Sunday, October 9, 2011


First off, allow me to refrain from defining opportunity cost.

Now that that's out of the way, let's get down to business. There Ain't No Such Thing As A Free Lunch. TANSTAAFL. Who first coined that acronym? Wiki doesn't know. "Uses of the phrase dating back to the 1930s and 1940s have been found, but the phrase's first appearance is unknown." I'm sure whoever coined it stole it from someone else.

Nevertheless, I do know who popularized it. My favorite author Robert A. Heinlein in his 1966 novel The Moon is a Harsh Mistress. (My favorite book by the way. And a great read for all you rational anarchists out there. I have an extra copy I will loan to a person who promises to read it.)

But that's all an aside.
What that first article really got me thinking about was a utopia where all the opportunity costs are clearly displayed on the products we can buy. Imagine it was expressed in some meaningful way. Like cigarettes wouldn't just cost the $9 dollars or so (Frankly I don't know how much a pack costs) but you would also see the 28 mins you loose from your lifespan from smoking the pack (quick Google search turned up: A used book on Amazon would cost $3.00 + 2hr 35mins. Think of the iPhone app store. Tiny Wings now costs $0.99 + 72hrs (Okay I play a lot of Tiny Wings). Facebook now would be required to display the REAL cost of social networking which would probably add up to quite a sum.

Obviously this could never be. But it got me thinking about (as Zach put it) the OC in an interesting way.

Jumping around again. After my roommate Erik started getting into his Sustainability class (Garrett is also in this class. Maybe he'll have some input.) we started talking about efficiency and the OC. I was confused by the point of the project. I asked how the class was going to decide what things were worth it for the community to provide for itself when the economy is vastly more efficient at providing goods. I pointed out that specialization and trade is more efficient than trying to do everything for yourself. I wanted to know where the line is drawn and how they were defining sustainability. Does it mean a closed system? No external input? Only using the resources available within the community? Does it mean the community could survive on its own if it came to that, say if there was, I don't know, a zombie apocalypse? Are they aiming for a mixed system? Is the qualification simply that the community requires less external input than the other on campus housing options? Having just started the class Erik didn't know at the time.

I still believe that it is more efficient to rely on the economy for most goods and services. But that raises another question. Is our economy sustainable? For how long? Is our species sustainable? What should a government's role be in protecting the environment? Even if inefficient, should we do it on moral grounds?
I use the word 'moral' as Robert Heinlein defines it in Starship Troopers. One of his characters posits that humans have no "moral instinct." We are taught and conditioned into morality. According to Heinlein it is "an elaboration of the instinct to survive... ...The basis of all morality is duty, a concept with the same relation to group that self-interest has to individual."
Pulling John Nash here (who I know little about, I'll admit. I just watched "A Beautiful Mind" so please call me on any misunderstanding I demonstrate here) what is best for the group is not simply what is best for the individual, but rather what is best for the individual and the group. Therefore, the final question is this: in an age of globalization, how can we instill global morality into the economy? Should we even try?


  1. Well my good sir, the sustainability class you speak of is actually an architectural design competition. The goal is to have a small village of 4 homes that can be used to test different building techniques. The homes will be rented out as student hosing and act like a living laboratory. One of the guidelines is the construction needed to be sustainable but who knows what that means.

  2. Haha So no one knows what sustainability exactly means. That's awesome. From what I hear from Erik it sounds like you guys are working really hard. I am excited to see the finished product. I know Erik is excited to live there. I hope you win.

  3. Wow, you made me aware of a lot of things I wasn't aware of. I also like ideas I got from the series of questions you posed. Overall very entertaining post.

  4. First of all, allow me to say this was a very good post. The fictional world where you can see the opportunity was a good idea except it's not accurately defined. The 28 minutes you lose from smoking a pack of cigarettes are not an opportunity they are another cost (which is not monetary). True these 28 minutes are a cost that people often ignore even though you have enough information around to know about that costs but ultimately are not high enough to outweigh the benefits that smokers get from smoking those cigarettes. However, an appropriate description of that environment would be that with those $9 you spent on a pack of cigarettes, you could buy instead 9 McDonalds $1 dollar menu, which would feed a young student like you for 3 days. Also with those 28 minutes that it is costing you because you smoke is equivalent to a 28 minutes run which could actually increase your lifespan by 2 minutes. Those 72 hours of tiny wings you play, their opportunity cost is 72 hours of studying, or 36 hours of studying, 30 hours of working, and 6 hours of exercise.
    The typical example I use in class is in the form of 2 questions. Assume two population groups: women with less than a high school degree and women with a college education. The first question is which group will represent most of the labor force. The answer is women with a college education because having a college education will make you more employable. The second question is which group will have more children. The answer is women with less than a high school education. The explanation is that these women's opportunity cost of having children is lower than for women with a college education because women with a college education will more likely have a job and a higher income so when they have children they "lose" more than women without a high school education who are less likely to be employed and more likely to have lower wages.
    Opportunity cost is more what you could have done instead of doing what you are doing. You could either have children or work (and make money). It is opportunity cost that will dictate how long you will stay in school. Will you get just a BS, will get a MA or a Ph.D. The further you go in your education, the greater your opportunity costs in terms of remunerated work you are given up. The more educated you are, the higher you potential income and therefore the higher your opportunity cost to pursue an education. It is also why you have larger college enrollment during bad economic times because opportunity costs go down. It is also why increase in minimum wages tend to lead to more high school drop out because it lowers opportunity costs for high school dropouts from dropping out of school!

    Finally sustainable environment is largely defined as an environment which would allow for human life to continue as it is today. This is a new trend in education and among political activists who believe that human beings are destroying the planet and the planet is no longer sustainable: concepts such as global warming, natural resources depletion, melting of the ice cap, etc. will make our environment unsustainable. The problem with the arguments is not they are wrong but they are unable to tell us exactly when this will happen, its magnitude but also completely ignores the costs of stopping that trend. How much does it cost to prevent the average temperature to go up by 1 Celsius degree in the next 10 years and what's the benefit of preventing that temperature of going up by that degree. Which also raises that important question what are we going to give up to prevent that temperature to go up? We could either spend a billion dollars prevent that temperature rise OR we could spend a billion dollars developing a cure for cancer or a vaccin for HIV. TANSTAAF...