The Dark Wraith Audio Lecture Series: Lecture 11
Lecture 11: "The Fundamental Economic Problem"
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This lecture sets forth the social problem economics as a discipline addresses: How do different individuals, groups, and societies allocate their scarce resources among competing possible end uses? Early in the lecture, the students are reminded of the essential importance of "opportunity cost" to economic decision making. Opportunity cost is the cost of the best foregone alternative. Whenever any choice is made, be it by an individual, a group, a business, or an entire society, many things are surrendered that would have been alternatives. The most valuable of those is the opportunity cost of the choice that was actually accepted.
At the personal level, opportunity costs incurred are often those involving the allocation of time. Choosing leisure (recreation, sleep, resting) is at the opportunity cost of the best wage that could have been made by working, instead. In fact, as I explain to students, choosing to be in a class for three hours a week, with two hours of studying for each in-class hour, means that a 16-week semester of economics for a person who could make $10 per hour at a job has an opportunity cost of $1440. (That's $10 per hour × 9 hours per week × 16 weeks.) The tuition the "direct cost" a student pays is a fraction of this "indirect cost"; hence, decision-making about whether or not to go to college is driven far more by a hidden cost than by the out-of-pocket money paid for tuition, books, and commuting or residency expenses. (That's why college enrollments generally go up during recessions: overall, wages are lower, so the opportunity cost of being in a class is lower!)
When a company chooses to use land it owns for a project, that land becomes an opportunity cost that must be included in the overall cost of the project. Even though the company owns the land and therefore does not have to pay for it to carry out the project, that land could have been used for other purposes and could, in fact, have been sold; the fact that it was not sold means that it is a very real cost of the project.
At the societal level, whenever a nation chooses to take on a given project, an entirely thorough cost-benefit analysis would have to include costs related to what must be given up for this project to be carried out. Although these costs do not appear as money out of the treasury in any immediate sense, they are nevertheless real, and they will express themselves sooner or later in the relative success or failure of the project and the losses incurred from the projects that had to be surrendered.
With that brief survey of opportunity cost as background, I encourage readers here to listen to this altogether engaging lecture, offered as a service of Dark Wraith Publishing. Although you will incur the opportunity cost of about 40 minutes of your time, it is well worth that modest expense. You are being afforded the chance to sit in on a real college lecture taught by an award-winning professor, who also happens to be your host here at The Dark Wraith Forums.
What more could an intelligent person with an insatiable thirst for quality education want?