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Economics Teaches Us Not To Fret

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02/12/2008
In a world of scarcity, every choice requires that something else of value must be given up, and the highest-valued alternative given up is the opportunity cost. That opportunity-cost emphasis focuses on the question of what is actually being given up when a choice is made. Its purpose is to ensure that we don't mislead ourselves with basic errors, because if we misunderstand the relevant costs, our understanding can well be incorrect even if our theory from that point on is correct (following the maxim that logic only means making no more mistakes than you are already committed to). Equally important, it helps ensure that others can't mislead us with their confused understanding, as so often happens when people try to sell government "solutions" to perceived problems (e.g., ignoring the cost to society of the taxation required to fund some spending program). FULL ARTICLE

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