Gratis Is Not Great

Almost every psychologically normal human is delighted to here about products everyone can enjoy free of charge.  “The school are free!”  “Health care is free!”  “Lunch is free!”

According to basic welfare economics, however, gratis goods are almost automatically inefficient.  Unless the marginal social cost of the product miraculously happens to be zero, setting a price of zero leads to socially wasteful behavior.

So what makes “free” so beloved?  The simplest explanation is that people are...