The Myth of Free

Posted by Social Science Research Network

The Myth of Free

John M. Newman (University of Memphis)

Abstract:       Myths matter. This Article is the first to squarely confront a powerful myth that pervades modern economic, technological, and legal discourse: the Myth of Free. The prevailing view is that consumers capture massive welfare surplus from an ever-rising flood of innovative new products that are offered free of charge by firms like Google, Facebook, Pandora, and others. This windfall was made possible, we are told, by the convergence of digitization and networking, which eliminated the marginal costs of such products. Free was born, heralding the end of scarcity and an age of abundance.

But that orthodox origin story is fatally flawed. This Article first formalizes, then deconstructs, the Myth of Free. Unsurprisingly, given its faulty premises, the Myth’s conclusion is incorrect: there is still “no such thing as a free lunch.” Free does not signal the end of capitalism or the demise of standard economic theory.

Moreover, the Myth of Free is not benign. It has led to an undeserved protected status for certain suppliers, who receive legal immunity or favorable treatment in close cases involving contract, antitrust, consumer protection, and privacy laws. It has motivated policy proposals that would eliminate market interventions or (paradoxically) competitive markets themselves, without adequate justification in either case. Worse yet, policies designed for a post-scarcity world necessarily overlook the persistent problems attendant to scarcity. This Article seeks to dispel the Myth of Free before it can wreak further harm.