Macabre Explanation of Opportunity Costs

[tcpip]

For those who haven't seen it...

I think dead children should be used as a unit of currency. I know this sounds controversial, but hear me out.

Comments

[anfalicious]

But the issue is that these things are already part of the economic world, yet aren't accounted for in most theory. For example, a happy population will be more productive (something that is supported by evidence in other fields), so therefore providing for public happiness (eg: funding festivals or the arts) should be taken into account in an economic theory. Similarly, a polluted environment is a less productive environment (if you need an example lets take soil quality), and thus has to be considered.

Sure, I'm putting my ideology into economics (that these things should be valued), but that's because the opposing ideology (that these things are free to exploit) is dominant in most current economic theory.

I agree, we shouldn't be concerned about gender when looking at string theory (unless the theory suggests that gender affects it... maybe it does), but your analogy is invalid as the things I'm talking about most certainly do affect economics.

Yes, the great leap forward was a disaster. But so is the loss of biodiversity (just one example) that we're currently experiencing and not calculating.

[ytterbius]

"You'd think they'd be pretty happy, and there are studies that say they are. But their GDP per capita isn't very impressive at all. "

Is the purpose of Economics to maximize GDP? I don't think so, though that may be a moral imperative that some Economists might piggyback into their conclusions.

"But the least productive environment of all is a pristine one in which production is banned due to environmental concerns. For example, ANWR has large potential for industry, but we don't wish to spoil the natural setting. That's fine with me, of course. I like clean water and trees and purple mountains majesty as much as the next guy, but the idea that a non-polluted environment is more productive is not factual. Again, we see here that economics takes a backseat to other concerns- protecting the environment."

Nobody is ever talking about banning all use of resources for economic development. The fact is that the choices that we make in how to best make use of available resources is what defines how much economic productivity can be had from those resources. Choices of regulation might be good or bad, but the choice, itself, is not inherently evil or wrong. The question is, who gets to make the choices, and some can reasonably argue that giving those choices entirely to an unelected corporate private sector, would be unwise. Ideally, Economics would be there to help us to judge the best solutions in a very calculated manner, the problem being that Economics is too often piggy-backed with the world-view that externalities, like dead babies and environmental costs, can be ignored.

You keep doing it

[goumindong]

"better economic outcomes, e.g. higher productivity."

why is more productivity better?

A: Because of our moral beliefs about what is good and what isn't. \

Lets get a bit deeper

"I brought up GDP because the person I commented to (ie, not you) implied that taking social considerations into economics produces better economic outcomes"

GOOD GOD YES. Taking social considerations necessarily makes economic prescriptions better.

To make this easy to understand, lets say that economics was perfect and that it was able to tell us exactly what changes when we modify any economic parameter.

If that is the case then the only way that we can get better economic outcomes is if we have the best maximization conditions. I.E. if we choose to maximize the social situation precisely in the "best" way. Any situation where we get closer to the ideal social structure is one in which economic outcomes are necessarily better.

Alright, now that we have covered the basics of this system, does it work if we relax the assumptions a bit? A: Yes it does. Economics does not need to be perfect in order to be better (or at least, have better expectations), rather we can say that so long as economics is not entirely wrong in how it provides for changes we can say that a better social maximization will likely provide better economic outcomes.

[anfalicious]

What economic evidence is there that "making people happy" makes them more productive?

Happiness studies is a growing field and is affecting many areas of study. Perhaps you may want to start here if you wish to doubt the claim. I'm not suggesting I agree with every conclusion out there, but I think at the very least there is enough evidence that to argue against it will require counter evidence.

Take Europe (please). Europe has no end to festivals and local customs and a rich history, and tons and tons of cradle-to-grave socialism. You'd think they'd be pretty happy, and there are studies that say they are. But their GDP per capita isn't very impressive at all.

No, but their GDP per hours worked (ie productivity) is.

But the least productive environment of all is a pristine one in which production is banned due to environmental concerns.<./i>

Red herring. Where did I make that argument? Not to mention it's wrong. Try here.

I suppose in *that* sense, it's an economic question, since having to choose any one thing or another is an economic decision by definition

Umm. Exactly. You say you value ANWAR, but what if ripping it up completely would secure America's energy needs for the next 200 years? At what point, at what economic level, do you say "OK, rip it all up"? This is precisely my point. This is an economic decision. Whether or not leaving it is the perfect economic decision is moot, as that is something we decide as a society for other reasons as you've suggested. However, to suggest that there is no economic impact of environmental degradation is just plain wrong.

And can we even calculate how much biodiversity we're losing? I've heard estimates that say we are losing x number of species a week. I'm pretty sure the rate of extinction of species is not 52 species a year, thoguh I haven't done much research on that and I'd be happy to see any info you'd like to share.

Yeah, it's really hard and the numbers are far from accurate. But when you're talking a range of between 30 000 and 130 000 per year the fine details tend to get loss in the general thought "fucking heaps".

Still more specious are claism that we're losing species we'll never discover.

Huh? Where? I didn't make that claim, but if you think there aren't species out there that haven't been discovered then you're laughingly ignorant of the natural world.

So, in summation. Happiness does increase productivity (or at least that's what the evidence suggests) and environmental degradation does have an economic cost, therefore we should be taking it into consideration when doing a cost-benefit analysis. Just because economics has been woefully ignorant of this in the past, and just because it benefits the status quo to try to keep ignoring these costs, it doesn't make them any less real.

Yearrggh.

[goumindong]

You're not an economist are you?

"This skews the data on productivity, since they can easily be less productive, but more productive per hour compared to countries that work longer hours."

Productivity is a measure of output per unit of input. Production is the total amount.

The question is, should we worry about productivity or production? Almost unequivically the answer is, from almost any moral basis that we should worry about productivity.

Consider for a second the standard labor/leisure tradeoff. If you're not familiar with it, you should go familiarize yourself with it. I am sure wikipedia can help.

Anyway, with this framework and with a little working of firm specific incentives to hiring we can see that wage should track with productivity. I.E. if you're more productive you're going to be paid more per hour. More importantly, the data supports that this is the case heavily. Even in the United States were wages have stagnated and productivity has increased, compensation has followed productivity(I.E. people are being paid in health benefits and not in wages).

Once we see these two things in context we can see that if people are earning a higher wage and are choosing to work less, then their leisure time MUST be, at the margin, worth more (in real production terms) than the leisure time of those who are working more with lower productivity.

If that isn't a way to say that they're better off, I don't really know what is.