The essay that I linked to the other day, by Russ Roberts, contains a lovely little quote by Thomas Sowell: only trade offs, no solutions.
Four small words, but they contain one of the most important lessons in all of economics: opportunity costs are everywhere. Opportunity costs are literally the cost of the opportunity foregone. If you choose to spend the next fifteen minutes reading and thinking about this blogpost, then you’re not going to be able to do something else in those fifteen minutes. You could have taken a nap, you could have listened to songs, you could have watched videos on YouTube – but now, each of these is not going to happen, because you’re going to devote your attention to this blogpost.
That is the opportunity cost, to you, of reading this blogpost.
But the deeper point is the one that Russ Roberts makes in his blogpost – that nothing is ever for free, because even if you pay nothing else, you’re still paying in terms of opportunity cost. That is, this blog is free, and will always be free, but in another important and meaningful sense, it has never been free: you’re always paying with your time, and that time could have been potentially better spent elsewhere.
And that’s the point that Sowell is getting at, when he says only trade offs, no solutions. Because opportunity costs are omnipresent, and because there is no escaping them, economics can never give you a “solution”. At best, it can simply tell you that in order to do this, you have to give up that.
And this is true no matter what you’re talking about: it could be how you’re going to spend the next fifteen minutes, it could be your decision to get married (or not), or it could be your decision to abandon a particular course you’ve enrolled in midway through. If you find yourself asking others (or yourself) whether this is the best thing to do, you’re asking the wrong question – at least as far as an economist is concerned.
What is the cost, the economist will advise you to ask yourself, of continuing with this course, or deciding to marry this person, or of spending the next fifteen minutes reading this blogpost? Whatever it is that you would have done otherwise is the price that you’re paying to do this instead – and if the cost seems too high, well, you’re saying that the trade off is too expensive, and you should go ahead and do that other thing instead.
Opportunity costs, in other words, are everywhere. Or all costs then, in a sense, are opportunity costs.
But I do think Sowell put it best, and certainly the most pithily: only trade offs, no solutions.