Cost - Revision history

ArchiveBot: Repoint 4 dead mises.org links to the archived original (automated; see Austrian Economics Wiki:Link repointing)

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Repoint 4 dead mises.org links to the archived original (automated; see Austrian Economics Wiki:Link repointing)

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	In [[action]], a less desirable condition is bartered for a more desirable. That which is abandoned is the [[price]] paid for the attainment of the end sought - and the [[value]] of the price paid are '''costs'''.<ref name="Mises_profit">Ludwig von Mises. [https://~~mises.~~freecapitalists.org/~~humanaction~~/~~chap4sec4.asp~~ "4. Action as an Exchange"], ''[[Human Action]]'', online edition, Chapter IV. A first analysis of the category of Action, [[Mises Institute]]. Referenced 2009-05-14}.</ref>		In [[action]], a less desirable condition is bartered for a more desirable. That which is abandoned is the [[price]] paid for the attainment of the end sought - and the [[value]] of the price paid are '''costs'''.<ref name="Mises_profit">Ludwig von Mises. [https://freecapitalists.org/books/human-action/read/chapter-iv-a-first-analysis-of-the-category-of-action/ "4. Action as an Exchange"], ''[[Human Action]]'', online edition, Chapter IV. A first analysis of the category of Action, [[Mises Institute]]. Referenced 2009-05-14}.</ref>

	==Opportunity cost==		==Opportunity cost==
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	# Finally, cost can be dated at the moment of decision or choice.		# Finally, cost can be dated at the moment of decision or choice.

	Therefore, there can never be objectively measurable [[Wikipedia:Externality\|external benefits]]. Costs (or benefits) are subjective and are inseparably tied to the act of choice. That is, an individual not involved in the economic decision or choice can never objectively measure another individual's costs (or benefits). Thus no statement about either the size or the very existence of external benefits can ever be falsified, and cannot be an argument for government [[intervention]].<ref name="Brownstein_Pareto">Barry P. Brownstein. [~~http~~://~~mises~~.org/journals/jls/~~4_1~~/~~4_1_6.pdf~~ "Pareto Optimality, External Benefits and Public Goods: A Subjectivist Approach"] (pdf), Journal of Libertarian Studies, Vol. IV. No.1 (Winter 1980). Referenced 2010-05-27.</ref>		Therefore, there can never be objectively measurable [[Wikipedia:Externality\|external benefits]]. Costs (or benefits) are subjective and are inseparably tied to the act of choice. That is, an individual not involved in the economic decision or choice can never objectively measure another individual's costs (or benefits). Thus no statement about either the size or the very existence of external benefits can ever be falsified, and cannot be an argument for government [[intervention]].<ref name="Brownstein_Pareto">Barry P. Brownstein. [https://freecapitalists.org/journals/jls/4-1-6/ "Pareto Optimality, External Benefits and Public Goods: A Subjectivist Approach"] (pdf), Journal of Libertarian Studies, Vol. IV. No.1 (Winter 1980). Referenced 2010-05-27.</ref>

	==Transaction costs==		==Transaction costs==
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	==Links==		==Links==
	* [[Wikipedia:Cost\|Cost]] on Wikipedia		* [[Wikipedia:Cost\|Cost]] on Wikipedia
	* [~~http~~://~~mises~~.org/journals/scholar/~~Thornton8.pdf~~ Richard Cantillon and the Discovery of Opportunity Cost] (pdf) Mark Thornton		* [https://freecapitalists.org/journals/scholar/thornton8/ Richard Cantillon and the Discovery of Opportunity Cost] (pdf) Mark Thornton
	* [~~http~~://~~mises~~.org/journals/rae/~~pdf~~/~~RAE3_1_9.pdf~~ Subjective Cost Revisited] (pdf), by William Barnett II		* [https://freecapitalists.org/journals/rae/rae3-1-9/ Subjective Cost Revisited] (pdf), by William Barnett II
	* [http://libertarianpapers.org/articles/2009/lp-1-39.pdf Austrian Economics and the transaction cost approach to the firm] by Nicolai J. Foss and Peter G. Klein		* [http://libertarianpapers.org/articles/2009/lp-1-39.pdf Austrian Economics and the transaction cost approach to the firm] by Nicolai J. Foss and Peter G. Klein
	* [http://www.econlib.org/library/Buchanan/buchCv6c0.html#Preface Cost and Choice: An Inquiry in Economic Theory], Preface, by Buchanan, James M., 1969		* [http://www.econlib.org/library/Buchanan/buchCv6c0.html#Preface Cost and Choice: An Inquiry in Economic Theory], Preface, by Buchanan, James M., 1969
	* [https://mises.freecapitalists.org/daily/4901 What's Cost Got to Do with It?] by Joseph T. Salerno, December 2010		* [https://mises.freecapitalists.org/daily/4901 What's Cost Got to Do with It?] by Joseph T. Salerno, December 2010
	[[Category:Economic concepts]]		[[Category:Economic concepts]]

ArchiveBot: Repoint 3 dead mises.org links to the archived original (automated; see Austrian Economics Wiki:Link repointing)

2026-08-16T04:08:23Z

Repoint 3 dead mises.org links to the archived original (automated; see Austrian Economics Wiki:Link repointing)

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	In [[action]], a less desirable condition is bartered for a more desirable. That which is abandoned is the [[price]] paid for the attainment of the end sought - and the [[value]] of the price paid are '''costs'''.<ref name="Mises_profit">Ludwig von Mises. [~~http~~://mises.org/humanaction/chap4sec4.asp "4. Action as an Exchange"], ''[[Human Action]]'', online edition, Chapter IV. A first analysis of the category of Action, [[Mises Institute]]. Referenced 2009-05-14}.</ref>		In [[action]], a less desirable condition is bartered for a more desirable. That which is abandoned is the [[price]] paid for the attainment of the end sought - and the [[value]] of the price paid are '''costs'''.<ref name="Mises_profit">Ludwig von Mises. [https://mises.freecapitalists.org/humanaction/chap4sec4.asp "4. Action as an Exchange"], ''[[Human Action]]'', online edition, Chapter IV. A first analysis of the category of Action, [[Mises Institute]]. Referenced 2009-05-14}.</ref>

	==Opportunity cost==		==Opportunity cost==
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	They can both have more oranges and more tires if they specialize and [[trade]]. Chen can offer Amy one tire in exchange for seven oranges. Chen would be better off because he would get seven oranges in exchange for one tire, while he would only get five oranges for one tire if he produced them himself. But this is attractive for Amy too, because she can get a tire for only seven oranges, which is fewer than the ten oranges she would have to give up if she produced tires herself. At any "orange price" of tires between five and ten, Amy and Chen are both better off.		They can both have more oranges and more tires if they specialize and [[trade]]. Chen can offer Amy one tire in exchange for seven oranges. Chen would be better off because he would get seven oranges in exchange for one tire, while he would only get five oranges for one tire if he produced them himself. But this is attractive for Amy too, because she can get a tire for only seven oranges, which is fewer than the ten oranges she would have to give up if she produced tires herself. At any "orange price" of tires between five and ten, Amy and Chen are both better off.

	The same logic is valid for countries - countries are also better off if they can specialize and trade.<ref name="Caden_Opportunity">Art Carden. [~~http~~://mises.org/story/3744 "Tire Trade Tirade"], Mises Daily, posted on Monday, October 12, 2009. Referenced 2009-10-13.</ref>		The same logic is valid for countries - countries are also better off if they can specialize and trade.<ref name="Caden_Opportunity">Art Carden. [https://mises.freecapitalists.org/story/3744 "Tire Trade Tirade"], Mises Daily, posted on Monday, October 12, 2009. Referenced 2009-10-13.</ref>

	==Subjectivity of costs==		==Subjectivity of costs==
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	* [http://libertarianpapers.org/articles/2009/lp-1-39.pdf Austrian Economics and the transaction cost approach to the firm] by Nicolai J. Foss and Peter G. Klein		* [http://libertarianpapers.org/articles/2009/lp-1-39.pdf Austrian Economics and the transaction cost approach to the firm] by Nicolai J. Foss and Peter G. Klein
	* [http://www.econlib.org/library/Buchanan/buchCv6c0.html#Preface Cost and Choice: An Inquiry in Economic Theory], Preface, by Buchanan, James M., 1969		* [http://www.econlib.org/library/Buchanan/buchCv6c0.html#Preface Cost and Choice: An Inquiry in Economic Theory], Preface, by Buchanan, James M., 1969
	* [~~http~~://mises.org/daily/4901 What's Cost Got to Do with It?] by Joseph T. Salerno, December 2010		* [https://mises.freecapitalists.org/daily/4901 What's Cost Got to Do with It?] by Joseph T. Salerno, December 2010
	[[Category:Economic concepts]]		[[Category:Economic concepts]]

64.132.13.2: /* Opportunity cost and trade */ spelling of Art Cardens last name.

2011-07-29T14:47:24Z

Opportunity cost and trade: spelling of Art Cardens last name.

← Older revision		Revision as of 14:47, 29 July 2011
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	They can both have more oranges and more tires if they specialize and [[trade]]. Chen can offer Amy one tire in exchange for seven oranges. Chen would be better off because he would get seven oranges in exchange for one tire, while he would only get five oranges for one tire if he produced them himself. But this is attractive for Amy too, because she can get a tire for only seven oranges, which is fewer than the ten oranges she would have to give up if she produced tires herself. At any "orange price" of tires between five and ten, Amy and Chen are both better off.		They can both have more oranges and more tires if they specialize and [[trade]]. Chen can offer Amy one tire in exchange for seven oranges. Chen would be better off because he would get seven oranges in exchange for one tire, while he would only get five oranges for one tire if he produced them himself. But this is attractive for Amy too, because she can get a tire for only seven oranges, which is fewer than the ten oranges she would have to give up if she produced tires herself. At any "orange price" of tires between five and ten, Amy and Chen are both better off.

	The same logic is valid for countries - countries are also better off if they can specialize and trade.<ref name="Caden_Opportunity">Art ~~Caden~~. [http://mises.org/story/3744 "Tire Trade Tirade"], Mises Daily, posted on Monday, October 12, 2009. Referenced 2009-10-13.</ref>		The same logic is valid for countries - countries are also better off if they can specialize and trade.<ref name="Caden_Opportunity">Art Carden. [http://mises.org/story/3744 "Tire Trade Tirade"], Mises Daily, posted on Monday, October 12, 2009. Referenced 2009-10-13.</ref>

	==Subjectivity of costs==		==Subjectivity of costs==

Pesterbot: /* Links */External Links to Links, replaced: ==External links== → ==Links==

2011-06-21T18:32:03Z

Links: External Links to Links, replaced: ==External links== → ==Links==

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	{{Reflist}}		{{Reflist}}

	==~~External links~~==		==Links==
	* [[Wikipedia:Cost\|Cost]] on Wikipedia		* [[Wikipedia:Cost\|Cost]] on Wikipedia
	* [http://mises.org/journals/scholar/Thornton8.pdf Richard Cantillon and the Discovery of Opportunity Cost] (pdf) Mark Thornton		* [http://mises.org/journals/scholar/Thornton8.pdf Richard Cantillon and the Discovery of Opportunity Cost] (pdf) Mark Thornton

Huckelberry: +indented "see also"

2011-02-07T00:47:10Z

+indented "see also"

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	===Opportunity cost and trade===		===Opportunity cost and trade===
	''See also: [[Comparative advantage]]''		<blockquote>''See also: [[Comparative advantage]]''</blockquote>

	For example, Amy can produce either one hundred oranges or ten tires in a day while Chen can produce ten oranges or two tires in a day. It doesn't look like they have anything to gain by trading: Amy is much more productive than Chen.		For example, Amy can produce either one hundred oranges or ten tires in a day while Chen can produce ten oranges or two tires in a day. It doesn't look like they have anything to gain by trading: Amy is much more productive than Chen.

Huckelberry: +clarify, wikiy

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+clarify, wikiy

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	In [[action]], a less desirable condition is bartered for a more desirable. That which is abandoned is the [[price]] paid for the attainment of the end sought - and the value of the price paid are '''costs'''.<ref name="Mises_profit">Ludwig von Mises. [http://mises.org/humanaction/chap4sec4.asp "4. Action as an Exchange"], ''[[Human Action]]'', online edition, Chapter IV. A first analysis of the category of Action, [[Mises Institute]]. Referenced 2009-05-14}.</ref>		In [[action]], a less desirable condition is bartered for a more desirable. That which is abandoned is the [[price]] paid for the attainment of the end sought - and the [[value]] of the price paid are '''costs'''.<ref name="Mises_profit">Ludwig von Mises. [http://mises.org/humanaction/chap4sec4.asp "4. Action as an Exchange"], ''[[Human Action]]'', online edition, Chapter IV. A first analysis of the category of Action, [[Mises Institute]]. Referenced 2009-05-14}.</ref>

	==Opportunity cost==		==Opportunity cost==
	The '''opportunity cost''', when performing an action, is ~~defined as~~ the ~~next~~ best alternative foregone. In other words, it is ~~what~~ an actor has ~~to give~~ up ~~to get~~ something else.		The '''opportunity cost''', when performing an action, is the value attributable to the best alternative foregone. In other words, it is the ''opportunities'' an actor has given up for something else.

	===Introductory Example===		===Introductory Example===

Jmorris84: /* Transaction costs */

2010-12-27T18:46:40Z

Transaction costs

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	As the number of beekeepers and apple growers increases, the costs of reaching an agreement on the size of the payment from the apple growers to		As the number of beekeepers and apple growers increases, the costs of reaching an agreement on the size of the payment from the apple growers to
	the beekeepers increase. If the '''transaction costs''' remain less than the possible gains from trading, an agreement will be reached. If, on the other hand, the transaction costs exceed the benefits from any trade, an agreement will not he reached. Under these circumstances many economists argue that the market has "failed" and that government intervention is therefore necessary. However, to argue for the government subsidization of the beekeepers is to ignore the fact that transaction costs are real costs which must be considered when making a trade. In the real world, when collective action does not take place, all that one can conclude is that the benefits of such action are smaller than the costs involved. In no way does this imply that the market has failed.		the beekeepers increase. If the '''transaction costs''' remain less than the possible gains from trading, an agreement will be reached. If, on the other hand, the transaction costs exceed the benefits from any trade, an agreement will not be reached. Under these circumstances many economists argue that the market has "failed" and that government intervention is therefore necessary. However, to argue for the government subsidization of the beekeepers is to ignore the fact that transaction costs are real costs which must be considered when making a trade. In the real world, when collective action does not take place, all that one can conclude is that the benefits of such action are smaller than the costs involved. In no way does this imply that the market has failed.

	The existence of transaction costs explains why certain trades do not take place in the market. Asserting that the [[trade]] should have taken place is equivalent to stating that transaction costs are not real costs and somehow should not have been considered by the parties involved.		The existence of transaction costs explains why certain trades do not take place in the market. Asserting that the [[trade]] should have taken place is equivalent to stating that transaction costs are not real costs and somehow should not have been considered by the parties involved.

	As an example, all of us have wished many times in our lives that we could be instantaneously transported to our destination, he it for work or recreation. Many times the existence of transportation costs (time and money) has led to a decision to stay at home. However, the existence of transportation costs explains why people make certain decisions, and by no means can be used as an argument for government intervention on the grounds of high transportation costs. That is, it would be incorrect to argue that resource allocation is not optimal because of the existence of these transportation costs. On the contrary, any subsidy payments would alter the pattern of resource allocation, making one course of action seem cheaper than it formerly did.<ref name="Brownstein_Pareto" />		As an example, all of us have wished many times in our lives that we could be instantaneously transported to our destination, be it for work or recreation. Many times the existence of transportation costs (time and money) has led to a decision to stay at home. However, the existence of transportation costs explains why people make certain decisions, and by no means can be used as an argument for government intervention on the grounds of high transportation costs. That is, it would be incorrect to argue that resource allocation is not optimal because of the existence of these transportation costs. On the contrary, any subsidy payments would alter the pattern of resource allocation, making one course of action seem cheaper than it formerly did.<ref name="Brownstein_Pareto" />

	==References==		==References==

Jmorris84: /* Subjectivity of costs */

2010-12-27T18:41:56Z

Subjectivity of costs

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	# Cost is subjective; it exists in the mind of the decision-maker and nowhere else.		# Cost is subjective; it exists in the mind of the decision-maker and nowhere else.
	# Cost is based on anticipations; it is necessarily a forward-looking or ex ante concept.		# Cost is based on anticipations; it is necessarily a forward-looking or ex ante concept.
	# Cost can never he realized because of the fact of choice itself: that which is given up cannot be enjoyed.		# Cost can never be realized because of the fact of choice itself: that which is given up cannot be enjoyed.
	# Cost cannot be measured by someone other than the decision-maker because there is no way that subjective experience can be directly observed.		# Cost cannot be measured by someone other than the decision-maker because there is no way that subjective experience can be directly observed.
	# Finally, cost can he dated at the moment of decision or choice.		# Finally, cost can be dated at the moment of decision or choice.

	Therefore, there can never be objectively measurable [[Wikipedia:Externality\|external benefits]]. Costs (or benefits) are subjective and are inseparably tied to the act of choice. That is, an individual not involved in the economic decision or choice can never objectively measure another individual's costs (or benefits). Thus no statement about either the size or the very existence of external benefits can ever be falsified, and cannot be an argument for government [[intervention]].<ref name="Brownstein_Pareto">Barry P. Brownstein. [http://mises.org/journals/jls/4_1/4_1_6.pdf "Pareto Optimality, External Benefits and Public Goods: A Subjectivist Approach"] (pdf), Journal of Libertarian Studies, Vol. IV. No.1 (Winter 1980). Referenced 2010-05-27.</ref>		Therefore, there can never be objectively measurable [[Wikipedia:Externality\|external benefits]]. Costs (or benefits) are subjective and are inseparably tied to the act of choice. That is, an individual not involved in the economic decision or choice can never objectively measure another individual's costs (or benefits). Thus no statement about either the size or the very existence of external benefits can ever be falsified, and cannot be an argument for government [[intervention]].<ref name="Brownstein_Pareto">Barry P. Brownstein. [http://mises.org/journals/jls/4_1/4_1_6.pdf "Pareto Optimality, External Benefits and Public Goods: A Subjectivist Approach"] (pdf), Journal of Libertarian Studies, Vol. IV. No.1 (Winter 1980). Referenced 2010-05-27.</ref>

RayBirks: /* Subjectivity of costs */ wikify & clarity

2010-12-11T11:56:49Z

Subjectivity of costs: wikify & clarity

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	==Subjectivity of costs==		==Subjectivity of costs==
	'''Costs''' are by nature subjective and not objectively measurable by an outside observer. An essential feature of Austrian theory, unlike the neoclassical theory, is that cost is directly related to the act of choice. A summary of the implications follows:		'''Costs''' are by nature subjective and not objectively measurable by an outside observer. An essential feature of [[Austrian School\|Austrian economic theory]], unlike the [[Neoclassical economics\|neoclassical theory]], is that cost is directly related to the act of choice. A summary of the implications follows:
	# Most importantly, cost must be borne exclusively by the decision-maker; it is not possible for cost to be shifted to or imposed on others.		# Most importantly, cost must be borne exclusively by the decision-maker; it is not possible for cost to be shifted to or imposed on others.
	# Cost is subjective; it exists in the mind of the decision-maker and nowhere else.		# Cost is subjective; it exists in the mind of the decision-maker and nowhere else.
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	# Finally, cost can he dated at the moment of decision or choice.		# Finally, cost can he dated at the moment of decision or choice.

	Therefore, there can never be objectively measurable [[Wikipedia:Externality\|external benefits]]. Costs (or benefits) are subjective and are inseparably tied to the act of choice. That is, an individual not involved in the economic decision or choice can never objectively measure another individual's costs (or benefits). Thus no statement about either the size or the very existence of external benefits can ever be falsified, and cannot be an argument for government intervention.<ref name="Brownstein_Pareto">Barry P. Brownstein. [http://mises.org/journals/jls/4_1/4_1_6.pdf "Pareto Optimality, External Benefits and Public Goods: A Subjectivist Approach"] (pdf), Journal of Libertarian Studies, Vol. IV. No.1 (Winter 1980). Referenced 2010-05-27.</ref>		Therefore, there can never be objectively measurable [[Wikipedia:Externality\|external benefits]]. Costs (or benefits) are subjective and are inseparably tied to the act of choice. That is, an individual not involved in the economic decision or choice can never objectively measure another individual's costs (or benefits). Thus no statement about either the size or the very existence of external benefits can ever be falsified, and cannot be an argument for government [[intervention]].<ref name="Brownstein_Pareto">Barry P. Brownstein. [http://mises.org/journals/jls/4_1/4_1_6.pdf "Pareto Optimality, External Benefits and Public Goods: A Subjectivist Approach"] (pdf), Journal of Libertarian Studies, Vol. IV. No.1 (Winter 1980). Referenced 2010-05-27.</ref>

	==Transaction costs==		==Transaction costs==

Six: /Provides a generalised introduction to opportunity cost./

2010-12-11T07:59:06Z

Provides a generalised introduction to opportunity cost.

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	In [[action]], a less desirable condition is bartered for a more desirable. That which is abandoned is the [[price]] paid for the attainment of the end sought - and the value of the price paid are '''costs'''.<ref name="Mises_profit">Ludwig von Mises. [http://mises.org/humanaction/chap4sec4.asp "4. Action as an Exchange"], ''[[Human Action]]'', online edition, Chapter IV. A first analysis of the category of Action, [[Mises Institute]]. Referenced 2009-05-14}.</ref>		In [[action]], a less desirable condition is bartered for a more desirable. That which is abandoned is the [[price]] paid for the attainment of the end sought - and the value of the price paid are '''costs'''.<ref name="Mises_profit">Ludwig von Mises. [http://mises.org/humanaction/chap4sec4.asp "4. Action as an Exchange"], ''[[Human Action]]'', online edition, Chapter IV. A first analysis of the category of Action, [[Mises Institute]]. Referenced 2009-05-14}.</ref>

	==Opportunity cost ~~and trade~~==		==Opportunity cost==
	The '''opportunity cost''' is what ~~you have~~ to give up to get something else.		The '''opportunity cost''', when performing an action, is defined as the next best alternative foregone. In other words, it is what an actor has to give up to get something else.

			===Introductory Example===
			As an example, suppose Amy, an economic actor, wishes to purchase a chocolate bar. Her preferences are ordered as follows:

			#Crunchie Bar
			#Mars Bar
			#Snickers

			Should Amy choose to purchase a Crunchie bar, she gives up her second highest preference, the Mars Bar. Assuming these bars are priced equally, the opportunity cost of her decision to purchase the Crunchie Bar is the Mars Bar.

			===Opportunity cost and trade===
			''See also: [[Comparative advantage]]''

	For example, Amy can produce either one hundred oranges or ten tires in a day while Chen can produce ten oranges or two tires in a day. It doesn't look like they have anything to gain by trading: Amy is much more productive than Chen.		For example, Amy can produce either one hundred oranges or ten tires in a day while Chen can produce ten oranges or two tires in a day. It doesn't look like they have anything to gain by trading: Amy is much more productive than Chen.