Every choice involves tradeoffs, and it would be great if people thought more in terms of tradeoffs and opportunity costs. It would help not just for public policy debates and business decisions, but also for our own lives.
If you spend time or money on one thing, that’s less time or money to spend on something else.
If the government spends time or money on one thing, it has less time or money to spend on something else.
If you fight for one cause, you now have less time to fight for a different cause.
Your right to something may conflict with my right to something else. For instance, if we’re neighbors, your right to play loud and annoying music conflicts with my right to peace and quiet. Many other rights similarly can come into conflict.
Many choices are not zero-sum. But with every choice, there are still tradeoffs. Time, money, and energy are limited resources. So it’s good to weigh all the costs and benefits before deciding whether something is really worth it.
Every choice has both benefits and costs. This includes the opportunity cost—the best possible alternative to that decision. Moreover, some actions can hurt some people while helping others, or help in some ways while hurting in others. So don’t just look at the benefits—look at everything.
But make sure to ignore the sunk costs; they’ve already been incurred, whether you pursue that choice or not. And don’t be afraid to change your mind while you’re making a decision.
If you’re looking at non-monetary costs and benefits, how you measure them depends a lot on your own value judgments. So cost-benefit analysis isn’t just a distant, spreadsheet-like exercise just for economists—it’s good practice for everyone.
Ultimately, cost-benefit analysis is about taking into account the full impact of your decisions. It’s about rational decision-making. And it’s about choosing to live the best possible life for yourself.
I also think our public policy debates would be improved if politicians had more freedom to talk about costs as well as benefits. For instance, politicians seem too hesitant to propose broad-based tax increases, and the shared responsibility that goes along with that. Instead, some conservative politicians promise tax cuts for everyone (and especially the rich), and some liberal politicians promise to raise taxes only for a handful of distant rich people. In other words, benefits for us and costs for them. This may be partly because too many voters want to think only about benefits and not about the costs that go along with those benefits.
But if we want better government, we all need to take responsibility for it. And that includes participating more in government and society, helping hold the government accountable, and yes, being open to paying higher taxes when it makes sense. Ultimately, we won’t get the benefits of better public services without paying for it.
Tradeoffs are everywhere. They’re embedded in every decision, and the sooner they become a bigger part of everyday discourse, the better.