The concept of opportunity costs is often brought up in discussions of economic exchange. However, this idea extends well beyond the borders of economics. It influences just about every aspect of life. Every day we make choices. We choose to get up in the morning and go to work. We choose which pair of pants to wear. We even choose between several different varieties of caffeine beverages to consume once we arrive at work. Anytime we discriminate between two choices we end up forfeiting the benefits of the option we have foregone. An example is when we choose to have coffee instead of a green tea we are foregoing the antioxidants in the tea for more caffeine. Whenever we make a choice something is given up.
Opportunity costs do not operate isolated from a temporal element. I would surmise that time does play a role in our decision-making process. We come across what is known by the Austrian School of Economics as Time Preference. The notion that people prefer present goods over future goods . Whenever we act rationally and make a decision we attempt to improve our present situation. However, we do so at our peril because we have to contend with the uncertainty of the outcome of our action (Murphy, 2015, P.50-51) . Let me quote Mises to solidify the Austrian take on uncertainty:
Time preference is not absolute with man; it is only one of the items entering into the weighing and balancing of pros and cons. A man swallows bitter pills for the sake of beneficent effects to be reaped at a later date. There cannot be any question of unconditionally preferring what is good in the short run to what is good in the long run; the intensity of the satisfaction expected from each of the alternatives must be taken into account too (Mises, 1948, P.744) .
While in most instances we evaluate choices with a bias towards the present. This is not without exception. There are instances such as deciding to take medicine or going to school that do not have an instantaneous pay off. However, most people would rather own their BMW at 40 than wait until they are 90. Most people would prefer drinking moderately priced wine regularly over drinking a fine vintage of Dom Perignon on occasion. For most people, they would have to abstain from wine drink for a bit to afford a bottle of top-shelf champagne. Even from the standpoint of home ownership the inferences of time preference applies. Most people finance their homes versus paying cash. In most cases, having the money upfront is an impossibility. Unless this individual profoundly delayed or forewent marriage and child rearing.
The idea of time in decision making is much than a mere observation of market catallactics. As discussed above choices are future oriented. It is just a matter of how beneficial the decision is long-term. From the perspective of time, the future can range anywhere from 5 minutes from now until the 5,000 years from now. What maybe advantageous 5 minutes from now may not be 5 years down the road. This idea can be applied morally, politically, socially,legally, and philosophically. It can extend from and individual actor to an entire nation or even planet. In the decision making process we need to not only discriminate between two options, but attempt to choose the one that will have the best long run results. Which is often derailed by the plight of uncertainty.
Operating under a veil of uncertainty causes us to question the benefit of looking towards the future. I could get hit by a bus tomorrow, is it really worth it to quit smoking? This is a variety of lingering mischief caused by the uneasiness of uncertainty. Which tends to skew incentives. Should we care about tomorrow if tomorrow isn’t guaranteed? Which provides a perverse but compelling argument for a litany of bad decision. For example, incurring massive amounts of debt. The colloquialism “you can’t take it with you” seems to apply here. There is also a moral element to this as well. Our present behavior is often imparted in children. There what is often referred in psychology as “modeling“. While our pursuit of instant gratification may seem to only impact us, it implicitly impacts future generations as well. Kids start to imitate the behavior of the adults around them. This actually is a strong point made by many social conservatives. The perceived erosion of our morals to be increasingly apparent in the youth. As the age that children become interest in topics such as sex, obscenity. drugs, among other excesses appears to be getting younger. Which in an abstract sense would reveal a lack of cultural foresight. Especially as community bonds continues to decay and state power continues to increase. Slowly eliminating many of the informal channels of charity and self-policing.
However, I would not describe myself as a social conservative. The older I get , the more arguments of communitarian conservatives tend to appear rational. The context of time in relation to choices and consequences cannot be underscored. Is there ever any ambiguity when a decision is shortsighted or a long term solution? I would argue yes. Many of the solutions to combat COVID-19 fall within this troubling grey area. The mandatory shutdown of all non-essential businesses mandated by various state governments. Is this the best long term solution? It would help facilitate flattening the curve to some capacity. It may help in terms of narrowing the spread of this highly contagious communicable virus. What about the economic impact of the virus? If you slice the apple in the other direction these mandated shutdowns are economically disastrous in the long run. Many businesses will not be able to whether the storm. Even just closing schools and daycares for 12 weeks has project a $153 billion loss in productivity . This is excluding the toll taken on the hard hit hospitality sector.
Choosing to shutdown non-essential businesses presents the classic example of an opportunity cost. Public health over the financial health of the economy. I am not making any judgement here, rather stating that there wasn’t a perfect solution. In this instance it wasn’t possible to work in the benefit of public health and the economy. State and local officials had to make some tough decisions. Hopefully will work out well in the future. However, doubt will always exist due uncertainty.
It also goes back to a dichotomy that I always like to examine. Autonomy over safety. One of the best examples of this the gun control debate. Would you rather live in a world that is purportedly safe, but you have relinquished the right to self-defense? Would you rather live in in a world where the danger of a mass shooting exists, but you can own a gun? Both scenarios have conspicuous opportunity costs. Drastic ones at that. It then turns into a choice between security and freedom. At the present moment which one do you value more? The same logic applies to imposing the COVID-19 shutdowns. The unanimous decision appears to be security over freedom. I hope that decision was the right one. Although, I am very skeptical. Treating safety as a positive right cannot guarantee it.