Opportunity Costs

Posted by PITHOCRATES - June 4th, 2012

Economics 101

Those on the Left are all for Choice as long as you Choose what they want you to Choose

Choice.  It’s what life is.  Every day we make hundreds of choices in our life.  The communists called that a burden.  And that their way removed all that stress from our lives.  The stress of constantly having to choose.  They came up with a new freedom.  Freedom from choice.  To live under oppression.  Like a slave.  Where you no longer had the burden of making a choice every waking hour of your day.  You simply took what the government gave you.  And relaxed.  Truly free.

It turned out the people living under communism preferred having that burden of choice.  And took every opportunity to escape the communist ‘freedom’.  To a freedom where you were free to choose whatever you wanted.  Instead of taking what central planners gave you.  Those on the Left always had a soft spot in their hearts for communism.  And Soviet central planners.  For they never cared that much for free markets.  Laissez faire capitalism.  Freedom of choice.  Because people so often chose poorly in their opinion.  For they weren’t as educated and enlightened as they were on the Left.  And therefore chose the wrong kind of foods to eat.  The wrong kind of beverages to drink.  The wrong kind of cars to drive.  The wrong kind of power to generate.  And the wrong people to vote for.

No.  Those on the Left are no fans of choice.  Except, of course, when it comes to abortion.  When it comes to abortion then they are big fans of choice.  But not so much when it comes to us choosing what to eat, drink and drive.  Or how we generate our energy.  So when it comes to choice those on the Left are like the Soviet central planners.  They are all for choice.  As long as you choose what they want you to choose.

When making any Economic Decisions we make our Choice based on Opportunity Costs 

But we choose.  Because we can.  At least with most things.  But how do we choose?  Does price determine what we choose?  Sometimes.  Quality?  Sometimes.  Loyalty?  Sometimes.  Sometimes it’s one of these things.  Sometimes a combination of all of these things.  Sometimes it’s none of these things.  So what is it that makes up your mind when confronted with a choice?  Do you know?  You do.  For obviously you’re making the choice.  But the ‘why’ we may have to coax out of you.  For you will probably not be able to explain why.  At least not as well an economist can.

The study of economics is all about choice.  And trying to determine what influences people’s choices.  So economists can offer economic policies to maximize economic activity.  By maximizing that thing we ultimately trade for.  Which is what?  Happiness.  We choose to increase our happiness.  Or utility in the parlance of economics.  The things we choose are the things that will give us the greatest happiness.  Or the greatest utility.  But if you’re like me you never saw ‘utility’ or ‘happiness’ expressed as units on a price tag in a store.  Price tags show only price.  Which tells us little how happy something will make us.  So how do we choose the things that will maximize our happiness?  Especially if you’re looking at two different things that have the same price?

Easy.  We don’t make our decision by looking at what we’re buying.  We make our decision based on what we’re not buying.  What we are giving up by buying this thing or that service?  What might have been had it not been for this purchase?  What opportunity we’re passing on to make this purchase?  What cost are we paying in lost opportunity by committing to this purchase?  In other words, when making any economic decisions we make our choice based on opportunity costs.  On an amount of happiness we’re giving up to acquire some other amount of happiness.  And whatever the number of our choices the end result is the same.  What we choose gives us more happiness than all other possible alternatives.  Regardless of price, quality or loyalty.  Though they could influence us when there is a tie.

Liberals make us Buy not what Increases our Happiness but what Increases their Happiness

You can’t put a price on happiness.  That’s what they say.  And they are right.  Whoever they are.  For example, luxury cars are nice.  But they are expensive.  Subcompacts are not as nice as luxury cars.  But they are not as expensive either.  So if you were choosing between these two cars which one would you choose?  I can’t tell because I don’t know your income.  But I can guess at your decision process.  You’re going to compare opportunity costs.  Driving a luxury car gives you enormous amounts of happiness.  For the limited time you spend driving it.  Enormous happiness for a limited amount of time.  Okay.  But what are the opportunity costs?

Let’s say your daily commute to and from work is one hour.  But when you get home you enjoy 4 hours between surfing the Internet and watching cable television.  When you’re not at work or home you like to use social media on your smartphone interacting with your friends.  And using your smart phone apps to maximize your fun in the evenings and on the weekend.  You like to spend your Sunday mornings at the coffee shop with you tablet reading the online Sunday papers.  The hours of driving happiness come to 10 hours a week.  And the hours of online/watching cable happiness comes to 32 hours a week.  Now being that you spend more time online or watching cable than driving then it’s safe to say that driving brings you less happiness than those other activities.  Because luxury cars are expensive they come with a high monthly payment and a high insurance premium.  Which means you will have to cut back on other spending to afford the luxury car.  So to afford the luxury car you have to give up your cable and home Internet access.  And cut back on your minutes on your smartphone.

The opportunity cost of the luxury car is giving up cable TV and cutting back on Internet access and smartphone minutes.  The opportunity cost of keeping those things is getting a subcompact car instead of a luxury car.  This is the ultimate decision we make in all of our economic decisions.  Which will cost us more in sacrificed happiness in the long run?  Which makes those decisions easy.  In the above example you would probably have never given the luxury car any serious thought.  This is why free markets work so well.  Why laissez faire capitalism works so well.  Because the economy is full of individuals making these decisions quickly.  Far quicker than any Soviet state planner.  And with far more insight into our own wants and desires than any Soviet state planner.  And in the aggregate this drives economic activity.  Bringing the things we want to market.  The things that give us the greatest amount of happiness.  The things that have the lowest opportunity costs.  Unlike Soviet central planning.  Or American liberal Democrat central planning. 

No.  These people try to change our purchasing decisions.  Making us buy not what increases our happiness.  But what increases their happiness.  Which is why when liberal Democrats are in power there is a general economic decline.  Because they do alter our purchasing decisions.  By increasing the opportunity costs of the things that increase our happiness.  So that we buy fewer of them.  But we don’t buy more of the things they want us to buy.  Because those things don’t increase our happiness.  When they subsidize hybrid cars (paid for with higher taxes from us) to get us to buy them it doesn’t make the hybrid cars give us any more happiness.  It just leaves us with less money because of the higher taxes.  So we buy less of everything else.  And in the aggregate this lowers economic activity.  Leaving us all less happy.

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Study finds that the Liberal Policies Like that Favored by President Obama make People Unhappy

Posted by PITHOCRATES - April 8th, 2012

Week in Review

Money can’t buy happiness.  A new study proves it.  For it’s not buying the richest country in the world happiness.  So there is something else apparently that leads to a people’s happiness (see Canada among the happiest countries in the world by Tavia Grant posted 4/2/2012 on The Globe and Mail).

It finds the world has, broadly speaking, become a “little happier” in the past three decades, as living standards have risen. (One exception is the United States, where life satisfaction has not improved).

Interesting.  Life satisfaction in America hasn’t improved.  I wonder why.  And what are the things that make people more satisfied in life.  Here are some of those things according to this study.

•Happier countries tend to be richer ones. But more important for happiness than income are social factors like the strength of social support, the absence of corruption and the degree of personal freedom.

•Unemployment causes as much unhappiness as bereavement or separation. At work, job security and good relationships do more for job satisfaction than high pay and convenient hours.

•Behaving well makes people happier.

•Mental health is the biggest single factor affecting happiness in any country. Yet only a quarter of mentally ill people get treatment for their condition in advanced countries and fewer still in poorer countries.

•Stable family life and enduring marriages are important for the happiness of parents and children.

•In advanced countries, women are happier than men, while the position in poorer countries is mixed.

•Happiness is lowest in middle age.

Liberal Democrats are all for bigger government.  Continuously raising taxes to pay for it.  The federal budget has exploded as a result.  As has the debt.  For despite the vast wealth they’re taxing out of the private sector it isn’t enough.  And as it is anywhere where people manage large piles of money there is corruption.  The bigger the pile the bigger the corruption.  And so it is with government.  Just look at the billions thrown away on pork barrel spending on worthless projects like the Murtha Airport.  This kind of out of control corrupt pork barrel spending makes people unhappy.  Apparently they would be happier with a government that lives responsibly within their means like they have to.  At least, according to this study.

High taxes and onerous regulatory compliance costs are squeezing small business.  Millionaire entrepreneurs of yesteryear say they couldn’t do what they did today.  The explosion in new regulatory law just squashes innovation.  It’s simply too costly and too complicated to go into business.  There are so many laws that it impossible to know them all.  Unless you’re a lawyer.  And lawyers are about the only ones who understand these laws.  Or, at least, understand them enough.  So they can sue any business for violating some obscure law the business owner is unaware of.  And they do this all the time.  It’s legal extortion.  For business owners find it cheaper to settle out of court just to make the lawyers go away.  As a result this active interventionist government pushed by liberal Democrats is a drag on job creation.  Whose answer is more benefits for the unemployed rather than helping the job creators.  This tenuous job environment makes workers feel less secure in their own jobs.  And less happy.  According to this study.

Liberals attack religion and their moralizing.  They attack conservatives and their moralizing.  Liberals instead prefer fewer restraints placed on life.  For who is to say what is right and wrong?  So they favor relaxed drug laws.  Free contraceptives.  Abortion on demand.  And as much consequence-free fun as they can have.  In public places.  And in quiet neighborhoods.  Where property damage is just kids blowing off a little steam.  I mean, who hasn’t done a donut on a neighbor’s lawn because they told them to be quiet at 2 in the morning?  Well it turns out people prefer having quiet church-going people for neighbors.  Who treat people with respect and behave well when in public.  These are the people that make other people happy.  According to this study, at least.

LBJ was a big liberal Democrat.  His Great Society was a bonanza of welfare benefits for the poor.  Especially for single mothers.  The government said to these single moms, “Look, you don’t need a husband in your life.  We will provide for you and your children.  We’ll even provide public housing for you to live in.  So you don’t need a husband.  And your children don’t need a father.  We can be all of that for you.”  Well, the worse place to live was in public housing during the Seventies.  Where crime and drugs use was rampant.  With no stable family structure kids of single parents turned to the street.  And crime.  Taking that behavior into their schools.  Spreading the trouble.  Having the government take over the role of family was like introducing a cancer into a healthy being.  And it spreads still to this day.  The idea that family isn’t important.  And that government can provide.  But more government has only made people less happy.  At least, according to this study.

The policies of liberal Democrats encourage irresponsible behavior.  Consequence-free fun.  They’ve attacked religion and tried to remove it from everyday life.  To the point that people today have very little if any moral compass.  Young women have babies out of wedlock.  Some of these mothers sacrifice everything in a herculean struggle to raise their children.  Working and sacrificing everything for their children.  Even a happy family life with a husband and father that would have made children rearing easier.  Some single mothers are superheroes.  Some are not.  And neither as are happy as a family with two parents providing for and nurturing their children.  And having time to spend with them in their childhood because they’re not working a second or third job.

So this is why America has not improved in the area of life satisfaction.  Because of the extraordinary growth of liberal Democrat policies.  The very things that lead people to be less happy.  At least, according to this new study.

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