I understand opinion writers are supposed to write opinions, but wouldn't you want to consult someone who knew something about the subject before displaying your ignorance in public?
EJ Dionne writing in the Washington Post makes the claim that "government works" citing as an example the bailout of auto companies by the federal government.
"In the end, taxpayers invested some $80 billion in the effort and recouped all but approximately $10 billion of that."
Let's think about this, Mr. Dionne (regrettably, after rather than before you wrote this).
1. If your investment advisor came to you and said he should be lauded for losing 12.5% of your money, would you do so?
2. To what other uses could that $80 billion have been put? If the government had not confiscated $80B from the private sector and directed it to the auto industry, isn't it likely it would have been invested in something that had a return higher than -$10 Billion?
I'm not sure whether to damn Mr. Dionne by pointing out his ignorance of opportunity cost or to assume he is knowingly trying to mislead his readers in order to make lame excuses for government economic malfeasance.
Showing posts with label Opportunity cost. Show all posts
Showing posts with label Opportunity cost. Show all posts
Tuesday, January 23, 2018
Monday, November 9, 2015
A Tale of Two Tickets -- Opportunity Cost and Climate Alarm.
John and Ted, two brothers, are big NFL football fans. Tickets to the Super Bowl are going for $5000 each on StubHub and Ebay. Suddenly they win two tickets to the SuperBowl in a raffle. John says to Ted, "We can't afford to pay $10,000 to go to the Super Bowl." Ted replies to John, "But we're not spending $10,000. We got the tickets for free." Discuss.
If you're an economist, the answer to this seems pretty obvious. If you're a politician, or a member of the general public, it isn't. But it illustrates an underlying problem in the political process -- namely, opportunity cost. The cost of those "free" tickets really is $10,000 for the simple reason that you could sell those tickets and use the $10,000 for something else. If you really would spend $10,000 for Super Bowl tickets, you're fine, but the fact that you already have them in hand is irrelevant.
This is the fundamental illogic that Bjørn Lomborg points out about Global Warming activists. Given that resources are not unlimited, if you spend $10 Trillion trying to change the climate, is the benefit of that greater than how else you could spend $10 Trillion? It's pretty clear from his analysis that it's not.
Every good idea is not worth doing. Because in doing that good idea you must sacrifice other ideas that may have more value. Going to the Super Bowl is a good idea for John and Ted. But is it a better idea than what else they could do with $10,000?
If you're an economist, the answer to this seems pretty obvious. If you're a politician, or a member of the general public, it isn't. But it illustrates an underlying problem in the political process -- namely, opportunity cost. The cost of those "free" tickets really is $10,000 for the simple reason that you could sell those tickets and use the $10,000 for something else. If you really would spend $10,000 for Super Bowl tickets, you're fine, but the fact that you already have them in hand is irrelevant.
This is the fundamental illogic that Bjørn Lomborg points out about Global Warming activists. Given that resources are not unlimited, if you spend $10 Trillion trying to change the climate, is the benefit of that greater than how else you could spend $10 Trillion? It's pretty clear from his analysis that it's not.
Every good idea is not worth doing. Because in doing that good idea you must sacrifice other ideas that may have more value. Going to the Super Bowl is a good idea for John and Ted. But is it a better idea than what else they could do with $10,000?
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