Monday, July 21, 2008

There's No Such Thing as a Free Lunch

Eating at Togo's reminded me of Milton Friedman's famous quote that there's no such thing as as free lunch. I thought this was just a clever phrase he made, but George Stigler recounts how that line is actually based on a real restaurant near U Chicago.

There was a restaurant/bar nearby which gave free sandwiches every day at lunch time. The trick was that they made the sandwiches extremely salty, so that the customers would buy beers and other drinks as soon as they started eating. The restaurant then increased the price of the beers so that it covered the price of the sandwiches.

When Stigler, Friedman, and other faculty members were eating, one of them commented on how great it is that lunch is always free. To which Friedman responded, "There's no such thing as a free lunch."

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