Welcome to the third installment of Economics for English Majors, which is appearing as a series of standalone essays until my new Dispatch newsletter, Wanderland, officially launches next Monday. (Please do join if you haven’t.) I’m taking advantage of the temporary format to write some longer pieces—the ones in the newsletter will be shorter, usually. But, since there’s no newsletter real estate to take up, for now I’ll go long.
Another way of thinking about that is that, at the moment, the opportunity cost of writing longer E4EM essays is relatively low. Opportunity cost is one of the three or four most important concepts in economics, especially for non-economists who want to understand economic thinking in the public policy context. It is simple enough, but still underappreciated, in part because we tend to look at opportunity cost from the consumer point of view and forget all about the production side.
The fundamental issue in economics is scarcity. Scarcity is a fact of life: No matter how rich we become as a society, and no matter how much material abundance we enjoy, there is never enough to go around to satisfy every desire of every person: Some goods are naturally limited (there are only so many Rembrandt paintings), some goods are rivalrous in consumption (if Steve smokes a cigar, Jonah can’t smoke the same cigar), and our desire to consume goods that require work to produce (see last week’s discussion of Say’s Law) conflicts with our practically infinite appetite for leisure time. As much as it may grieve David French, you can’t plant turnips and play World of Warcraft at the same time. You have to choose one.
That special application of scarcity—“If you want x, you have to forgo y”—is opportunity cost.