Sunday, October 9, 2011

The O.C.

Although many aspects of economic thought can be debated and tweaked, opportunity cost, is not one of these. We know that in order to have something we must give up something else if for no other reason than that there is only a finite amount of time in a day. A 'this for that' debate is part of our everyday lives. The amount of these decisions in ones lifetime approaches an infinite amount and they are guided by our past experiences and future expectations.
I think one of the most important lessons we can learn and teach to others is the idea of the hidden aspects of economics. What I mean by this is the opportunity cost associated with taking action such as taxation. As with the broken window fallacy taxation is often times ignored in the realm of opportunity cost. A new tax on millionaires may appeal to a large portion of the public because it is what is seen, a tax that helps support a bill to provide jobs. What is not seen is the opportunity cost associated with the money that has been taxed. Might it itself been used to create a job? Or spur an invention or innovation that might create 10,000 jobs? Or be used to buy a new car that helps people currently employed? These are questions that are difficult to answer but should be asked.


  1. I like your point. Can questions like that be answered? Can we ever know what the value of leaving 5% more in taxpayers pockets is?

  2. Does history give us any clues? Would that allow us to really infer how people would spend today? What would we give up? What would we get back?

    Provocative post, Zach.