If you have never been offered a free product, you must be living on a deserted island. Sellers offer free software, free cell phones, free checking accounts, and recently, free computers. Dentists give out free toothbrushes. Advertisers tout that if you buy three tires, you get one free. At state visitors’ centers, there are free brochures and maps. Publishers provide free CD-ROMs along with some of their textbooks. You might think that the presence of so many free products contradicts the economist’s assertion that "there is no free lunch". You would be wrong! Scarce resources are used to produce each of these products, and because those resources have alternative uses, society incurs an opportunity cost. Where there are opportunity costs, there are no free lunches. So why are these goods offered for free? In a word: marketing! Firms sometimes offer free products to entice people to try them, hoping they will then purchase them (or upgraded versions of them) later. That free software may eventually entice you to buy the producer’s upgraded software. In other instances, the product contains advertising. Those free brochures contain advertising for shops and restaurants and that free e-mail program is filled with ads. In still other cases, the product is only "free" in conjunction with a purchase. To get the free bottle of soda you must buy the large pizza. To get the free cell phone you need to sign up for a year’s worth of cell phone service. "Free products"? Sure. "Free lunches"? That is quite another matter.

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1.2 Abstractions and models button

"What do you consider the largest map that would be really useful?" "About six inches to the mile." "About six inches!" exclaimed Mein Herr. "We very soon got six yards to the mile. And then came the grandest idea of all! We actually made a map of the country on a scale of a mile to a mile!" "Have you used it much?" I enquired. "It has never been spread out yet," said Mein Herr. "The farmers objected. They said it would cover the whole country and shut out the sunlight!" Lewis Carroll Silvie and Bruno, 1889 In many ways, good economic models are like good maps. Both are abstractions that purposely leave out irrelevant facts and circumstances. Both are useful and practical because they simplify complex realities. Maps not only help us understand geographical relationships but also serve as useful tools. A road map of the United States, for instance, helps us understand where Connecticut is located relative to California. It also is highly practical in helping us drive between Indiana and Idaho. In much the same way, economic models are helpful and useful. For example, a model indicating how consumers respond to a change in a product’s price helps us understand a significant facet of human behavior. That model also is highly practical. Among other things, it identifies the primary way a business can reduce an overstock of unsold goods. The appropriate map or appropriate economic model is the simplest one that accomplishes a specific goal. Although we may need a highly detailed street map of Cleveland to find a specific residence there, we need only a general road map to drive between Cleveland and Columbus. Similarly, we need a highly complex, detailed economic model to predict the economic effects of a general reduction of U.S. tariffs (taxes on imported goods) on the relative outputs of various U.S. industries. In contrast, a much simpler model will suffice to show how a reduced U.S. tariff on imported beef will affect the total consumption of beef in the United States. You will discover many economic models in your study of economics. The trick is to use the right model for the right purpose. Think of these models as highly useful, highly practical "maps," which help us better understand elements of the highly complex economy.

Photograph courtesy of: (c)Nance Trueworthy;

1.3 Specialized definitions button

"Then you should say what you mean," the March Hare went on. "I do," Alice hastily replied; "at least I mean what I say—that’s the same thing you know." "Not the same thing a bit!" said the Hatter. "Why, you might just as well say that ‘I see what I eat’ is the same thing as ‘I eat what I see!’" Lewis Carroll, Alice in Wonderland, 1865 In an indirect way, the specialized terms used in games such as soccer, baseball, bowling, and so forth provide insights on the study of economics. Consider the game of pool, for example. The following terms are used in pool but have slightly or totally different meanings in everyday language: "pool," "cue," " kiss," "bank," "bridge," "combination," "break," "lag," "run," "rack," "scratch," "chalk," and "rail." Economics, too, uses terms that have different meanings than in everyday usage. In economics "labor" usually means all productive effort, not simply blue-collar workers; "capital" means human-made productive resources, not money used to buy resources. Also, "investment" means purchase of capital goods, not purchases of stocks and bonds; "public good" means goods that have special characteristics, not the good of society; and so forth. Learning to communicate in the game of pool (or any other game) requires learning the meaning of specialized terms. It’s the same with economics! It is not enough to "mean what you say," in economics. To communicate effectively (and to do well on exams!) you must "say what you mean," using the precise terms of the discipline.

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