* There is no such thing as a freebie in economics because ultimately somebody has to bear the cost of the supposedly free giveaways
* CAG’s financial audit for 2013-18 concluded that Delhi has no debt sustainability issues as its GSDP grew faster than its public debt
The Aam Aadmi Party’s win in the Delhi elections has inspired others to replicate its strategy. The West Bengal government’s last full budget before state polls proposed free electricity for quarterly consumption of up to 75 units. Mint explains the economics of freebies.
What’s the economics of freebies?
There is no such thing as a freebie in economics because ultimately somebody has to bear the cost of the supposedly free giveaways. The concept is popularly known as There’s No Such Thing as a Free Lunch, which is the name of a book by Nobel Prize-winning economist Milton Friedman, who showed that everything has to be paid for by taxes if not today or tomorrow, then the day after. When governments dole out gifts, citizens have to pay for them. It isn’t always the rich who pay. Often the poor pay for the gifts, as governments collect taxes on everything from matchboxes to diamonds.
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