reality” (p. 36).

He addresses the problems with rent control by referencing Milton Friedman and George Stigler’s famous “Roofs or Ceilings: The Current Housing Problem.” Subsequently, he provides examples using the “opportunity cost lens” to show how quality deteriorates and discrimination rises under rent control. Fuller reminds the reader that intentions are not results.

Intentions Guarantee Outcomes

Chapter 3 introduces the reader to the “cobra effect,” showing how intentions can backfire: “It’s critical to understand that virtually all public policies alter the relationship between costs and benefits. ... And when people change their actions, they may do so in a way that works at cross-purposes with a public policy’s noble intentions” (pp. 53–54). He uses the examples of the United Airlines Flight 232 accident in 1989, the “Ban the Box” legislation intended to help people with a prison record get a job, and occupational licensing requirements for electricians.

In the first example, Republicans Jim Lightfoot and Kit Bond proposed legislation requiring parents to put their infants in safety seats on commercial planes. While this sounds reasonable, this would have made it more expensive to fly than drive, leading more families to choose driving to their destination. However, people are more likely to die in a car accident than in a plane accident, so this legislation would have led to more children dying in cars than would have been saved on planes.

This chapter conveys a powerful message—good intentions do not necessarily lead to good outcomes. Fuller’s examples demonstrate that legislation intended to increase safety and save lives or new labor laws intended to help people get a job, can actually kill people and make it harder to find a job.

Exchange Is Exploitation

Voluntary exchange is a positive-sum game. Unfortunately, the myth remains that when a business owner gets richer, his or her customers become poorer. The logic is clear and simple—no two individuals will voluntarily trade unless they ex ante believe they will be better off for it. This does not mean there is never ex post regret or “buyer’s remorse.”

Furthermore, my actions of buying a movie ticket or a latte prove my revealed preference—that I thought it was worth it and that I was not “ripped off” or “exploited.” I thought the benefit of the purchase was greater than the cost—the next best alternative that I could have purchased with that same money.

Fuller explains the benefits of exchange and how the term “exploitation” is misused. He then explains how this logic even applies to so-called sweatshops. He explains that he is not referring to situations of slave labor, which are immoral and violate human rights and dignity. Rather, he discusses the stereotypical Nike story where the shoe giant opens a factory in a poor country and people work long hours for relatively low pay (relative to what we in wealthy countries earn). He correctly points out that people look at the world through their own eyes and weigh their personal benefits and costs. While Westerners would not work for those wages, we are not in those countries. Since the relationship between the firm and the worker is voluntary, he argues no exploitation occurs.

Trade Is War

Fuller deftly summarizes the benefits of free trade and introduces Public Choice analysis, something lacking in many textbooks. Public Choice analysis explains why some politicians support tariffs and quotas while economists almost unanimously oppose them.

Fuller successfully applies the “opportunity cost lens” to explain comparative advantage and the benefits of specialization. In addition, Fuller debunks the “Save American jobs” argument often used to support trade restrictions. When we consider the effects of this policy on all groups, we learn that while one group wins, the majority loses. This chapter is very timely, especially given this election year.

Markets Are Unregulated

In this final chapter, Fuller explains that the free market does not need to be regulated by the government. The government plays a legitimate role in enforcing contracts. However, in a free market, businesses are “regulated” by their customers. Fly-by-night operations or businesses selling shoddy products will die off. Businesses are incentivized to act like they love their customers by offering them superior products at competitive prices. If not, then consumers will spend their money elsewhere.

Fuller also explains how market incentives punish discrimination by imposing an opportunity cost on bigoted business owners. Moreover, when the government limits profits, it increases the likelihood of discrimination.

Conclusion

I thoroughly enjoyed reading this book. Fuller succeeds in exposing six typical economic myths. He provides several excellent examples of the unintended consequences of government intervention and presents prominent free-market thinkers who are omitted from the average high school or university classroom.

It is clearly written and is accessible to the average layperson. Nonetheless, economics educators will also find this to be a useful resource for their teaching while students will see policy issues more clearly and see the world more carefully through the “opportunity cost lens.”