Yes, There Are Tradeoffs Between Disease Prevention & Economic Destruction
The COVID-19 pandemic has really highlighted how differently economists and noneconomists think. All over the world, variations of the same discussion have taken place over the last week or so. It goes as follows.
An economist discusses the cost of the governmental responses to the pandemic and is quickly met with accusations of cynically trying to "put a price on a life." The economist camp tries to explain its reasoning while the noneconomist camp is horrified that anyone would "let old people die to protect the rich" or "prioritize economy over health."
What is really going on here is that economists and noneconomists have vastly different mindsets. Economists are constantly thinking in tradeoffs. It is second nature. It lies at the very core of economics. All of the problems economists attempt to solve involve various possible choices and finding the most optimal one.
This is based on the understanding that we live in a world of scarcity. All means are scarce, so allocating them to serve certain ends must necessarily leave other ends unsatisfied. Economists attempt to ensure that scarce resources are used efficiently. This is not as simple as putting two numbers on a piece of paper and choosing the largest one. All choices happen under uncertainty. We do not have full knowledge, and as such there is always the possibility of making the wrong choice.
The concept of opportunity costs is one of the first things budding economists are taught. The benefit of every action should be weighed against the missed benefit of the action not taken. Opportunity costs are by definition unseen and thus can be easily overlooked.
Read Complete Editorial Here:
Zero Hedge
An economist discusses the cost of the governmental responses to the pandemic and is quickly met with accusations of cynically trying to "put a price on a life." The economist camp tries to explain its reasoning while the noneconomist camp is horrified that anyone would "let old people die to protect the rich" or "prioritize economy over health."
What is really going on here is that economists and noneconomists have vastly different mindsets. Economists are constantly thinking in tradeoffs. It is second nature. It lies at the very core of economics. All of the problems economists attempt to solve involve various possible choices and finding the most optimal one.
This is based on the understanding that we live in a world of scarcity. All means are scarce, so allocating them to serve certain ends must necessarily leave other ends unsatisfied. Economists attempt to ensure that scarce resources are used efficiently. This is not as simple as putting two numbers on a piece of paper and choosing the largest one. All choices happen under uncertainty. We do not have full knowledge, and as such there is always the possibility of making the wrong choice.
The concept of opportunity costs is one of the first things budding economists are taught. The benefit of every action should be weighed against the missed benefit of the action not taken. Opportunity costs are by definition unseen and thus can be easily overlooked.
Read Complete Editorial Here:
Zero Hedge
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