Econ 101: Opportunity Cost

One of the principles of economics that confuse people to no end is actually fairly easy to understand. Opportunity cost is simply the idea that, if you use your resources to obtain something, you can't use those same resources to obtain something else.' It seems that the United States Congress, the people who actually hold this nation's purse strings, can't quite grasp the concept, either.

It's easy when dealing with numbers as large as the U.S. budget to assume that there's money for everything. Unfortunately, that kind of thinking is what lead to the U.S. budget being as large as it is. And in the end, the amount of money is finite (supply), while the amount of wants(demand) is infinite. So we can't afford to buy everything after all. American politicians seem to think that they can give the majority of people something for nothing, simply by taxing the rich minority. That will only work for so long.

This makes it all the more important to choose prudently what we spend our money on. If we make 400 dollars a week and go out Friday night to blow $50 on booze and another $100 on a hooker, one could make the argument that we were being less than responsible with our money. But our rent is only $100 a week so we've still got some money left over for unimportant things like lunch. And at least it was our money with which we were being irresponsible.

Now let's say we, as the U.S. government, make 6 trillion dollars a year. That is, we took money from all our citizens (only the ones who make more than a certain amount, anyway) for no reason other than we are the U.S. government. Now, we've got this 6 trillion dollars sitting in our lap, and every now and then we dump it on the floor and roll around in it, and it comes time to spend it. There's a knock at the door. We get up to answer it and lo and behold it's Jim Anyman, saying that for only 30 million dollars he will perform a study to determine why prisoners don't want to be in jail. That seems like a sensible outlay of money to us (does it, really?) so we hand Jim 30 Million and tell him to report back to us when he figures out this Gordian Knot of a stumper.

That 30 million dollars was much lower, as a percentage of income. than the $150 a week we blew on booze and floozies. Does that make it a more responsible expenditure? At least for the $150 we got drunk and laid. Although, from a certain point of view, I guess we got f**ked by Jim Anyman, too.

If you're in the mood for a horror/thriller sometime, do yourself a favor. Get a copy of the U.S. Federal Budget for any of the last 10 years (or any of the last 40, for that matter) and take a look at what expenditures the Congress authorizes. Don't look at the costs as a percentage of the overall budget. Look at it as, how much space would that much money take up if I had it in $100 bills.

This country was once known as the 'Land of Opportunity'. I suppose it still is. After all, Jim Anyman got 30 million dollars for his 'study'. And there's thousands of Anymans making money off the Federal Government. Just remember, it's our money they're spending, and we're footing the bill with opportunity cost.