Thursday, December 6, 2007

Basic Opportunity Costs

Here is a great lesson in opportunity costs. Economists refer to opportunity costs as the next highest valued use of a resource. It would warm my heart if the environmentalists fully understood the concept.

The environmentalists make constant calls for renewable energy such as wind and solar. A company wants to build a wind farm in Texas and environmental groups sue Texas Land Commissioner Jerry Patterson, principally over the fact that these turbines will kill a huge number of birds.

The opportunity cost in this case of reducing carbon emissions is the killing of birds. It runs back into the problem of scarcity: humans have unlimited wants and limited means to acquire them. If you want more birds, you're going to have accept some carbon emissions or nuclear waste. If want less carbon emitted by building wind farms, you're going to have to accept fewer birds. You can never have everything you want. Then again, maybe what some environmentalists want is less energy production.

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