Opportunity Costs and Merit Wants

Abstract

If opportunity costs are about cabbages, merit wants are about philosopher kings. These rival doctrines may speak in the language of economics but the guiding hand behind them is that of politics. The great questions are there: Who should rule? How should they rule? Who will govern the governors? How might subjective preferences be converted into collective rationality? In short, the question of whether decisions should be made by social interaction, with many minds contributing, or by intellectual cogitation, with an elite acting, in effect, as a single intelligence, will reappear here in different doctrinal form. The better to get to know them, we shall approach opportunity costs analytically, by decomposition, and historically, by evolution, for from these seemingly simple garden-variety notions of cost and merit, we shall peel off layers of ideology. If our economic onion causes more than a few tears, we can say only that it’s better to be sad theoretically than actually sorry for absentmindedly eliminating economics from public policy.

The notion that the cost of any action can only be measured by the value of the opportunities foregone by taking the action is at the same time trivial and profound.

Walter Nicholson in Microeconomic Theory