Costs and Opportunities
29th September 2021
Everyone who has ever taken an introductory course in economics learned that “cost” is a short, punchy synonym for “forgone opportunities”. When you spend a dollar – or a minute – you choose one possible use for that money or time, and you give up a vast array of alternative uses. Your choice shows what you then judged to be the most desirable of the available opportunities. Whether your choice was wise depends on the value of what you got, as compared to the value of what you could have had. You may realize later that you misjudged; in that case, you paid “too much”. Or you may be satisfied, so that the price was “just right”. In neither case, though, is the cost “nothing”.
Whether Joe Biden ever took Econ 101, I don’t know. If he did, he has forgotten the meaning of “cost”. To be fair, he was a college freshman about sixty years ago. It’s natural that a few bits of book learning would slip from his mind over the decades. (After all, he apparently doesn’t remember what advice his military advisors gave him a few months ago about Afghanistan.) Forgetfulness explains the President’s defense of his multi-trillion dollar spending proposals: “My Build Back Better Agenda costs zero dollars”, because “it adds zero dollars to the national debt”.
Let’s make the implausible assumption that the second statement is accurate, that the trillions spent will be matched by trillions in tax revenue gained through shutting down “tax breaks, loopholes, and tax evasion for big corporations and the wealthy”. What that means is that the trillions whose disposal that Biden Administration proposes to take out of the hands of “corporations and the wealthy” – a cohort of hundreds of thousands, if not millions, of decision makers with a wide range of values – won’t be available for the goods and services that they would have purchased and the investments that they would have made.