on 9/5/02 8:38 AM, Steven Bissell at [log in to unmask] wrote:

> But Gus, it remains a tautology. If I turn right, I've lost the
> opportunity to turn left. So what? Under any conceivable set of
> circumstances doing X negates the ability to do Y. Saying that the cost
> of X is (actual cost of X) + Y is meaningless. The cost of X is whatever
> it is, the 'opportunity' costs are not real.
>
> I think I'm going to let this bone go; I'm starting to sound hysterical
> even to myself.
>
> Steven
>
It's part of the economists' argument - correct as far as it goes - that
there are costs to everything.  Their meaning is not quite as you describe -
if you had a choice in turning right or left, and turned right, but in the
absence of that choice would have turned left rather than driven straight
ahead, that is an opportunity cost.  It is what your second most desired
choice is, the one you gave up in order to make your more desired choice.
Sometimes it is trivial - sometimes it is pretty important.

The concept is a reminder to those who often forget it and propose policies
without attention to larger contexts.  A tautology can be useful when
someone is holding an illogical position or who suggest that policies can be
evaluated only for the good they promise without paying attention to costs
(monetary and otherwise) they impose.

A nontrivial example relevant to this list:  Federal dams brought cheap
electricity to many who were otherwise without it.  At a relatively trivial
level (if you grant the existence of public values, as I do) the taxes so
used could have been either left in consumers' pockets, to be used as they
saw fit, or spent in pursuit of other public purposes.  Would it have been
better to leave them in people's pockets?

Yes by definition if you are a libertarian, because empirical results don't
matter.  More ambiguous and potentially harder to determine if you are not a
libertarian.  In my opinion trying to settle the issue by arguing that if
the dams were not built, the money would have been better used by consumers
is a non starter.

But those dams ALSO ended a great deal of on going research on how
electricity could be generated in isolated areas - research we now wish was
much farther along, and which from our present vantage point serves public
ends better than those dams, unless you are really into war.  (Dams are
targets in the way a backyard generator will never be.)  That is a
nontrivial opportunity cost.  Were they worth it?  Here we would have to
look at opportunity costs for PUBLIC values since we can't achieve all
simultaneously.  Here there are grounds for comparison.

Opportunity costs can perhaps be compared with policies within the public
realm, as well as within the private realm, but I suspect it is very hard to
compare them across realms because the contexts of choice are fundamentally
different - as Sagoff showed so well.

As I think about it more, for purposes of policy analysis the whole concept
is suspect (beyond being a simple reminder that nothing is free - Hardin's
point that there is no such thing as a side-effect) because the context in
which a choice is made so strongly affects the choices actually made.

NONE of what I am saying is to defend Lomborg and the apologists for
corporate values that look up to him as an authority on all things
ecological.  He did expose exaggerations in certain areas - and that was and
is a service - but his work is also a good example of how statistics (from
any political perspective) are not a good substitute for analysis.

I'll bow out for now.

Gus diZerega