Friday, January 29, 2016

Dear Forbes: Your Math Sucks

"There's no such thing as a free lunch."

Everyone has heard this bludgeoned-to-death economic axiom, regardless of whether or not they have ever stepped foot in an economics class. The reasoning is as follows: even if lunch is free for you, someone, somewhere, bore the cost of that delicious meal. There is no denying this; it is an a priori fact.

Our friends at Forbes have been hellbent on reminding everyone of this truism lately. It typically looks something like this:

     "Bernie Sanders fails again to understand that there is no free lunch."

     "Unnamed Democrat forgets economics 101: there's no free lunch."

     "Now, a quick economic lesson for our democrat friends: There's no free lunch."

It goes on like this forever. They sit atop their pseudo-intellectual tower, incessantly giving the public free economic lessons. Gee, that sure is swell, misters! 

But their free-lunch lessons are nonsensical.

In economics, deciding whether or not to do anything comes down to a simple question: does the marginal benefit outweigh (or equal) the marginal cost? If the additional benefit you receive from doing some activity x is greater than or equal to the additional cost of doing that activity, then you do it. Every time.

For you Econ nerds out there, here's the equation: If MB ≥ MC, then do it. Whatever "it" happens to be is irrelevant; your net benefit is greater than your net cost.

So, back to Forbes. What is missing from their ad hoc lessons? You guessed it -- the marginal benefit. They don't even mention it. That leaves us to wonder whether, a) Forbes writers and columnists do not realize they're forgetting this important little bit and are therefore just stupid; or b) they know it and they're intentionally leaving it out of their math in order to serve a political end. Are they charlatans or imbeciles?

I don't think they're stupid, which sucks for them because it would have been a lot more forgivable. 

According to this logic, no one would ever spend any money on anything, because without including a benefit, the cost is always too high -- zero is never more than MC. I am sure the folks over there are aware that this is not how the world works, and yet they insist on publishing this rubbish anyway.

Please, Forbes, pray tell, what in the hell are you doing?

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